A CPC Central Committee Political Bureau meeting on July 30 urged efforts to keep expanding domestic demand, counteract the impact of COVID-19, boost final consumption and create conditions for consumption upgrading.

Despite the achievements in epidemic prevention and control along with economic recovery, the current macro economy is still far from normal. Resuming the increase of demand is the key to overcoming economic difficulties, said Zhang Bin, a research fellow from the Institute of World Economics and Politics at the Chinese Academy of Social Sciences.

At present, the restoration of demand mainly depends on expanding domestic demand, Zhang continued. It is necessary to reduce the investment cost of the private sector through a loose monetary policy and a proactive fiscal policy, and to drive the growth of private sector investment through the growth of public sector investment. Increased investment will propel economic growth, and the labor market and residents’ income will also improve accordingly, ultimately forming a strong support for consumption.

Continued expansion of domestic demand and consumption is a means of regulation and control, with the goal of deflating shocks and stabilizing growth. Zhang Keyun, a professor from the School of Applied Economics at Renmin University of China, noted that salary increases, interest rate cuts, tax reductions and exemptions, a sound social security system, and employment expansion are all policy tools to expand domestic demand. In addition, it is imperative to adjust consumption policies to stimulate consumption, especially to tap the consumption potential of the vast rural areas.

China’s economic growth in the future is inseparable from stable and high-quality consumption growth, said Chen Haiqiang, a professor from the Wang Yanan Institute for Studies in Economics at Xiamen University.

Chen suggested strengthening the construction of consumption infrastructure and systems to promote cross-city and cross-regional consumption. Cross-city consumption is conducive to accelerating the flow of economic factors between cities of different tiers, thereby driving high-quality endogenous economic growth.

In recent years, China has seen a fourth round of consumption upgrades, which is to say increasing demand for higher education, medical care and elderly care, said Duan Wenbin, a professor from the School of Economics at Nankai University. The key to meeting the demand is to expand employment, adjust the income distribution structure, improve the social security system and improve the quality of the supply system.

“Expanding domestic demand is an important strategic plan for stabilizing economic growth,” said Huang Qinghua, deputy dean of the College of Economics and Management at Southwest University. From the supply side, we must continue to optimize supply allocation, focus on new consumption hotspots such as online consumption, and facilitate diversified supply systems adapted to consumption upgrades so as to stimulate the growth of household consumption.

From the consumption side, Huang suggested doing everything possible to stabilize employment and expand the people’s income sources while improving the income distribution system to effectively enhance residents’ consumption capacity.

New-type urbanization is an important driving force for investment and consumption. The growth of consumption and effective investment will become a powerful engine propelling domestic demand and providing continuous impetus for China’s economic development.

In Huang’s view, new infrastructure construction provides short-term support for expanding consumption. The cycle of new infrastructure construction is relatively short, the return on investment is relatively fast, the investment effect is relatively obvious, and it is easier to stimulate the participation of social capital. As such, the construction of new infrastructure can achieve important results in stabilizing growth, adjusting structure and benefiting people’s livelihood in the short term.

New-type urbanization is a medium-term support, and continuous promotion of new-type urbanization will gradually release huge investment and consumer demand, Huang continued.

For new-type urbanization to drive investment and consumer demand, it is necessary to innovate with the system and mechanism of the integrated development of urban agglomerations and metropolitan areas, said Zhang Keyun. Coordinated regional development can solve the problem of unbalanced regional development, tap the enormous consumption and investment potential, increase effective demand, and promote the healthy growth of the national economy.

Innovation with the system and mechanism for the integrated development of urban agglomerations and metropolitan areas is a long-term guarantee, Huang said. Their integrated development is conducive to breaking through the bottleneck of urbanization, eliminating barriers to the development of urban-rural integration, guiding the free flow of resources and production factors, and improving resource utilization efficiency.