At the end of 2021, the Politburo meeting and the central economic work conference set the tone of "steady growth" one after another, but there was little ink on "consumption". Does this mean that it is still difficult to improve consumption after "staggering" for nearly two years?
After the epidemic, the consumption of Chinese residents continued to be depressed, and there was still a large gap in the social zero trend level by November 2021. In fact, in order to solve the problem of low consumption, various government departments have successively issued relevant policies and measures since 2020. However, due to the damage of residents' balance sheet and the repeated local epidemic from time to time, the above policies have little effect.
The sluggish recovery of household consumption is not unique to China. Globally, except for the United States, which directly "sends money" to residents, by the third quarter of 2021, the consumption of residents in most economies had not returned to the pre epidemic level. This shows that the endogenous repair process of residents' consumption is generally slow, and the exogenous consumption policy other than direct "sending money" is difficult to work. This is also likely to be one of the reasons for the significant reduction in the number of references to "consumption" in the above-mentioned meetings.
In addition, our previous report pointed out that China's demand for steady economic growth in 2022 is prominent, and the three main lines of policy are real estate correction, fiscal advance and monetary easing. Compared with household consumption, the above three policies are obviously more "immediate" effective.
Nevertheless, we believe that expanding domestic demand as a strategic base point is still an area of sustained policy focus. On the one hand, the central economic work conference stressed the importance of "ensuring employment and people's livelihood". To some extent, this reflects that the policy has focused on the essential reason for solving the consumption problem, that is, it is difficult to repair residents' income. Only when employment and people's livelihood are guaranteed can residents' consumption ability and willingness be effectively improved.
On the other hand, the policy is not completely unable to find a "grasp" in the field of consumption, and the field of rural consumption is considered to have great potential. At the regular policy briefing of the State Council on December 8, 2021, the director of the rural economy Department of the national development and Reform Commission mentioned that "building a new development pattern, agriculture and rural areas have potential and space, and undertake the important task of exploring the consumer market of more than 500 million rural residents and implementing the strategic basis of expanding domestic demand".
Although China's rural consumption level is relatively backward, its recovery resilience after the epidemic is stronger than that in cities and towns. In 2020, China's rural population will be about 510 million, accounting for 36.1% of the country's total population; The consumption expenditure of rural residents is about 8.3 trillion yuan, accounting for only 21.5% of the national consumption expenditure. This reflects the current situation of insufficient consumption power of rural residents and low per capita consumption expenditure.
The core factor restricting the consumption rate of rural residents is the level of disposable income. We follow the "DuPont analysis" framework for analyzing consumption, After disassembling the resident consumption rate (consumption expenditure / GDP) into disposable income / GDP and consumption tendency (consumption expenditure / disposable income), it is not difficult to find that the low level of disposable income is the key to restricting the consumption rate of rural residents. In the first three quarters of 2021, the disposable income of rural and urban residents accounted for 24.7% and 64.6% of GDP respectively, highlighting the gap between urban and rural areas.
Since May 2021, the two-year compound growth rate of rural consumption has continued to be higher than that of cities and towns, demonstrating the resilience of China's rural consumption. We believe that the reason is mainly due to the relatively high proportion of employed people in urban service industry, so the recovery of rural residents' disposable income level after the epidemic is faster than that in cities and towns.
Next year, rural bulk consumption is expected to become a major driving force for consumption recovery. At the policy briefing of the State Council on December 8, 2021, it was mentioned that "areas with conditions are encouraged to carry out the renewal of rural household appliances, implement the subsidy for furniture and home decoration to the countryside and a new round of automobile to the countryside". In view of the clearer main line of the current steady growth policy, we believe that the above rural consumption is likely to become a major driving force for the recovery of consumption in 2022.
Taking history as a mirror, the policy of "home appliances to the countryside" from 2007 to 2010 effectively stimulated rural consumption. Due to the limited level of disposable income of rural residents, over the years, when stimulating rural consumption, the state often adopts financial direct subsidy measures to make up for the consumption power of rural residents in disguise, such as the policy of "home appliances to the countryside" implemented from 2007 to 2010. After the implementation of the policy, "home appliances to the countryside" refrigerator sales accounted for 52.6% of the national refrigerator sales; From 2008 to 2011, the average household ownership of refrigerators in rural areas increased from 0.30 to 0.62, and the sales volume of refrigerators in China increased from 26.08 million to 58.97 million, with an average annual growth rate of 31.3%.
A simple quantitative calculation is carried out in combination with the speech at the policy briefing of the State Council, taking into account China's household appliances, furniture, automobiles The retail sales of four types of bulk consumption of building materials account for 38% of the total retail sales above the limit (data in 2020). If the consumption expenditure of rural household appliances / furniture / home decoration / automobile increases by 10 ~ 20 percentage points in 2022 with the help of policies (referring to the period when household appliances went to the countryside, the sales volume of refrigerators in 2009 was 51% year-on-year, 20 percentage points higher than the year-on-year average of 31% in 2006-2007), which led to an increase in the growth rate of national household consumption (10 ~ 20) * 38% * 21.5% = 0.8 ~ 1.6 percentage points.
Risk tip: the epidemic spread exceeded expectations, and China's foreign policies exceeded expectations
