Lian Ping: Boosting consumption requires tapping into rural potential.

The speech transcript was given by the director of the Chief Industry Research Institute of Liang Ping and the chairman of the China Chief Economist Forum at the 2025 China Chief Economist Forum Annual Meeting. Dear leaders, experts, and guests, good morning. The topic of my speech is "boosting consumption requires tapping into rural potential." I will discuss six main aspects regarding this issue. Firstly, it is necessary to significantly increase consumption in 2025. The recently held Central Economic Work Conference identified expanding domestic demand as the primary focus of work in 2025, with the two main areas of focus being investment and consumption. Consumption currently contributes increasingly to the growth of our country's economy. In the period from January to November 2024, the final consumption expenditure contribution rate was around 55%, and it may reach around 60% for the whole year. Due to the slowdown in household income growth, pressures on the real estate market, weak investment returns, and persistent deflationary pressures, consumption expenditure growth among residents slowed down in 2024, and our economic growth target for 2025 may be around 5%. To achieve this level of growth, it is still necessary to accelerate efforts to promote consumption. Secondly, a key task in boosting consumption in 2025, as mentioned in the economic work conference, includes four aspects: intensifying the implementation of policies to promote new development, using greater fiscal subsidies to stimulate large-scale equipment upgrades and the continued replacement of durable consumer goods, expanding the opening and innovation in the service sector to boost consumption in sectors such as telecommunications, healthcare, and elderly care, pushing forward the real estate market to stabilize and stimulate consumption expenditure on related goods like furniture, home decor, and building materials, and implementing special actions to boost consumption, such as raising basic pensions for retirees, increasing the level of residents' pensions, and addressing the income of low-income residents, and so on. Thirdly, our country's rural areas have significant potential for consumption growth. Typically, after human society entered the industrialization era, the main consumption demand of an economic entity usually comes from urban areas rather than rural areas, and our country is no exception. However, given various factors such as the current level of urbanization and the rural land system in our country, in the foreseeable future, there is still significant potential for consumption growth in rural areas. Consumption is a function of income and expectations, and the slowdown and decline in rural residents' disposable income are the fundamental causes of inadequate consumption. In the... (Unfortunately, the text is too long for a single response. Please let me know if you would like me to continue with the translation)The system of separating land contract and management rights should be perfected. In addition, further reforms should be promoted in the land acquisition system, and the distribution of land value-added benefits should be placed at the forefront of land reform.Sixth, to promote the urbanization of farmers and increase transfer income with greater resources. The Central Economic Work Conference emphasized the need to coordinate the promotion of new urbanization, steadily expand investment and consumption, and by 2025, more fiscal resources will be used to accelerate the urbanization of agricultural migrant population. The conversion of rural residents to urban residents will significantly increase their consumption performance, including expenditures on housing, clothing, transportation, education, healthcare, elderly care, and so on. It is expected that the scale of public fiscal support expenditures enjoyed by rural migrant population will increase by more than 50% annually, which is a very substantial figure, indicating that future fiscal resources will be more inclined towards this aspect. The difference in the level of urbanization development leads to a noticeable income disparity between urban and rural areas. By the end of the third quarter of 2024, the ratio of per capita disposable income between urban and rural residents was 2.46. Although the gap between urban and rural residents has narrowed in recent years, it still remains significant. China's urbanization development is actually a process of urbanization of agricultural migrant population. From 2014 to 2020, the newly added urban population exceeded 150 million, and by the end of 2020, China's urbanization rate reached 63.9%, with an average annual increase of 1.35 percentage points. However, after 2020, the growth rate of China's urbanization rate slowed significantly. By the end of 2023, the urbanization rate was 66%, an increase of only 0.76 percentage points, still far from the level of urbanization of over 75% in developed countries, especially the household registration rate, which is even lower, not even reaching 50%. Therefore, there is considerable room for growth in both areas. In the future, the country is expected to increase resources in this area to promote the increase of the proportion of household registration, and to encourage more farmers to become urban residents. Improvements will be significant in four areas: first, the proportion of food expenditure in urban residents is relatively low compared to other expenditures, while the proportion of food expenditure in rural areas is relatively high; second, housing expenditure accounts for a high proportion, while the self-sufficiency rate of housing for rural residents is very high. Looking ahead to 2030, assuming the population remains at around 1.4 billion and the urbanization rate increases by 0.8% annually, the average annual size of farmers converting to urban residents is estimated to be around 12 million. Considering the public fiscal support expenditures enjoyed by urban residents and the driving force of consumption investment, it is believed that it may reach 1 trillion each year. It is recommended that from 2025, special long-term national bonds of around 500 billion should be issued continuously for about five years, specifically for supporting urbanization projects, with a focus on supporting the conversion of farmers to urban residents directly linked to changes in household registration rates in various regions, in order to encourage local governments to continue promoting urbanization construction. In summary, the reform of rural homestead-related systems will greatly increase farmers' property income, while the reform and improvement of rural collective property rights systems will help increase farmers' operational income. More farmers becoming urban residents will increase residents' transfer income, leading to a comprehensive improvement in residents' consumption capacity and demand. Therefore, boosting consumption should not only focus on urban areas but should also explore the potential for rural consumption growth, through reforms of institutional mechanisms and increased public fiscal resources, to unleash the potential of rural consumption growth. This article is from the "Chief Economist Forum"; edited by GMTEight: Wen Wen.