The driving force for China's economic growth in the future will largely stem from consumer spending.
According to the National Bureau of Statistics' household survey data, China's marginal propensity to consume was 70.1% in 2020. In comparison, countries such as the United States, Germany, the United Kingdom, and France exhibited higher figures, with their respective marginal propensities to consume at 89.0%, 89.2%, 93.2%, and 85.1%. This disparity reveals a notable gap of over ten percentage points between these countries and China.
Overall, there remains significant potential for consumption growth in China.
However, stimulating consumer spending is a multifaceted challenge.
It encompasses various elements, including the need to enhance income levels, improve purchasing power, and boost consumer willingness to spendMoreover, it calls for elevating the quality of supply to meet consumer demand, which involves optimizing product availability, enhancing supply chain efficiency, reducing costs, and improving the structure of supply.
In summation, enhancing consumption is a long-term strategic endeavor that cannot be achieved merely through short-term stimuliIt demands focus on a myriad of critical issues affecting consumer spending and requires a comprehensive approach to fostering gradual increases in consumption.
Among the pivotal strategies should be the transformation of distribution models, reduction of distribution costs, and improvement of distribution efficiency.
From the perspective of political economics, production, distribution, exchange, and consumption constitute the four foundational pillars of a nation's economy.
Production influences consumption and distribution (which includes both distribution and exchange), while consumption and distribution, in turn, have feedback effects on production.
Since the establishment of the People’s Republic of China, the distribution model for consumer goods has transitioned through two significant phases:
The first was during the command economy era where a unified and controlled distribution model dominated
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From the early years after the founding of the country until 1983, when urban commercial reforms were initiated, a nationally unified wholesale-led consumer goods distribution system was established to cater to the developmental needs of the consumption goods sector amid a time of scarcity.
This model played a crucial role in a market characterized by shortages, effectively managing the distribution of consumer goods throughout the country.
The second phase emerged post-reform, transitioning to a production-enterprise-driven distribution paradigmStarting in 1983, the former monopoly held by the wholesale distribution system was dismantled, paving the way for a new network where production enterprises led the distribution processes.
This era marked a shift from a singular, controlled market to a diversified edifice comprising numerous actors within the distribution landscape.
The new distribution system, characterized by its flexibility, facilitated adaptive responses to the rapid development of the reform era and the burgeoning consumer goods market, thereby playing an invaluable role in stimulating consumption.
Any distribution model must align with the trajectories of economic development, market demands, and consumption growth.
As the consumer goods market has burgeoned in China along with an evolving landscape of logistics, the internet, and retail environments, shortcomings within the existing distribution model have become increasingly apparent.
High distribution costs pose a significant hurdle: During the wholesale-led era, distribution costs typically constituted about 30-50% of product pricesCurrently, however, the share of distribution costs in product pricing has soared to above 70%, indicating a troubling trend.
This is primarily manifested through elevated transaction costs, excessive intermediaries, and significant capital constraints linked to various distribution stages.
From a certain standpoint, distribution expenses can be characterized as purely “consumptive” costs that do not generate value but merely inflate the overall costs of goods.
Consequently, the burden of rising distribution costs ultimately falls on the consumer, impeding their spending capacity.
Moreover, the level of organization within distribution processes is relatively low
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The break from a traditionally controlled wholesale framework has resulted in a fragmented distribution model dominated by numerous small and medium enterprisesThis heterogeneity not only complicates risk management within the distribution market but also leaves many of these enterprises ill-equipped to cope with management challenges effectively.
This reality has, to some extent, resulted in a lack of robust government oversight over this critical segment of the national economy.
Additionally, declining efficiency throughout the distribution processes exacerbates the problemThe existing distribution model has led to stagnating productivity levels within consumer goods logistics.
Statistical data underscores this trend: In 1991, the total retail sales of consumer goods in China reached only 939.8 billion Yuan, whereas projections indicate that by 2024, this figure may soar to 48.8 trillion Yuan, with retail sales of physical goods surpassing 43 trillion YuanSuch stark contrasts reinforce the notion that the consumer goods market has undergone exponential growth.
As a result, the consumer industry has emerged as a vital pillar of China's economic architecture.
However, prevailing distribution models are increasingly inadequate to accommodate the swift evolution of the consumer goods marketplace, and systemic obstacles to growth have emerged.
Distribution challenges now rank among the key impediments to invigorating consumer spending.
It is high time to redefine the importance of distribution! It is essential to embark on a transformational journey to innovate new distribution models!
The transformation of distribution paradigms presents itself as an inherently complex systemic undertaking that integrates various domains including production, distribution, and consumption while encompassing transaction logistics and information sectors.
Currently, a promising avenue appears to lie in targeting logistics
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