Agencies
China is pinning more hopes on the services sector to lift demand and breathe new life into the economy, with a raft of new measures to boost spending in areas ranging from tourism to care for the elderly.
In a 20-point directive released on the weekend, the State Council, the country’s cabinet, said it would increase support for nursing care, consider extending visa-free policies to more countries, and encourage "low-altitude tourism” to spur spending on services, a sector that is growing faster than goods.
The measures follow the release last week of the Politburo’s midyear economic review, which underlined services as an "important solution” to expanding overall consumption, something Beijing is banking on for future growth amid subdued external demand.
The country posted a 5 per cent increase in gross domestic product in the first half of the year from 12 months earlier, but momentum took a hit in the second quarter as year-on-year growth slowed to 4.7 per cent, according to official figures.
The authorities are looking to unleash new demand in emerging sectors including low-altitude aviation – an area that includes airships and parachuting – as well as cruises, yachts, and recreational vehicle camping.
They are also considering further extensions of its visa exemption programme, which has contributed to a surge in inbound tourism this year.
In the first half of 2024, 14.64 million overseas visitors entered the country, roughly 2½ times the number for the same period last year, as authorities reinstated the 144-hour free transit visa to cover 54 countries and 37 entry points, according to the most recent official data.
The directive vowed to "optimise entry policies and the consumption environment, and speed up the resumption of flights”.
In addition, services related to basic home-based needs such as catering, elderly care, childcare and housekeeping should also be expanded, it said.
Abandoned rural property should be developed into accommodation such as inns for travellers, it said.
The directive also included a pledge to cultivate new types of spending by developing unstaffed retail stores, self-pickup lockers, esports and live streaming e-commerce.
Shi Lei, a professor of economics at Fudan University, said the latest measures indicated the authorities were responding to changing spending habits.
"Though people’s incomes are increasing at a slower rate, their demand for quality services is growing. The past four decades saw Chinese people work hard while spending little, but today it’s started to be the other way around,” Shi said.
"By improving the service sector and encouraging spending, they are trying to expand demand and curb the tendency to save money.” China’s use of services was growing faster than commodity consumption and had become the main source of incremental spending, Chen Lifen, a researcher with the State Council’s Development Research Centre, was quoted by state news agency Xinhua as saying in a report on Sunday. Incremental spending refers to new consumer demand.
In the first half of this year, retail sales of services increased by 7.5 per cent year on year, 4.3 percentage points faster than retail goods sales in the same period, according to the National Bureau of Statistics.
However, services account for a "relatively low” proportion of consumption in China compared with the average level observed in high-income economies when they were at the same stage of development, Chen said, adding that "there is great room for growth”.
China’s retail sales, a figure that tracks consumer demand for finished goods, rose by 2 per cent year on year in June, a notable slowdown from the 3.7 per cent gain in the previous month.