Increasing consumption and improving people's livelihoods are key to boosting China's development, given the country's great consumption potential. However, consumption is not a panacea for all the development-related ills, because a better way to boost the economy is to increase people's purchasing power, which can be realized through effective investment.

Effective investment can create employment opportunities and ensure the smooth supply of resources, increasing people's purchasing power.

Also, China should speed up the process of transforming the economy from "Made in China" to "Created in China", from traditional manufacturing to intelligent manufacturing. Besides, now over 65 percent of China's population lives in cities, but only more than 45 percent has urban hukou, or urban household registration. That means many migrant workers without hukou cannot enjoy the basic public services in cities. This calls for the government to take measures to unleash the full potential of urbanization and industrialization, in order to meet people's need for a better life.

In addition, since the real estate sector is still a pillar industry of the country, the government should create favorable conditions for the sector's recovery and optimize the industrial structure. And effective investment can help private enterprises to regain their confidence and act as a catalyst for increasing consumption.

By strengthening the social services system, the government can help people have more money which they can spend on consumption. As such, governments at all levels should provide necessary assistance and subsidies for vulnerable groups, including through money transfer, to help boost their basic consumption power.

The building of a national unified market can help ensure the smooth circulation of goods and thus boost consumption, especially because, despite the continued recovery of the catering and tourism sectors, people are still reluctant to purchase commodities such as vehicles, electronics and household goods. And people's urge to buy vehicles, apartments and household goods will be rekindled by an active housing market, and sound consumer credit and well-developed mortgage systems.

While many third- and fourth-tier cities have relaxed administrative control over the real estate industry in line with the change in the relationship between supply and demand in the property market, some first- and second-tier cities should adjust their policies to help meet new homebuyers' demand.

Furthermore, local governments should consider distributing consumption vouchers among the people to stimulate consumption. But some local governments are reluctant to do so for various reasons. While consumer vouchers alone may not be able to solve all the consumption-related problems, they can help unleash some of the consumption potential of the middle-income group. As for households with relatively low incomes, they need increased subsistence allowances and other timely monetary assistance.

Compared with giving cash to low-income households, however, it would be better for governments to issue coupons that can be re-deemed for purchasing basic goods and services, because that would prevent some recipients from spending the money on nonessential, frivolous goods and services.

Moreover, efforts should be made to optimize policies to not only unleash the full consumption potential but also promote common prosperity. Therefore, the authorities should increase effective investment, and help expand domestic demand by stimulating consumption to ensure all the people can share the fruits of China's development.

The author is chief economist of the China Academy of New Supply Side Economics.

The opinions expressed here are those of the writer and do not necessarily represent the views of China Daily and China Daily website.

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