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Wan LixinOpinion deputy editor of Shanghai Daily
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Consumer expenditure flagged as a solution
By Zhang Fengming |
July 4, 2009, Saturday
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Print Edition
Print Edition
THE People's Bank of China Governor, Zhou Xiaochuan, said yesterday that investment may be a "second-best" policy and excess savings should flow to developing countries.
Zhou, speaking at the Global Think Tank Summit in Beijing, said lifting China's consumption to boost the economy and solve the global imbalance was "easier said than done."
The Chinese government is gearing up domestic consumption to boost the economy after investment and exports have been hard bit by the global financial crisis. More consumer expenditure could also help cut global imbalances by trimming China's savings.
The central bank governor said China's household savings were stable in the past decade, accounting for roughly 20 percent of the country's gross domestic product.
Zhou said there was a need to adjust income distribution to enable individuals to enjoy more income rather than corporations, but these things took time.
Central action
That meant that expanding investment, especially those in the area of improved urbanization, was now the "second-best" policy option.
China's higher savings rates originated mainly from corporations and government in previous years during urbanization.
Corporation savings' contribution to GDP doubled to 22.9 percent in 2007 from 1992, while the government savings' take also nearly doubled to 8 percent in the same period.
The central government has already taken initiatives, such as subsidies on home appliances and autos in rural areas, to ignite domestic consumption in less developed areas.
Health insurance reform valued at 850 billion yuan (US$124.5 billion) over three years is on the way.
Zhou said China needed to expand consumption but added that extra savings could still persist. "We may still maintain residual savings," he said. "If there are any, I would like them to flow to other developing countries."
He said this would still need the support of the international financial system to help improve global productivity and income distribution, and drive broader global growth.
Some Western economists have argued that China's high savings have fueled the global imbalance. Zhou said that was not the case.
Zhou, speaking at the Global Think Tank Summit in Beijing, said lifting China's consumption to boost the economy and solve the global imbalance was "easier said than done."
The Chinese government is gearing up domestic consumption to boost the economy after investment and exports have been hard bit by the global financial crisis. More consumer expenditure could also help cut global imbalances by trimming China's savings.
The central bank governor said China's household savings were stable in the past decade, accounting for roughly 20 percent of the country's gross domestic product.
Zhou said there was a need to adjust income distribution to enable individuals to enjoy more income rather than corporations, but these things took time.
Central action
That meant that expanding investment, especially those in the area of improved urbanization, was now the "second-best" policy option.
China's higher savings rates originated mainly from corporations and government in previous years during urbanization.
Corporation savings' contribution to GDP doubled to 22.9 percent in 2007 from 1992, while the government savings' take also nearly doubled to 8 percent in the same period.
The central government has already taken initiatives, such as subsidies on home appliances and autos in rural areas, to ignite domestic consumption in less developed areas.
Health insurance reform valued at 850 billion yuan (US$124.5 billion) over three years is on the way.
Zhou said China needed to expand consumption but added that extra savings could still persist. "We may still maintain residual savings," he said. "If there are any, I would like them to flow to other developing countries."
He said this would still need the support of the international financial system to help improve global productivity and income distribution, and drive broader global growth.
Some Western economists have argued that China's high savings have fueled the global imbalance. Zhou said that was not the case.
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