Unnamed Macro ｜ Review of Consumption Situation in China in 2022 and Prospect in 2023
In 2022, the overall consumption situation in China was influenced by local scale rebound of domestic epidemic, rising unemployment rate, decreased residents’ willingness to consume, obvious fluctuation of automobile consumption and other factors, showing a trend of rapid decline and slow rise and tending to be stable. Among them, the multi-point distribution of domestic epidemic and local scale rebound kept service consumption under pressure, and the epidemic repeatedly led to an increase in unemployment rate, while reducing consumers’ confidence in employment, income and willingness to consume, and the decline of residents’ income and weakening consumption expectations led to a decrease in consumer demand, thus slowing down the growth rate of consumption. Looking forward to 2023, despite the low cardinal utility, the continuous optimization and adjustment of epidemic prevention policies, the diversified development of commodity retail channels and the landing of a number of policies to promote consumption, the future consumption will probably reverse the weak trend and achieve sustained recovery, but the decrease of the total population in China and the acceleration of the aging process are not conducive to the expansion of consumer demand, and the sudden shift of epidemic prevention and control policies will cause certain disturbances to consumption in the short term, which will lower the growth rate of future consumption to a certain extent. Therefore, it is estimated that the natural year-on-year growth rate of total retail sales of social consumer goods will gradually increase in 2023, and then stabilize, with a cumulative year-on-year growth rate of around 6.1%.
I. Review of the consumption situation in 2022
From January to November, 2022, the total retail sales of social consumer goods decreased by 0.1% year-on-year, which was 13.8 percentage points lower than that in 2021. After reaching the lowest point in May, the growth rate slowly picked up, and in October, the second round of decline began, showing a trend of sharp decline, slow rise and stabilization (as shown in Figure 1-1). Among them, the total retail sales of social consumer goods increased by 3.3% in the first quarter, decreased by 0.7% in the first half of the year, and increased by 0.7% in the first three quarters. Judging from the monthly growth rate, the year-on-year growth rate in March-May was in a negative range, and it began to pick up gradually after reaching the lowest point in April. In October, the growth rate turned from positive to negative again, and the overall trend showed a first decline, then an increase and then a slight decline.
On the whole, the total retail sales of social consumer goods in 2022 showed the following characteristics:
First, affected by the multi-point spread of the COVID-19 epidemic and the local scale rebound, the annual consumption growth rate showedThe steep decline and slow rise tend to be stable.The trend characteristics of.
At the beginning of the year, due to the improvement of the epidemic situation, the relatively loose epidemic prevention and control measures in various places have promoted the recovery of service consumption such as catering, and at the same time, the reduction of residents’ travel restrictions has increased the demand for car purchases and made consumption recover.The recovery has accelerated, forming the highest point of the year.From March, a new round of epidemic continued to spread, and it didn’t get better until June, during which it spread to first-tier cities such as Shanghai, Beijing and Guangzhou. At the worst, Shanghai was closed in April, which led to the continued pressure on service consumption such as catering and tourism, and the control of transportation and logistics under strict epidemic prevention policies also inhibited online consumption; On the other hand, the spread of the epidemic caused the unemployment rate to rise, and the urban survey unemployment rate reached a peak of 6.1% in the past two years in April (as shown in Figure 1-2). At the same time, the epidemic repeatedly reduced consumers’ confidence in employment, income and willingness to consume, and the consumer confidence index has remained at a relatively low level since it fell sharply in April (as shown in Figure 1-3). The decline in residents’ income and the weakening of consumption expectations have reduced consumer demand, thus slowing down the growth rate of consumption. In addition, the superposition of the high cardinal utility in the same period in 2021 made the consumption growth rate drop sharply from March to May in 2022. Since June, the epidemic situation has generally improved, but local rebounds have occurred one after another. With the introduction of intensive consumption promotion policies, the growth rate of consumption has rebounded, but the recovery rate is slow. Since November, due to the shift of epidemic prevention and control policies, the epidemic situation has ushered in a concentrated outbreak at the end of the year, which has caused short-term disturbances to consumption, resulting in a low year-on-year growth rate of total retail sales of social consumer goods in 2022.
Second,Consumption shows obvious differentiation.
On the whole, the consumption above and below the quota shows obvious differentiation. such asFigure 1-4As shown, as of November 2022, the year-on-year growth rate of retail sales of consumer goods above designated size was higher than that of.Total retail sales of social consumer goods1.8Percentage points, this difference has obviously expanded since the epidemic spread again in March, mainly because of the epidemic’s impact on flexible employment.The low-skilled middle-and low-income groups gathered in the service industry have a greater impact, their income has dropped sharply, and the gap between the rich and the poor in society has been further widened, which has led to obvious differentiation in the consumption field. From the perspective of sub-categories, the consumption of different commodities also has obvious differentiation. Essential consumer goods such as cereals, oils, foods, Chinese and western medicines are less affected by the epidemic, and the growth rate is relatively stable, but the growth rate of optional consumer goods such as clothing, shoes, hats and cosmetics fluctuates obviously with the epidemic (such asFigure 1-5As shown). The long-term existence of epidemic situation makes residents’ marginal propensity to consume decline. In order to improve their ability to resist risks, they will increase their savings and reduce their consumption. Due to the lack of flexibility, the overall consumption of compulsory consumer goods will not fluctuate too much, but optional consumer goods will be greatly affected by income and marginal propensity to consume. In addition, due to the downturn in the real estate industry and the continuous decline in commercial housing sales, the consumption of related industries such as furniture, construction and decoration materials has been declining year-on-year (such asFigure 1-6), there was no sign of improvement by the end of the year.
Third, automobile consumption has become one of the main reasons that affect the recovery of consumption.
After a brief recovery in February 2022, the growth rate of automobile consumption showed a sharp downward trend. The severe epidemic situation has caused some car companies to stop production, and the industrial chain and supply chain of the automobile industry have been hit. The overlapping logistics obstacles have put pressure on the supply side. At the same time, oil prices and car prices have risen, and many companies have laid off employees, resulting in sluggish demand. The retail sales of automobiles have fallen sharply, further depressing consumption. After June, after the introduction of intensive policies to promote automobile consumption, such as halving the vehicle purchase tax and launching a new round of new energy vehicles to the countryside, automobile consumption rose sharply, which led to an unexpected rebound in consumption. However, with the release of the previously suppressed consumer demand, the continuous measures to promote automobile consumption also weakened marginally, as shown in the data, with the slowdown of automobile consumption growth, consumption recovery also slowed down further (for example,Figure 1-7As shown).
Second, the prospect of consumption situation in China in 2023
Combining the factors of pull-up and pull-down, compared with the year-on-year growth rate of total retail sales of consumer goods in 2022, it is expected that the natural year-on-year growth rate of total retail sales of consumer goods in 2023 will gradually increase and then stabilize.
From the pull-up factors:
First, low cardinal utility.
With the spread of a new epidemic, the growth rate of total retail sales of social consumer goods has been at a low level in 2022, and a low cardinal utility has been formed in 2023. It is estimated that the growth rate of total retail sales of social consumer goods in 2023 will be significantly higher than that in the same period in 2022, and the contribution rate of cardinal utility to the growth rate of consumption will be about 40%.
Second, the consumption of service industries, mainly catering, tourism and entertainment, has been accelerated.
With the further optimization and implementation of epidemic prevention and control, the epidemic will gradually be effectively controlled, the public will rationally face the virus, scientifically prevent and treat the virus, and the disappearance of residents’ fear will be combined with the full liberalization of epidemic prevention and control policies. In the early stage, consumer demand suppressed by contact risk and social radius will be released quickly, and service consumption will gradually return to normal. In addition, the improvement of the epidemic situation has created conditions for further population mobility, and international tourism is expected to gradually recover in the future, thus playing a better supporting role in accelerating the recovery of consumption.
Third, the diversification of commodity retail channels and the continuous improvement of county and township infrastructure have increased the contribution rate of online consumption to consumption growth.
With the growth of new retail formats such as live broadcast and delivery, the construction of new consumption infrastructure and service support capacity such as county and township logistics system has been continuously improved, and the impact of epidemic situation has forced retail and catering enterprises to continuously explore online business, accelerate the development of online sales, take-away food delivery and other non-contact services, which has continuously expanded the depth and breadth of the online consumer market, and its contribution rate to consumption growth will gradually increase.
Fourth, policy drivers.
In March 2022, the government work report proposed to promote the sustained recovery of consumption, including promoting residents’ income through multiple channels, improving the income distribution system and enhancing consumption capacity; Promote the deep integration of online and offline consumption, promote the recovery of life service consumption, and develop a new mode of consumption; Continue to support the consumption of new energy vehicles, and encourage local governments to carry out green smart home appliances to the countryside and trade in old ones. On April 25th, 2022, the General Office of the State Council issued "Opinions on Further Releasing Consumption Potential and Promoting Sustainable Recovery of Consumption", proposing 20 key measures in five aspects, making concerted efforts, giving consideration to both distance and distance, comprehensively releasing consumption potential, and striving to stabilize the basic consumption disk. On July 7, 2022, the Ministry of Commerce and other 17 departments launched 12 measures from six aspects to further invigorate automobile circulation, expand automobile consumption, help stabilize the basic economy and ensure the improvement of people’s livelihood. On September 26th, 2022, the Ministry of Finance, the State Administration of Taxation and the Ministry of Industry and Information Technology issued the Announcement on Continuing the Policy of Exempting New Energy Vehicles from Purchase Tax, extending the period of exempting new energy vehicles from purchase tax until the end of 2023. This is the third extension of exempting new energy vehicles from purchase tax. In addition, the Party’s Report to the 20th CPC National Congress proposed to focus on expanding domestic demand and enhancing the basic role of consumption in economic development. With the further liberalization of epidemic control measures and the introduction of intensive consumption promotion policies, it is expected that the future consumption growth rate will further increase.
From the perspective of depressing factors:
First, the population factor.
According to our calculation, the population of China peaked in 2017, and the total population of China began to show negative growth in 2018. Even according to the official data, the national population will increase by only 480,000 in 2021, and the population will have a negative growth in 2022 at the latest, which means that the total population of China is decreasing or will decrease year by year. The total market size of a country depends on the total population and per capita consumption. Population is the market and the total demand. When the total population began to decrease, it reflected the risk of market contraction to some extent. At the same time, with the acceleration of population aging, economic vitality will continue to weaken. Although the "three-child" birth policy has been implemented and related supporting measures have been released one after another, it will still take a long time to improve the existing population structure and total fertility rate in China. The decrease of the total population and the acceleration of the aging process have restrained the growth of consumer demand.
Second, the per capita income growth rate of residents has decreased, and the marginal propensity to consume has declined.
In the short term, consumers’ confidence in employment, income and willingness to consume is greatly reduced due to the repeated and long-lasting epidemic. In order to improve their ability to resist risks, they will increase their savings and reduce their consumption. According to the household deposit data released by the central bank in 2022, residents’ willingness to save has increased significantly, and it is difficult to change this situation until the epidemic situation has substantially improved. At the same time, the impact of the epidemic on low-income people is much greater than that on high-income people, while the marginal consumption power of low-income people is stronger, and the decrease in income growth will lead to a significant decline in consumption growth. In the long run, the decline of the total population is accompanied by the aging, which leads to the sharp decline of the labor force. The decline of the total output of the whole society makes the growth rate of per capita income decline, which in turn slows down the growth rate of consumption.
Third, the recovery of consumption is uneven, and the demand for optional consumption continues to be under pressure.
Consumption of clothing, shoes, hats, gold, silver and jewelry is greatly affected by income. Before residents’ income improves as expected, such consumption demand will continue to be suppressed, while consumption of household appliances, audio-visual equipment, furniture, construction and decoration materials will also be dragged down by the downturn of the real estate cycle, and it will take some time for commercial housing sales to resume positive growth, so such optional consumption may continue to be under pressure.
Fourthly, there may be some disturbance in the COVID-19 epidemic in the short term, which will inhibit the consumption of services.
The shift of epidemic prevention and control policy will lead to a concentrated outbreak of COVID-19 epidemic in the whole country, which will cause some disturbance to consumption in the short term. However, with the gradual normalization of the epidemic, the public can scientifically prevent and treat the virus, and this influence will gradually weaken.
To sum up, with the further optimization and implementation of epidemic prevention and control, the epidemic will be effectively controlled step by step, the disappearance of residents’ fear will be combined with the full liberalization of epidemic prevention and control policies, the consumer demand suppressed in the early stage due to contact risk and the narrowing of social radius will be released quickly, and service consumption will gradually return to normal. At the same time, driven by factors such as low cardinal utility in 2022, diversified development of commodity retail channels and the landing of a number of policies to promote consumption, the future consumption growth rate will be further improved. However, according to official data, the population of China will reach its peak in 2020 at the latest. As the birth rate continues to decline, the total population will start to decrease, and consumer demand will face the risk of shrinking. In addition, the decline of the total population is accompanied by the aging, which leads to a sharp decline in the labor force, and the total output of the whole society may decline, which in turn leads to a decline in the growth rate of per capita income, which is ultimately not conducive to the expansion of consumption. Therefore, based on the above logical judgments, it is estimated that the cumulative year-on-year growth rate of total retail sales of consumer goods will be around 6.1% in 2023.
Brief introduction of Peking University National Economic Research Center;
Peking University National Economic Research Center was established in 2004. Attached to Peking University Institute of Economics. Relying on Peking University, the key research fields include China’s economic fluctuation and economic growth, macro-control theory and practice, economic theory, China’s economic reform practice, frontier topics of transition economy theory and practice, political economy, and western economics teaching and research. At the same time, the Center closely tracks the major changes in macro-economy and policies, and integrates short-term fluctuations and long-term growth into a comprehensive theoretical research framework, interpreting them from a unique observation perspective, grasping macro trends, analyzing data changes, understanding the original intention of policies, and predicting the effects of policies.
The research of the Center has achieved remarkable results, which has had a great impact on China’s macroeconomic policies. The most representative achievements are: (1) Promoting the adjustment of population policy in China. Since 2006, Professor Su Jian, director of the Center, has called on China to immediately and completely abandon the family planning policy and encourage childbearing instead. (2) Research on the macro-control system: The Center proposed a three-dimensional macro-control system including market-oriented reform, supply management and demand management policies. (3) Research on the strength of macro-control: In July 2017, the Center pointed out that China’s macro-control should be strictly guarded against overexertion. This suggestion was instructed by the main leaders of the State Council, and it was completely consistent with the view that "macro-control is moderate" put forward in the report of the 19th National Congress three months later. (4) Achievements of China’s economic target growth rate. In 2013, after careful analysis and calculation, Liu Wei and Su Jian thought that China could ensure employment as long as it had an annual economic growth rate of 6.5%. Shortly thereafter, this growth rate became the benchmark target of China government’s economic growth rate. China’s economic practice in recent years has also proved the accuracy of their calculation results. (5) Supply side research. Professor Liu Wei and Professor Su Jian are the earliest scholars who study the supply side in China. In 2007, they began to publish academic papers on supply management in magazines such as Economic Research. (6) Research on the new normal. Liu Wei and Su Jian collaborated on the paper "Macro-control in China under the New Normal" (Economic Science, No.4, 2014)It is the first academic paper to study the new normal of China’s economy. Su Jian and Lin Weibin also studied the new normal of developed countries. (7) The China Economy Seeking Breakthrough edited by Liu Wei and Su Jian was translated into English, Korean, Russian, Japanese and Hindi and published. (8) Research on subsidy mechanism of Beijing subway.In 2008, our research group was entrusted by Beijing Finance Bureau to design a subsidy mechanism for subway operation in Beijing. This mechanism has been used since January 1, 2009 until now.
Central publications are: (1) Yuanfu magazine. Yuanfu is a monthly electronic publication sponsored by Peking University National Economic Research Center. Its purpose is to present the major macroeconomic events at home and abroad this month in the most timely, professional and comprehensive way and to interpret the key events professionally. (2) China Economic Growth Report (annual report). This report mainly analyzes the long-term problems existing in China’s economic operation. Since 2003, it has been published for 14 consecutive issues, which is the longest one among the related annual reports and has been included in its annual report funding plan by the Ministry of Education. (3) A series of macroeconomic operation analysis and forecast reports. The Center regularly publishes a series of analysis and forecast reports on China’s macroeconomic operation, especially the center’s forecast report is in a leading position in the country in terms of forecast accuracy.
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