In recent years, the mainland's GDP growth has slowed down significantly, and the macroeconomy has entered a medium-to-high-speed development stage from the past era of high growth. In this context, how to maintain the steady and healthy development of the economy has become an important topic for economists.
Li Xunlei, China's chief economist, suggested in a recent "Q1 2024 Economic Roundtable" that if it is difficult to effectively tax the rich, we should consider other ways to increase domestic demand, one of the important ways is to stimulate the consumption of the rich. This view has been widely discussed.
Mr. Li Xunlei pointed out that the contribution of consumption of high-income groups to total economic demand is not as good as that of low- and middle-income groups, because the cost elasticity of high-income groups is smaller. However, for a long time, there has been an asymmetry between the consumption structure and the income structure of the mainland, resulting in insufficient consumption power of low- and middle-income groups, and it is difficult to fully release the inherent consumption potential.
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However, the size and wealth accumulation of the mainland's wealthy groups have expanded rapidly, but their consumption growth tends to rely on non-real consumption such as real estate and finance, which is difficult to provide effective support for the real economy and employment.
In response to this situation, Li Xunlei believes that if direct taxation is difficult to cover all the rich and difficult to operate, the relevant departments can consider indirectly reducing the income of this group by increasing the consumption of the rich to support the real economy.
Optimize the consumption structure. Consumption vouchers, cashback policies and other means can be used to guide the wealthy to consume more physical goods and services, such as high-end consumption, health care, cultural tourism, etc. This can effectively release the consumption potential of this group and enhance the driving effect on the real economy.
Improve the consumption environment. We should focus on solving the consumption problems of the wealthy, such as optimizing the layout of high-end business districts, improving high-end brands and service systems, and improving the level of consumption facilities. At the same time, it is also necessary to pay attention to the consumption needs of small cities and rural areas, innovate consumption methods and channels, and expand coverage. This will help to invigorate the consumption of the rich.
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Break down barriers to investment. High-income groups are more supported by financial investment, and we can explore the establishment of multi-level project foundations to lower the threshold for ordinary people to participate in high-end projects. At the same time, it can also promote the linkage between consumption and investment, such as giving a certain return on investment based on consumption behavior, so as to promote consumption as investment.
Innovate consumption patterns. As new consumption concepts and lifestyles become more and more mature, we should strengthen our integration with the frontiers of new consumption at home and abroad, support offline and online integration, and cultivate new consumption formats. This will once again ignite the desire of the rich to consume and contribute to the expansion of consumption.
Effectively guiding and stimulating the consumption of the wealthy through a variety of measures can not only alleviate the pressure of the recent high economic level, but also help stimulate the employment and income of low- and middle-income groups, so as to achieve more balanced development. This is consistent with Mr. Li Xunlei's long-standing argument that he attaches great importance to real employment and improving the distribution of income structure.
Once the consumption of the rich is effectively mobilized, it will drive the development of a large number of related industries and service industries. For example, the high-end restaurant industry will face a broader market and need to continuously innovate dishes and experiences to meet different consumer demographics, so as to expand employment.
Cultural and leisure projects designed for the consumption of the wealthy will spring up like mushrooms, bringing new growth points to the cultural and creative industries, and the healthcare and wellness industries will benefit the most, requiring a large number of employees to participate in operations and services. This will ease the pressure on mainland employment within a certain range.
As these related industries expand, more jobs will be opened to low- and middle-income groups, and their income levels will also be increased to a certain extent. Once the low- and middle-income groups get more employment opportunities and higher salaries, their consumption potential will be further stimulated and unleashed.
This will form a virtuous and reciprocal circle: the consumption of the rich will lead to employment, expand the income of low- and middle-income groups, and the consumption of low- and middle-income groups will once again promote the real economy. Realize the consumption upgrade with the participation of the whole people, realize the positive adjustment of income distribution, and finally achieve the new normal of sustainable economic development.
It is believed that with the joint efforts of the government and all sectors of society, the new idea of "stimulating the consumption of the wealthy" will certainly be put into practice on the mainland and achieve phased results, pointing out a new direction for economic development.