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Behind China's upbeat numbers
By Sun Lijian |
November 27, 2009, Friday
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Print Edition
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DESPITE some recent inspiring figures on domestic consumption, it's too early to expect a vigorous and sustainable expansion of China's domestic demand.
China's retail sales in October rose 16.2 percent year on year to 1.17 trillion yuan (US$171 billion), the National Bureau of Statistics (NBS) announced this month. The rise was 0.7 percentage points higher than that in September.
The first 10 months saw a 15.3-percent growth in retail sales to 10.14 trillion yuan year on year, according to the NBS.
In particular, China's auto sales rose 72 percent year on year to 1.22 million units in October, bringing total sales to 10.89 million units from January to October, up 36 percent from a year ago, figures from the China Association of Automobile Manufacturers showed.
Although the statistics are impressive, we need to read between the numbers to form a more objective view of the country's domestic consumption pattern.
The current increase of domestic consumption is largely the result of such government stimuli as promoting sales of household electrical appliances in the countryside. But China's traditional values of frugality and minimal consumption discourage many people from spending too much for too long.
Moreover, the NEETs (people who are not in employment, education or training) and the moonlites (people who always spend all their salaries or earnings before the end of the month) have contributed greatly to the vitality of the domestic consumption market.
Yet their consumption is unlikely to be sustainable since their monomaniacal consumption structure (mainly houses and cars) and their frequent job-hopping for higher pay deprive them of leisure and a sense of security - they often have to worry about jobs.
In fact, even in Japan, a society in which individual consumption accounts for nearly 80 percent of the nation's GDP today, the Japanese hardly find any improvement in the quality of their life with such high consumption (in particular, they do not draw happiness from their consumption). Many believe that the increase in individual consumption is largely the result of increasing living costs.
An increase in domestic consumption alone is no indication of a stronger driving force for sustainable domestic demand. If most people in a society do not derive happiness from their consumption - they are sometimes forced to consume because of fear of price hikes - such consumption mode is unsustainable.
Car consumption is rising in China, for sure, but it's not without problems.
Most glaring are the worsening of road conditions, soaring oil prices, lack of parking spaces, and possibly high prices of cars powered by clean energy.
All in all, China's economy will be very much driven by state-supported urbanization, among other things, at least in the next one or two years. Over reliance on government spending is no cure to economic woes in the long run.
(The author is professor of finance and executive vice dean of the School of Economics at Fudan University.)
China's retail sales in October rose 16.2 percent year on year to 1.17 trillion yuan (US$171 billion), the National Bureau of Statistics (NBS) announced this month. The rise was 0.7 percentage points higher than that in September.
The first 10 months saw a 15.3-percent growth in retail sales to 10.14 trillion yuan year on year, according to the NBS.
In particular, China's auto sales rose 72 percent year on year to 1.22 million units in October, bringing total sales to 10.89 million units from January to October, up 36 percent from a year ago, figures from the China Association of Automobile Manufacturers showed.
Although the statistics are impressive, we need to read between the numbers to form a more objective view of the country's domestic consumption pattern.
The current increase of domestic consumption is largely the result of such government stimuli as promoting sales of household electrical appliances in the countryside. But China's traditional values of frugality and minimal consumption discourage many people from spending too much for too long.
Moreover, the NEETs (people who are not in employment, education or training) and the moonlites (people who always spend all their salaries or earnings before the end of the month) have contributed greatly to the vitality of the domestic consumption market.
Yet their consumption is unlikely to be sustainable since their monomaniacal consumption structure (mainly houses and cars) and their frequent job-hopping for higher pay deprive them of leisure and a sense of security - they often have to worry about jobs.
In fact, even in Japan, a society in which individual consumption accounts for nearly 80 percent of the nation's GDP today, the Japanese hardly find any improvement in the quality of their life with such high consumption (in particular, they do not draw happiness from their consumption). Many believe that the increase in individual consumption is largely the result of increasing living costs.
An increase in domestic consumption alone is no indication of a stronger driving force for sustainable domestic demand. If most people in a society do not derive happiness from their consumption - they are sometimes forced to consume because of fear of price hikes - such consumption mode is unsustainable.
Car consumption is rising in China, for sure, but it's not without problems.
Most glaring are the worsening of road conditions, soaring oil prices, lack of parking spaces, and possibly high prices of cars powered by clean energy.
All in all, China's economy will be very much driven by state-supported urbanization, among other things, at least in the next one or two years. Over reliance on government spending is no cure to economic woes in the long run.
(The author is professor of finance and executive vice dean of the School of Economics at Fudan University.)
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