Xinhua Insight: China pins growth hopes on consumption, service

As demand for exports continues to slip and the real estate sector cools, China expects consumption and the service sector to help pick slack.

The nationwide shopping spree on Single's Day (Nov. 11) offered solid proof of the spending power for the country's billion-plus population.

China's top e-commerce platform Alibaba reported a stunning 91.2 billion yuan (14.3 bln U.S. dollars) in sales, thanks in part to an expanding number of rural consumers.

More than 8,000 online shopping stations were set up by Alibaba in villages nationwide, helping thousands join in the sales event for the first time. Their trade volume surpassed 100 million yuan after 1 hour and 47 minutes.

Wu Maoxian, a village grocery store owner in Guizhou Province, is one of the rural buyers. He spent 800 yuan buying five winter coats for his family on Tmall, an online shopping platform by Alibaba.

Several thousand kilometers away, Xia Kai, a farmer-turned businessman in Suining County, east China's Jiangsu Province, sold 700,000 yuan worth of furniture in a single day using two shops on Tmall and another four on JD.com, a major competitor of Alibaba.

By the end of 2014, nearly 30 percent of China's 620 million rural population had internet access. The percent of rural Internet users is quickly catching up with cities due to widespread mobile Internet.

To get in early on the lucrative market, Alibaba plans to invest 10 billion yuan to establish 100,000 village service centers in the next three to five years, mostly to teach rural people how to make best use of the Internet. Meanwhile, JD.com will hire 100,000 villagers as agents to expand their business in 100,000 villages within a year.

Giving vigor to rural consumption is one approach the Chinese government is adopting to counter the slowing economy. China's economy expanded 6.9 percent year on year in the third quarter of 2015, the lowest reading since the second quarter of 2009.

China expects an annual growth of 6.5 percent for the country to "build a moderately prosperous society" by 2020. Many have doubted if the country can succeed.

"Although the Chinese economy is slowing down, the economic structure is improving, with consumption and service new engines for growth, instead of investment," said He Lisheng, professor with the China Executive Leadership Academy Pudong.

After eight years of loss, Zhubajie.com, China's largest crowdsourcing platform, is expected to turn profitable this year.

"The 'spring' of the service trade is coming with a booming private sector, high Internet penetration and increasing per capita GDP," said Zhu Mingyue, CEO of Zhubajie.com, which received 2.6 billion yuan of financing in June.

The company, currently estimated to be worth more than 10 billion yuan, is an online market where over ten million service providers, typically designers and advertisers, trade with three million small companies on a tight budget.

"We are not only a trading platform but also an incubator of startup companies that grow on the rising deals from the platform," said Zhu, who said the revenue this year is expected to quadruple that of last year at 200 million yuan.

With new trademark registration, printing and financing businesses, the company is expected to have a revenue of 1 billion yuan next year, he said.

"2015 is just the beginning," said Zhu.

China's service sector activity increased slightly in November, according to a survey conducted by financial information service provider Markit and sponsored by Caixin Media Co., Ltd.

The Caixin China General Services PMI (Purchasing Managers' Index) came in at 51.2 in November. A reading above 50 indicates expansion, according to the survey released on Thursday.

Meanwhile, increasing urbanization is expected to create a new force in consumption, driving growth, said He Lisheng.

At present, China has 750 million urban residents including 250 million migrant workers who do not enjoy equal rights to education, employment, social security, medical care and housing.

The central government plans to help 100 million migrants settle in cities and enjoy equal public services by 2020, which will expand consumption, stabilize real estate markets and improve investment in urban infrastructure and public services, said He.

The professor called for the government to add more public services that cater for the new urban population in order to spur the economic growth. Endit