China's consumption is gradually returning to normal levels with the restoration of consumer confidence, as policies further heightened market expectations for a rebound in consumption.
The interbank transaction volume of UnionPay cards reached 359.2 billion yuan ($55.6 billion) on the New Year's Day, roughly the same as a year earlier, according to data released by China UnionPay, a national bank card association, on Saturday.
Among the total, Heilongjiang and Shanxi provinces and the Inner Mongolia autonomous region took the lead in terms of year-on-year increase of catering consumption on Jan 1, which was generally over 15 percent. During the same period, the volume of consumption in travel and accommodation increased by more than 10 percent on a yearly basis in Qinghai, Shandong and Zhejiang provinces.
Chinese people had a three-day extended weekend including the New Year's Day at the beginning of 2021. In this way, consumers were given more time to unleash their passion for consumption, said Chen Han, a data analyst with China UnionPay.
The rise in consumption was also driven by a series of favorable policies at the national and local levels.
Guizhou province issued vouchers worth more than 90 million yuan in December to boost consumption in tourism, automobiles and home appliances. Suzhou, a major city in Jiangsu province, offered discounts and a huge amount of subsidies to boost furniture consumption.
During the annual Central Economic Work Conference held in Beijing last month, policymakers highlighted the need for effective institutional arrangements in guiding consumption, savings and investment, saying that China will take more steps to create jobs, improve its social security system, optimize the income distribution structure and expand the middle-income group as part of the efforts to expand domestic consumption.
The country will lift some administrative restrictions on purchases in an orderly manner and tap the consumption potential of counties and townships, according to a statement released after the meeting.
A teleconference held by the Ministry of Commerce on Dec 26 emphasized that China should stimulate consumption potential, build a modern commercial circulation system, promote the formation of a strong domestic market, enhance the level of traditional consumption, accelerate the fostering of new types of consumption, and build a consumption upgrade platform.
Experts said consumption growth will support a rapid economic rebound in China this year.
"Thanks to the arrival of COVID-19 vaccines, the overall economic situation in China will likely return to normal this year, with consumption catching up in strength," said Liu Ligang, managing director and chief China economist at Citigroup.
Liu forecast that the country's retail sales of consumer goods will increase by 16.5 percent on a yearly basis this year, compared with a 4.1 percent contraction in 2020.
"According to our estimates, consumption will contribute about 6 percentage points of China's GDP growth, which will reach 8.2 percent this year," he said.
The government is still launching policies to boost consumption of automobiles and home appliances, as well as consumption in other sectors. Moreover, if China accelerates the implementation of reforms of the household registration system to allow a growing number of migrant workers to have urban household status, the government will encourage these people to make greater contribution to the local economy in terms of consumption, he said.