However, Li sees in the consumption growth rate a downward trend. In 2018, the total growth rate of retail sales of consumer goods was around 9 per cent, and the average growth rate in the first half of 2019 fell to 8.4 per cent. The total retail sales of consumer goods reached 9.8 per cent in June, but this was mainly driven by the automobile industry.6 Other consumption growth rates, including the service industry, were still weak. The consumer price index of the service industry dropped from three to less than two per cent.
Li believes that the reason behind consumers’ lack of optimism is the stagnating disposable income of residents. Li finds that the trend of income growth is very similar to the trend of growth of total retail sales of consumer goods. However, while in 2018 the per capita disposable income of high-income groups increased by 8.8 per cent, middle-income groups achieved a growth of only 3.2 per cent. If inflation is considered, the income growth of middle-income groups is almost equal to zero. This is the main reason for the slow domestic consumption, in Zhang’s view. In addition, the consumption structure has diverged. The consumption of high-end consumer goods and luxury goods has grown rapidly.
Secondly, regarding investment, the growth rate of manufacturing investment in China's fixed asset investment fell to three per cent during the first half of 2019. This indicates that the slowdown of investment in the manufacturing industry and the lack of domestic demand and rising labor costs are all related, Li explains. Regarding the growth rate of real estate investment, it was 10.9 per cent, which has become the main factor for stabilizing the growth of fixed asset investment. As for the growth rate of infrastructure investment, it was relatively weak, only around 4 per cent. Li believes that it will be unrealistic to stimulate economic growth through infrastructure investment in 2019.
Finally, regarding foreign trade, contrary to Zhang, Li finds that exports were generally weak in 2019, likely due to increased trade friction between China and the United States. In sum, during the first half of the year, these three drivers were tempered. Therefore, even though the current economic downturn is not large, it can maintain a steady downward trend.
Li suggests focusing on solving structural problems in response, such as expanding the proportion of public spending that is allocated to social security. Increasing future social security funds would increase consumer confidence and thus also consumption rates. In terms of taxes and fees, Li sees the necessity to further reduce the financing costs for small and medium-sized enterprises (SMEs) and to implement corresponding supporting policies. According to him, "instead of just shouting slogans, there need to be practical steps" (而不是只是喊口号，需要有实际的举措).
Li notes that in the future, like most developing countries such as the United States or Japan, the Chinese economy will be driven by consumption, but the main force of consumption is the middle and low-income classes, which are currently growing relatively slower than the upper middle class. In consequence, for his next policy recommendations, Li proposes to firstly reduce the actual interest rate level, so that SMEs can reduce the financing cost, which would then increase employment and the income of the middle and low-income groups especially.In addition, it is necessary to achieve balanced social development through public spending in Li’s view.