祝融说。

Beyond the roar of investment and the waves of exports, in the symphony of the macroeconomy, there is a melody that seems gentle yet is endlessly sustained — consumption. If investment is the economy's "engine," pursuing speed and passion, then consumption is more like the economy's "chassis" and "suspension system." Its task is stability, shock absorption, and the provision of the most fundamental support.

Over my four decades of research, I have witnessed the term "consumption" rise from a relatively minor role in the national economic strategy to the core position it holds today: "smooth domestic circulation," "give play to the fundamental role of consumption in economic development." Behind this lies a profound change in China's stage of economic development.

Once upon a time, when we talked about economic growth, we invariably spoke of investment and exports. Consumption seemed merely a byproduct of production and investment. But as the size of China's economy has grown, the demographic dividend has shifted, and the external environment has become increasingly complex, we have come to realize more and more deeply that the foundation of a truly strong and resilient economy must lie in its vast and active domestic market, and consumption is the core of that market.

Compared to the violent fluctuations of investment and the dependence on others of exports, household consumption has a natural "rigidity" and "stability." No matter how the economy rises and falls, basic expenses such as food, clothing, housing, and transportation must be covered. This stability makes consumption a "buffer" during economic downturns and the last line of defense against a hard landing.

However, consumption is also an area easily misled by "feelings." Questions like "All my friends are trading down on consumption" and "Why does the statistics bureau say consumption has grown when I don't feel it?" are ceaseless. This indicates that consumption is a highly differentiated phenomenon full of structural differences. To understand consumption, we need both precision in interpreting macro data and keen insight into the consumption behavior of different groups in different scenarios.

In this chapter, like an experienced market researcher, we will dive into the vast ocean of Chinese consumption. We will start with the core indicator — total retail sales of consumer goods (social zero), revealing its scope and composition and squeezing out the "water." Next, we will learn how to interpret it from multiple dimensions such as structure, trend, and price. Most importantly, we will build a "golden triangle" analytical framework of "employment-income-consumption," which is the only way to understand the fundamental drivers of consumption. Finally, by reviewing the extreme case of the pandemic shock, we will deeply understand the resilience and differentiation of Chinese consumption.

Understanding consumption means you can truly feel the "body temperature" of the Chinese economy and grasp its deepest potential and most real challenges.

8.1 Total Retail Sales of Consumer Goods: Scope, Composition, and "Water Content"

Published monthly alongside industry and investment data is a heavyweight indicator — total retail sales of consumer goods, often shortened to "social zero." This is the most core and widely cited metric for measuring consumption. But it is also an indicator easily misinterpreted. To use it well, we must first conduct a thorough "X-ray" scan of it, seeing its bones and meridians.

Scope Definition: What Exactly Does It Count?

• Official definition: Social zero refers to the total amount of physical goods sold directly to individuals and social groups by enterprises (units, self-employed individuals) for non-production, non-operational purposes, plus the income from providing catering services.

This definition is quite long. Let us break it down into key phrases:

1. Sold to whom? — Individuals and Social Groups
   • Individuals: This is what we typically understand as household consumption.
   • Social groups: Refers to government agencies, organizations, military units, schools, enterprises, and institutions. Goods they purchase for non-production, non-operational purposes are also counted in social zero. For example, office supplies purchased by a company, holiday gifts for employees, and cigarettes and alcohol for entertainment. This is the first major difference between social zero and our intuitive sense of "household consumption."
2. What is sold? — Physical goods + Catering services
   • Physical goods: This is the absolute bulk of social zero. Food, clothing, and daily necessities, from a bottle of water to a car, are all included.
   • Catering services: This is the only service item included in social zero. What you spend when eating at a restaurant is counted in social zero.
   • Important omission: All service consumption except catering is NOT included in the scope of social zero. For example, your rent, utilities, transportation and communication bills, education and training fees, medical expenses, tourism and entertainment spending... these items, which account for "half" of residents' consumption expenditure, are not counted in social zero. This is the second and largest difference between social zero and the full picture of real consumption.
3. Used for what? — Non-production, non-operational use This qualifier is meant to distinguish between consumption and investment. For example, if a construction company buys steel and cement, that is an intermediate input for production and operations, and is not counted in social zero. But if a household buys decoration materials to renovate their own home, that is non-production and non-operational and is counted in social zero.

Summary: Social Zero ≠ Household Consumption

Through the above analysis, we must firmly remember one conclusion: total retail sales of consumer goods is just a relatively good reflection of "physical goods consumption." It cannot represent the full picture of household consumption. It is like an X-ray that only captures part of your body — it can reflect a lot of important information but is certainly not a full-body portrait.

Composition Breakdown: Looking at Consumption from Different "Shelves"

To analyze more deeply, we need to see what "shelves" are in this "big supermarket" of social zero. The NBS provides several different classification methods:

• By location of business unit:
  • Urban retail sales of consumer goods: Nearly 90% of the total, the absolute majority.
  • Rural retail sales of consumer goods: About 10%, reflecting consumption conditions in rural areas.
• By type of consumption (the most commonly used classification):
  • Goods retail: About 90%.
  • Catering revenue: About 10%. Catering revenue is more sensitive to changes in the economic environment and more volatile. During economic downturns or pandemic shocks, people first cut back on non-essential expenses like dining out, so catering revenue growth is often seen as a "leading indicator" of consumer sentiment.
• By retail format:
  • Retail sales of consumer goods by units above designated size: "Above designated size" refers to wholesale enterprises with annual main business revenue of 20 million yuan or more, retail enterprises with 5 million yuan or more, and accommodation and catering enterprises with 2 million yuan or more. This part is a comprehensive survey with higher data quality, reflecting the health of large and medium-sized supermarkets, chain stores, and e-commerce platforms.
  • Online retail sales: This is the most important structural change in recent years. The NBS publishes "national online retail sales" and the proportion of "physical goods online retail sales" in total social zero. This proportion has climbed from less than 10% a few years ago to over 25% today, profoundly changing China's consumption landscape.
• By commodity category (the most detailed and valuable classification): The NBS publishes the commodity retail classification data for units above designated size, mainly including:
  • Necessities: Grain, oil, food, beverages, tobacco and alcohol, daily necessities. This part has rigid demand and stable fluctuations, serving as the "stabilizer" of consumption.
  • Discretionary consumer goods:
    • Real estate-related (post-real-estate cycle): Household appliances and audio-visual equipment, furniture, building and decoration materials. Their health lags behind the real estate sales cycle.
    • Travel-related: Automobiles, petroleum and petroleum products. Automobiles are the single largest commodity item in social zero (about 10%), and their sales fluctuations have a decisive impact on the overall growth rate of social zero.
    • Upgrade-oriented: Cosmetics, gold, silver, and jewelry, communication equipment (mainly mobile phones). Their growth reflects residents' willingness to consume upgrades and the pursuit of "face consumption."
    • Others: Clothing, footwear, hats, knitwear, cultural and office supplies, etc.

By analyzing these sub-items, we can grasp the structural changes in consumption from every detail of "food, clothing, shelter, and transportation."

The "Water Content" of Social Zero: How to See the Data More Realistically?

As discussed, social zero has some "scope-related" characteristics that cause it to differ from our perception of household consumption. As professional analysts, we need to know how to "squeeze out the water" to get closer to the real situation.

• "Water" 1: Includes group consumption. In economic upturns, especially in investment-driven boom cycles, this part can account for a significant share (e.g., enterprises buying high-end cigarettes and alcohol for business entertainment). Under the background of the "Eight Provisions" and anti-corruption efforts in recent years, much of this "water" has already been squeezed out.

• "Water" 2: Excluding price factors. The officially published growth rate of social zero is a nominal growth rate. To measure the change in real consumption volume, we need to exclude the impact of price increases. Real social zero growth rate ≈ Nominal social zero growth rate - CPI (Consumer Price Index)

  This formula is crucial! Especially during periods of high inflation, the nominal growth rate may look decent, but if CPI rises faster, the real purchasing volume of households is actually declining. For example, nominal social zero grows by 5%, but CPI rises by 6%, then the real growth rate is -1% — consumption is actually "trading down."

• "Water" 3: The huge disturbance from automobiles. Because automobiles have a very high weight in social zero, and their sales are significantly impacted by short-term policies such as purchase tax incentives, the "pulse-like" growth or decline of automobiles often seriously disturbs the overall growth rate of social zero, masking the real trends of other consumer goods. Analyst technique: To see more clearly, we typically calculate the growth rate of "retail sales of consumer goods excluding automobiles." This indicator better reflects the endogenous and general trend of consumption. If the overall growth rate looks good but is mainly driven by automobile consumption, we need to be cautious about the breadth of the consumption recovery.

8.2 Interpreting Social Zero: Structure, Trend, and Price Factors

With a grasp of the basics of social zero, we can begin to examine this "sales report" like an experienced retail executive.

Structural Analysis: The Era of Consumption "Differentiation"

In today's China, talking about consumption without mentioning "differentiation" is saying nothing. Behind the aggregate data lie huge structural differences between different goods, channels, and population groups.

• Product structure differentiation: The seesaw between "necessities" and "discretionary goods"
  • During economic downturn / weak confidence: Consumption structure will tilt significantly toward necessities. Growth in grain, oil, food, daily necessities, etc., remains steady, while growth in discretionary goods such as automobiles, mobile phones, gold, jewelry, and cosmetics plummets. People "tighten their wallets," cutting non-essential spending. This is a typical manifestation of "trading down."
  • During economic upturn / confidence recovery: Discretionary goods show greater elasticity. Big-ticket items like cars and home appliances start to pick up, and upgrade-oriented consumption (such as high-end cosmetics, smart devices) grows significantly faster than the overall rate.
• Channel structure differentiation: The "replacement" and "integration" of online versus offline
  • The continued penetration of online retail: The growth rate of online retail sales of physical goods has long been and systematically higher than offline retail growth. This has become an irreversible trend. Even during periods when overall social zero growth slows, online retail can still maintain relatively high growth.
  • The reshuffling of offline formats: Traditional formats like department stores and large supermarkets face significant challenges, while formats closer to communities and offering better value, such as convenience stores and discount stores, show stronger resilience.
• Urban-rural structure differentiation: Rural consumption catching up In recent years, driven by the continued growth of rural residents' income and the improvement of rural e-commerce and logistics infrastructure, the growth rate of rural retail sales of consumer goods has often been faster than that of urban areas. This reflects the enormous potential of the lower-tier market and is an important future growth point for Chinese consumption.

Trend Analysis: Year-on-Year, Quarter-on-Quarter, and Two-Year Average

The method for interpreting the trend of social zero growth is similar to that for industry and investment:

• Cumulative year-on-year: The main indicator for grasping medium-term trends.
• Quarter-on-quarter (seasonally adjusted): The "trailblazer" for observing short-term momentum and marginal changes. If the quarter-on-quarter growth rate of social zero improves for several consecutive periods, it usually indicates that consumer confidence is gradually being repaired.
• Two-year average/compound growth rate: The "calibrator" for eliminating base effects and restoring the real growth trajectory when impacted by extreme events like the pandemic.

Price Factors: The "Real Body Temperature" Beneath Nominal Growth

Again, when analyzing social zero, it is essential to simultaneously focus on CPI.

• Nominal social zero growth rate - CPI ≈ Real social zero growth rate
• Look at the "gap": Observe the "gap" between the nominal growth rate curve and the real growth rate curve. The size of this gap reflects the "contribution" of inflation to the nominal value of consumption.
• Beware of "stagflation" risk: The worst situation is when CPI continues to rise while the real growth rate of social zero declines or even turns negative. This indicates that rising prices have seriously eroded residents' purchasing power, and the economy may fall into "stagflation" (stagnation + inflation).
• Monitor "deflation" pressure: Conversely, if CPI is persistently negative or hovering at low levels, even if the nominal social zero growth rate is not high, the real growth rate may be acceptable. But persistent deflation suppresses residents' willingness to consume (because they expect future prices to be lower), which is unhealthy for long-term consumption.

8.3 Data Linkages: The Triangular Relationship Between Consumption, Household Income, and Employment

Social zero data is only the "appearance" of the consumption story. To explore the fundamental driving forces behind it, we must delve into a more foundational logical framework — what I call the "golden triangle" of consumption analysis. The three vertices of this triangle are: employment, income, and consumption.

Between these three lies an unbreakable, cascading causal chain: Stable employment → Growing income → Active consumption

First Link (Foundation): Employment — "Do You Have a Job?"

Employment is the foundation of people's livelihood and the most fundamental prerequisite for all consumption activities to occur. If a person has no job, or is constantly worried about losing their job, their consumption behavior will inevitably become extremely conservative.

• Core indicators:
  • Urban surveyed unemployment rate (monthly): The most core "pressure gauge" for the job market. A rise in the unemployment rate is the biggest killer of consumer confidence.
  • Number of new urban jobs (monthly/quarterly): Reflects the job market's ability to create employment.
  • Number of migrant workers and their average monthly income (quarterly): Crucial for understanding the employment and income conditions of low and middle-income groups.
• Linkage logic: Deterioration in the job market will lead the decline in consumption. When we see a trend rise in the unemployment rate, especially high youth unemployment, even if current social zero data is acceptable, we must maintain high vigilance about the future consumption outlook. Because the impact of unemployment, through income and confidence channels, transmits to the consumption side with a lag but inevitably.

Second Link (Intermediary): Household Income — "How Full Is Your Wallet?"

With a job comes income. The level of income, along with expectations of future income growth, directly determines residents' spending power (Ability to spend).

• Core indicator:
  • National per capita disposable income year-on-year real growth rate (quarterly): This is the most authoritative indicator for measuring the growth of residents' "money bags." The NBS publishes the real growth rate (excluding CPI), which has the strongest comparability with the real growth rate of social zero.
• Linkage logic: The growth rate of household income is a coincident or slightly leading indicator of the consumption growth rate. The long-term trends of the two are highly convergent.
  • M-shaped differentiation: Beyond the total amount, we should pay more attention to the structure of income. If income growth is mainly concentrated in high-income groups while middle and low-income groups see sluggish income growth, the boost to total consumption will be very limited. Because the consumption propensity of high-income groups (consumption expenditure / income) is declining; their new income is more likely to be used for savings and investment rather than consumption. Conversely, promoting income growth for low and middle-income groups has the most significant effect on boosting consumption.
  • Impact of property income: Besides wage income, household income also includes business income, property income (such as rent, dividends, investment returns), and transfer income. During stock market and real estate booms, the increase in property income (the "wealth effect") greatly boosts residents' consumption confidence and ability, especially for luxury goods, automobiles, and other big-ticket items. Conversely, falling asset prices (the "negative wealth effect") suppress consumption.

Third Link (Result): Consumption — "Dare to Spend?"

With stable employment and growing income, will residents necessarily consume actively? Not necessarily. There is a key psychological variable here — consumer confidence.

• Core indicator:
  • Consumer Confidence Index (monthly): Compiled by the central bank or some market institutions through questionnaire surveys, understanding residents' views on the current and future economy, employment, and income, as well as their willingness to consume and save.
• Linkage logic: Consumer confidence is the bridge connecting "income" and "consumption."
  • When confidence is high: Residents are optimistic about the future and dare to "spend tomorrow's money." They may increase credit consumption (using credit cards, consumer loans), and consumption growth may even exceed income growth.
  • When confidence is low: Residents are uncertain about the future and tend toward "precautionary saving." Even if current income is acceptable, they will save their money to cope with potential future risks such as unemployment or illness. At this point, we see a sharp rise in the household savings rate and consumption growth significantly lagging income growth.

Comprehensive Application of the "Golden Triangle"

When analyzing consumption, my team creates a chart containing four curves:

1. Urban surveyed unemployment rate (inverse scale)
2. Real growth rate of per capita disposable income of residents
3. Consumer Confidence Index
4. Real growth rate of social zero

By observing the relative positions and lead-lag relationships of these four curves, we can form a complete and deep judgment on the state and prospects of consumption. For example, if we see the unemployment rate rising, income growth slowing, and the Consumer Confidence Index falling, even if this month's social zero data rebounds due to short-term promotions, we can judge that the downward pressure on consumption has not really dissipated.

8.4 Case Study: The Resilience and Differentiation of Consumption Under the Pandemic Shock

The COVID-19 outbreak in early 2020 was an unprecedented "stress test" for China's consumption system. By reviewing this shock, we can vividly understand all the analytical frameworks discussed earlier.

Phase One: Shutdown and Standstill (Q1 2020)

• Shock: Nationwide lockdown measures virtually eliminated offline consumption scenarios.
• Data performance:
  • Social zero: January-February 2020, the cumulative year-on-year growth rate of social zero plummeted to -20.5%. Catering revenue suffered the most severe blow, collapsing by -43.1%.
  • Differentiation: Offline consumption was in shock, but online consumption showed strong resilience. Online retail sales of physical goods still achieved positive growth of 3.0% in January-February. At the same time, necessities (grain, oil, food, daily necessities) related to home living were in strong demand, while discretionary consumer goods collapsed across the board.
  • Employment and income: The urban surveyed unemployment rate soared from 5.2% to a historic high of 6.2%.

Phase Two: K-shaped Recovery and Structural Differentiation (Q2 2020 - 2021)

• Background: The domestic outbreak was effectively controlled, and work and production resumed in an orderly manner. However, the normal pandemic prevention and control measures of "preventing imported cases and preventing domestic resurgence," along with residents' concerns about the epidemic, profoundly changed consumption behavior.
• Data performance:
  • K-shaped recovery: The trajectory of recovery showed a distinct "K" shape.
    • The upward arm: Online retail, necessities, and goods related to the "stay-at-home economy" and pandemic prevention (such as computers, small appliances, medical supplies) continued to grow strongly. At the same time, with overseas travel restricted, high-end consumption returned home, and luxury goods consumption was exceptionally hot.
    • The downward arm: Contact-intensive, gathering-type service consumption such as catering, tourism, movies, and offline entertainment recovered extremely slowly, repeatedly hit by localized outbreaks.
  • Repair of the employment-income-consumption chain: As the economy recovered, employment and income conditions gradually improved. The overall growth rate of social zero also picked up quarter by quarter and reached very high levels in 2021 due to the low base. However, the recovery of the Consumer Confidence Index always lagged behind the recovery of economic indicators. The "precautionary saving" tendency was evident, with household deposits increasing significantly.
  • The independent story of automobiles: Under a series of stimulus policies, automobile consumption showed strong resilience, becoming an important force driving the recovery of social zero.

Phase Three: Scarring Effects and Confidence Rebuilding (2022-Present)

• Background: The pandemic entered its third year. Repeated lockdowns and uncertainty caused deeper "scarring effects" on residents' employment, income, and confidence that were difficult to eliminate in the short term.
• Data performance:
  • Weak consumption, low confidence: Even after the optimization of pandemic prevention policies, the recovery of consumption was tortuous and fell far short of expectations. The Consumer Confidence Index remained low for a long time.
  • "Trading down" and "rationality" coexisting: Residents' consumption behavior became more conservative and rational. On one hand, they became more price-sensitive, and the pursuit of good quality at reasonable prices ("value for money" consumption) rose. On the other hand, willingness to invest in areas such as health, education, and self-improvement increased.
  • Obstruction in the "golden triangle": Structural pressures in the job market (especially youth employment), weakening household income expectations, and insufficient confidence in the future together constitute the "blockage" currently constraining the core recovery of consumption.

Lessons from the Pandemic Case

1. The resilience of consumption lies in "necessities" and "online": Even under the most extreme shocks, basic demand for goods consumption still exists, and the developed e-commerce network makes it possible to realize this demand.
2. Service consumption is the biggest "weakness": The vulnerability of contact-based service consumption is fully exposed when facing a public health crisis.
3. Confidence is more important than gold: The "scarring effects" of the pandemic tell us that a one-time income subsidy may not be as effective as a stable job expectation in making residents "dare to consume." Restoring confidence is a more long-term and fundamental task than stimulating consumption.
4. Differentiation is the new normal: The differentiation between income classes, age cohorts, and consumption scenarios was dramatically amplified after the pandemic. Future analysis of consumption must focus more on structure than on aggregates.

Chapter Summary

In this chapter, we conducted a comprehensive inspection of consumption — this "stabilizer" of the economy.

Starting from the core indicator "social zero," we clarified its scope and composition, and learned how to squeeze out its "water content" to more truthfully grasp the pulse of goods consumption.

We mastered the methods of interpreting the "age of differentiation" behind social zero data from dimensions such as structure, trend, and price.

Most importantly, we constructed the "golden triangle" analytical framework of "employment → income → consumption," finding the fundamental forces driving consumption and understanding the key role of "confidence" in it.

Finally, by reviewing the impact of the pandemic, we experienced firsthand the resilience, fragility, and complexity of consumption.

At this point, we have analyzed the two pillars of domestic demand — investment and consumption. But China's economic cycle has never been a closed system. Through foreign trade, it is closely connected with hundreds of economies around the world. In the next chapter, we will turn our gaze globally to analyze the last of the "three carriages" — foreign trade. We will explore how China plays the role of "world factory" and how the waves of the global economy lap against China's shores.