Consumption Growth Remained Steady Despite Household Income Growth Decelerated

Coinciding with the economy’s downward trend, the household income subdued. In the first half of 2016, China’s per capita real disposable income of households increased by 6.5% YoY, 1.1 percentage points lower than that in the same period last year. Quarterly, it rose 6.5% both in the first and second quarter, 0.2 percentage points lower than the GDP growth rate on a similar comparison, which occurred for the first time in recent years (see Fig. 1.12).

In the first half of 2016, sales of consumer goods at domestic market increased steadily. Total retail sales of consumer goods picked up by 10.3% YoY, matching its growth rate in the first half of 2015. Given weak foreign trade and subdued investment growth, the steadily rapid growth of household consumption increased the contribution of consumption to GDP growth. In the first half of 2016, the contribution of final consumption expenditure accounts for 73.4% of GDP growth,

Consumption growth stayed robust YoY. Source CQMM team calculations on CEIC data

Fig. 1.12 Consumption growth stayed robust YoY. Source CQMM team calculations on CEIC data

an increase of 13.2 percentage points over the same period a year ago and 13.5 percentage points over 2015 respectively.

While sales of consumer goods expanded, new commercial forms grew rapidly. In the first half of 2016, the online retail sales[1] of physical goods increased by 26.6%, accounting for 11.6% of the total retail sales of consumer goods, up by 0.8 percentage points than that in 2015. Furthermore, sales of quality consumer goods maintained rapid growth, suggesting that the consumption structure be upgraded distinctively, In the first half of 2016, of retail sales by enterprises above designated size, for sports and recreation articles went up by 16.9% YoY, for communication equipment grew by 14.9%, for camera increased by 22%, all above the growth rate of total retail sales of consumer goods, suggesting that the demand for consumer goods is being upgraded.

Consumption in rural areas grew faster than that in urban areas. In the first quarter and the second quarter, the real retail sales of consumer goods in rural area were up by 8.8 and 8.6%, 0.9 and 0.7 percentage points higher than those in urban areas respectively, maintaining the state of growing faster than that in urban areas since 2013. The narrowing gap between the urban-rural consumption growth is coinciding with figures for the urban-rural income gap. In the first and second quarter, the per capita real disposable income of rural residents went up by 7.0 and

Consumption in rural areas grew faster than than in urban areas YoY. Source CQMM team calculations on CEIC data

Fig. 1.13 Consumption in rural areas grew faster than than in urban areas YoY. Source CQMM team calculations on CEIC data

6.7% respectively. By contrast, the per capita real disposable income of urban households picked up by 5.7 and 5.8% respectively (see Fig. 1.13). Helped by the internet platform, the consumption market in rural areas has been extended, and the consumption environment has been improved. Compared with urban areas, the market structure of consumer goods in rural areas has larger development room.

  • [1] Online Retail Sales: refers to the sales of goods and services got through public online tradingplatform (including self-built websites and third-party platform). Goods and services includephysical goods and non-physical goods (such as virtual product, services). The total retail sales ofconsumer goods include online retail sales of physical goods, excludes online retail sales ofnon-physical goods.
 
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