The 14th Five-Year Plan for National Economic and Social Development¹ (14FYP) clearly states that China will accelerate the establishment of “dual circulation” with the domestic market as the mainstay to start a new journey of building a modern socialist country. The coverage on domestic consumption in the 14FYP has taken on new significance. It has become much more specific in terms of not only reinforcing the role of domestic demand as a primary driver for China’s economic growth, but also the comprehensive upgrade of its quality in combination of progress in the digital economy and improvements in social welfare.
Specifically, the 14FYP noted that digital technology will reach every corner of social interactions and daily lives in China. From shopping, health care, education, entertainment, to daily travels, digital footprints will be considered an important asset in the development of third-party big data service industry, and that will lead to a comprehensive transformation in China’s industries.
Second, the 14FYP emphasized that in addition to generating further increase in the household income level, it will strive to deliver higher standard of living and greater sense of satisfaction to the populace. Meanwhile, it downplayed the significance of the annual GDP growth target in 2021-2025. Compared to the 13th Five-Year Plan that proposed an actual numerical target for economic growth, “high-quality, healthy, and reasonable economic growth” became the objective in the 14FYP.
The potential of China’s consumers
In 2010, most urban Chinese households had enough money to cover basic needs like food, clothes, and housing, with median disposable income per capita at around RMB21,000 per year. In 2020, the median urban disposable income has more than doubled to around RMB44,000 per year, and a lot of well-to-do households are now having ample funds for leisure like regularly eating out, beauty products, flat-screen TVs, and holiday travel. By 2024, the Development Research Center (DRC) of the State Council expects that the nation will have at least 560 million middle-income consumers².
Figure 1 China’s rapid transformation to a middle-class society