The General Office of the State Council, China's Cabinet, recently issued a document calling for the use of emerging new business forms to improve the quality and expand the capacity of consumption, so as to accelerate the development of new forms of consumption.

This year, because of the need to prevent and control the spread of COVID-19, more consumer spending has moved online and new business forms such as online medical services and online education are booming.

Undoubtedly, with the younger generation gradually dominating the consumer market and the consumption sector continuously undergoing digital transformation, new business forms and models will promote the capacity expansion and quality improvement of new forms of consumption and help expand domestic demand.

However, since 2010, China's total retail sales of consumer goods has been declining because of slowing national economic growth and dipping incomes.
As the measures taken by the government to promote economic growth during this period have mostly benefited real estate, infrastructure and finance sectors, income divergences among different groups have continuously widened, with high incomes mainly concentrated in a few traditional industrial sectors.

Also, the continuous rise in housing prices in some cities has not only constrained the development of manufacturing, innovation sectors and high-end services, but also hampered the further increase of household consumption capacity. It has also raised the cost of urban services, causing prices in some services to far outpace people's income growths.

This, along with overcapacity and a price war in the manufacturing sector that have checked commodity prices and growth in manufacturing workers' wages, has further suppressed people's consumption.

Efforts to develop the new forms of internet-based business are expected to intensify competition and contain excessive rises in consumer prices, further stimulating consumption.

However, to expand consumption, the country needs to fundamentally change the traditional debt-driven development model and advance supply-side structural reforms, to realize high-quality development, enhance the competitiveness of manufacturing and service industries, and cultivate more middle-income groups. Practical measures are also needed to improve supply chain efficiency through strengthening infrastructure, institutional reform and technological means to effectively reduce costs for real businesses.

At the same time, the government should increase investment in healthcare, old-age care and education to enhance people's sense of security and embolden them to spend more.

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