Education, e-commerce part of China’s services game plan to spur domestic consumption
Both industries faced strict government regulation in recent years. Chinese leaders have indicated consumers will be the target of stimulus measures to reach this year’s economic growth target.
People shop at Taikoo Li Sanlitun in Beijing on Jul 2, 2024. (AP Photo/Vincent Thian)
SINGAPORE: China is looking to services such as eldercare and childcare as well as education – an industry targeted by government curbs in recent years – to boost domestic consumption in the wake of lower-than-expected growth in the second quarter.
The industries were part of 20 general directives issued by the State Council, China’s Cabinet, on its website on Saturday (Aug 3) to guide ministries and local authorities on high-quality development of service consumption.
The State Council wants local authorities to "increase the supply of care services for the elderly", a sector with growth potential as the population ages.
It called for the development of childcare services, as fewer people opt to have babies due to the high cost of education and lack of social benefits.
The government also aims to promote colleges, universities, scientific research institutions, as well as social organisations to open up “high-quality educational resources” to meet the needs of the public.
Other services it urged local governments to promote were catering, housekeeping, entertainment, tourism, sports, residential, and green and health services.
New forms of digital consumption should be cultivated and expanded, including unmanned retail stores, self-collection lockers, e-sports, social commerce and livestreaming e-commerce, it added.
The call to promote education and new forms of digital commerce has raised some eyebrows among observers because of restrictions previously imposed to rein the industries in.
China's state planner said promoting domestic consumption will take on a "more prominent position", as the country tries to address one of the biggest drags on its economy. Measures include encouraging spending on household appliances and boosting tourism by making it easier for foreigners to travel to China. China's GDP grew by a slower-than-expected 4.7% year-on-year in the third quarter. A major drag has been weak domestic consumption. Retail sales went up by just 2% in June, slowing from 3.7% growth the month before. Olivia Siong reports.
Last July, Chinese regulators imposed a fine of nearly US$1 billion on the Jack Ma-backed Ant Group for “illegal acts” related to corporate governance, financial consumer protection, participation in the business activities of banking and insurance institutions and other areas.
The penalty ended an investigation into the tech giant that kicked off in 2020.
The probe was seen as the start of the government’s campaign to bring the nation’s most influential tech companies and billionaire entrepreneurs to heel.
In July 2021, China announced a clampdown on private tuition to reduce the academic burden and pressure on students.
Curbs included requiring after-school tuition centres to register as non-profit organisations and prohibiting both online and offline tutoring over the holidays and weekends.
MEETING DIVERSE CONSUMPTION NEEDS
The 20 guidelines come in the wake of official data showing the world's second-largest economy grew 4.7 per cent in the April-June quarter. It was the slowest since the first quarter of 2023 and missed a 5.1 per cent analyst forecast in a Reuters poll.
China’s protracted property downturn and employment insecurity are dampening economic recovery after strict pandemic measures were lifted at the end of 2022.
One economist told the state-owned news outlet Global Times that promoting high-quality service consumption would contribute to the “balanced and sustainable growth of China’s economy”.
According to economist Cao Heping from Peking University, many of the service consumption areas cited are those that need to be further developed to increase China's national income levels.
In an opinion piece published on the state-run China Internet Information Centre, one analyst wrote that the measures proposed reflect "new ideas to promote consumption growth".
Associate research fellow Liu Jintao from Renmin University of China wrote that the measures, such as developing the silver economy and opening up high-quality education resources to meet the diverse needs of the public, could help the ageing population.
They can also enhance the skills of the people by meeting the "diversified consumption needs of relevant groups", thus achieving quality economic growth.
The government’s new plan to promote consumption does not include proposed budgets.
Instead, income tax reductions are planned to offset the cost of caring for children under three and senior citizens, according to the document.
Beijing also pledged to ensure that eligible small businesses in the service sector can benefit from greater financial support, particularly from banks.
The plan calls for more food-themed festivals to be held, and for the promotion of street food popular with locals. It pledges to encourage major foreign companies in the food and beverage industry to open their first outlets in China.
Last month, Chinese leaders signalled that the stimulus measures needed to reach this year’s economic growth target will be directed at consumers, deviating from their usual playbook of pouring funds into infrastructure projects, Reuters reported.
The world's second-largest economy faces deflationary pressures, with retail sales and imports significantly underperforming industrial output and exports.
The Politburo, a top decision-making body of the ruling Communist Party, pledged at the end of its July meeting to make "countercyclical adjustments" to meet an economic growth goal of roughly 5 per cent for the year.
