Boosting Consumer Spending Requires Efforts on Both Stimulating Consumption and Improving Supply Quality

Bo Yongzhong | Columnist of Hexun

The main driving force behind China's economic development in the future is consumer spending.

According to data from the National Bureau of Statistics, in 2020, the marginal propensity to consume for Chinese residents was 70.1%, while that of American, German, British, and French residents was 89.0%, 89.2%, 93.2%, and 85.1% respectively, which is higher than China's by more than 10 percentage points.

Overall, there is still a lot of space for consumer spending to increase in China.

Boosting consumer spending is a very complex issue.

It involves increasing income levels, improving consumption capabilities, and enhancing consumer willingness. It also involves improving supply quality, including optimizing product supply, streamlining logistics, reducing costs, and improving structural adjustment.

From a long-term perspective, boosting consumer spending is a systemic engineering project that cannot be achieved through short-term tools alone; it requires a comprehensive approach to address key issues affecting consumption, including the supply-side quality of products, services, and infrastructure.

In this regard, changing logistics models, reducing logistics costs, and improving logistics efficiency should become an important part of promoting consumer spending.

According to economic theory, production, distribution, exchange, and consumption are the four key stages of national economy.

Production determines consumption and logistics (distribution, exchange), while consumption and logistics affect production.

Since the founding of New China, our country's consumer goods logistics model has experienced two major periods:

The first period was during the planned economy era when a unified logistics system dominated the market. From the early days of the founding to 1983, the government established a nationwide wholesale-dominated logistics system that handled all consumer goods logistics.

This model played an important role in China's market during the shortage period.

The second period began after the urban commercial reforms in 1983, when a production-oriented logistics system was established.

This logistics system is characterized by multiple stakeholders and multiple channels, with no clear dominant party or unified market.

With its flexibility, this new logistics system has played an important role in adapting to China's rapid economic development and consumer goods market growth.

Any logistics model must be adapted to economic development, market demand, and consumer spending.

As China's consumer goods market continues to grow rapidly, and with the constant changes in logistics, e-commerce, and terminal markets, the current logistics model has become increasingly restrictive for consumer goods industry development and consumer spending.

The main issue is that logistics costs account for a significant portion of product prices, averaging over 70%.

This will ultimately be borne by consumers, increasing their burden and affecting the effectiveness of consumption promotion.

Logistics costs are pure "consumption" costs that do not create value but only increase product prices.

The high logistics costs will ultimately be passed on to consumers, increasing their burden and affecting the effectiveness of consumption promotion.

-- Low Organization Degree :

Breaking down the former unified logistics system dominated by wholesale enterprises and establishing a production-oriented logistics system has led to a lack of "clear" logistics channels and poor organization management in the logistics sector.

This is reflected in the numerous small-scale logistics companies that have sprung up, with limited risk-bearing capacity, poor operational and management capabilities, and difficulty in playing a key role in the logistics process.

This reality also means that the government has failed to effectively manage the logistics sector.

-- Low Efficiency :

The current logistics sector is characterized by low efficiency, with a lack of unity and coordination among logistics companies, leading to poor service quality, high costs, and low reliability.

This has led to difficulties in achieving the expected goals of consumption promotion and consumer spending.

According to relevant statistical data: In 1991, China's social commodity retail turnover was approximately RMB 9.398 billion, while in 2024, it reached approximately CNY 488 million, with real commodity retail turnover exceeding CNY 430 million.

Only from a market scale perspective, China's consumer goods market has undergone significant changes.

China's consumer industry has also become an important driving force behind the country's economic development.

The current logistics model is no longer able to fully adapt to China's rapidly growing consumer goods market, and it is now a major constraint on the development of the consumer goods industry.

It is now time to redefine the importance of logistics and to reform the logistics model!