Economists from Peking University and a former central bank adviser have called for increased government support for China’s expanding services sector, emphasizing its potential to drive consumption and economic growth. This recommendation comes as China’s leadership prioritizes consumption-driven growth amidst ongoing tariff disputes with the United States.
The country’s policy shift toward boosting household consumption is evident in its recent fiscal initiatives, including an expanded consumer goods subsidy program. The government has doubled its fiscal stimulus to 300 billion yuan ($41.46 billion), targeting sectors such as electric vehicles, appliances, and other consumer goods.
Yan Se, associate professor and deputy director of the Institute of Economic Policy at Peking University, suggested that this subsidy scheme could be extended to the services sector. Speaking at a meeting on Wednesday, Yan emphasized that services consumption, unlike durable goods such as electronics, offers more lasting engagement. “You may not buy another television this year, but the services industry is different… It has stickiness and it’s not one-off,” Yan explained.
Recent official data shows a slowdown in consumer goods sales. Home appliance and audio-visual device sales grew by 10.9% in January and February compared to the same period in the previous year, down significantly from a 39.3% surge in December and 22.2% growth in November.
In 2024, China’s household services consumption reached 13,016 yuan per capita, marking a 7.4% increase year-on-year and accounting for 46.1% of total household consumption expenditure, according to official statistics.
Liu Qiao, dean of Guanghua School of Management at Peking University, noted that household spending on services remains relatively low compared to China’s annual economic output. He argued that increasing the household spending component of the national economy to nearly 60% by 2035—up from less than 40% today—will be critical for sustained growth. Liu also forecast that services will account for about 60% of household consumption by that time.
Chen Yuyu, director of the Institute of Economic Policy Research at Peking University, added that the service industry would play a crucial role in future employment. He emphasized the importance of a strong, innovative manufacturing sector, but stressed that a focus on services consumption is equally vital for economic development.
Meanwhile, Liu Shijin, a former adviser to China’s central bank, echoed the call for bolstering services consumption. Speaking at a forum last week, Liu highlighted that rural migrant income growth and urbanization are key drivers of increased services consumption. “When we talk about insufficient consumption, the key issue is the lack of services consumption. Goods consumption is more or less stable, but services consumption is directly related to the level of urbanization,” Liu explained.
The consensus among economists is clear: expanding the services sector could be a key lever for China to unlock future economic growth and consumption-driven prosperity.
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