Second, how to view the consumption structure

Behind the transformation of industrial structure, also contains the change of consumption structure. If the United States is taken as an example, there are three parts in the consumption structure, the first part is durable goods, the most typical is household appliances and automobiles, the second part is non-durable goods, such as food and clothing, and the third part is service consumption. The share of services consumption fell until the US GDP per capita reached $10,000, as cars and appliances moved into homes and squeezed out the share. After $10,000, the proportion of service consumption continues to rise to about 70% when the per capita GDP of the United States is $60,000.

Therefore, the author would like to extend two views:

First, I agree that there are some short-term economic shocks, such as weak income growth and a lack of confidence in the future. But we must also be aware of structural problems. In other words, the sustained growth of service demand now faces the shortage of the supply side, where many service industries are still regulated, and the quantity, quality and diversity of service industries are not enough. This can also explain some of the current phenomenon: why the overall consumption is insufficient, but it seems that Changsha is quite popular, Zibo is also popular. If underconsumption is a common problem, why do people still want to spend money in places that are fun and tasty? Therefore, the issue of consumption is not so simple as the total amount, the author suggests that we pay more attention to the changes in China’s consumption structure.

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Second, in the next 15 years, China will experience a significant increase in the proportion of services. The economic structure changes experienced by developed countries are not far away from us. This is a huge potential for China to upgrade its consumption. You might say, isn’t it too far to look at China in American historical data? In fact, if China’s GDP growth rate is around 5% today, it would mean doubling GDP in 15 years. What is the concept of doubling?

Today’s GDP per capita is $13,000, but in 15 years it will be about $25,000. In the same period in the history of the dollar, service consumption accounted for more than 50% of total consumption. The most developed regions in China, such as Shanghai, will also double their GDP per capita by more than $50,000 in 15 years, and the proportion of service consumption will reach 60-70%. In this sense, the change of China’s consumption structure is “the future has come“. That is to say, either China will not grow in the future, or you assume that Chinese consumers are different from American consumers, otherwise the continuous rise in the number and proportion of service consumption is certain and has great potential.

From this point of view, supply-side business investment and government policies are likely to unleash economic growth potential and structural dividends brought about by changes in the consumption structure. It depends on whether we can seize this opportunity.