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Boost domestic spending, sure, but what kind?
September 16, 2010, Thursday
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EDITOR'S note:
It serves no good for so-called economists to encourage China to consume more without specifying what to consume.
Buying cars and furs surely counts as consumption, but don't cars and furs damage nature and kill wildlife?
So-called economists say China needs to consume more, because it lags far behind the US in the level and scale of consumption. But hasn't the US already consumed itself into a financial crisis? Why should China follow the US model of conspicuous consumption?
So-called economists lament that China invests too much. Yes, huge investment in auto manufacturing is too much, but investment in education is far from enough. So one cannot make the sweeping statement that there's too much investment in China.
Li Baojie and Chen Yongrong
WITH the help of massive fiscal stimulus and record bank lending, China posted 9.1 percent growth last year, even as other major economies, like the United States, European Union and Japan, went into recession.
However, China remains a poor country, according to Vice Commerce Minister Yi Xiaozhun. "It is not rich and still faces many development bottlenecks."
Although it has overtaken Japan as the second largest economy and is the holder of the world's largest foreign exchange reserves, China has a very low per capita income, which ranks just 98th in the world, ahead of El Salvador and behind Albania.
Major problems China faces include unreasonable economic structure, weak capacity for scientific and technological innovation, rising resource and environmental constraints, uneven urban-rural and regional development and lack of coordination between economic and social development.
These issues were cited by Premier Wen Jiabao who addressed the opening ceremony of the World Economic Forum's Summer Davos session in Tianjin on Monday.
As pro-growth policies are phasing out this year, attention is shifting to whether China can achieve sustainable growth to continue to power the recovery and become a really strong country.
China needs to rebalance its economy to rely more on consumption, rather than on investment and exports, said experts at the three-day meeting, which ended yesterday.
Official data showed investment contributed to 92.3 percent of gross domestic product last year and 59.1 percent in the first half of this year. But in the US, consumer spending accounts for 70 percent of GDP.
Nestle Chairman Peter Brabeck-Letmathe said if China wishes to have sustainable growth, it must find new growth drivers other than exports and investment.
According to the 2010 Trade and Development Report released on Friday, the global recovery is still fragile and growth in most countries might slow down again next year if countries fail to find new growth engines.
High bank savings due to high housing prices, education and medical costs, and a lack of universal social welfare are widely regarded as the hurdles to consumer spending growth in China.
The fall in the share of China's household disposable income in GDP is "very undesirable," said Martin Wolf, associate editor and chief economic commentator with the Financial Times.
China needs to shift income to households using proper interest rates and higher wages, he said.
Tong Jiadong, vice president of Tianjin-based Nankai University, recommended that the government adjust income distribution, improve social welfare and keep inflation in check to spur consumer spending.
"We will pursue balanced growth of domestic and external demand and establish a long-term mechanism to expand domestic demand, consumer demand in particular," Premier Wen said.
Government investment can get quick results, but its impact cannot last long, said Cheng Siwei, former vice chairman of the Standing Committee of China's National People's Congress.
The Chinese government unveiled new rules in May to boost private investment since the US$593 billion stimulus is scheduled to last only through the end of the year.
But private businesses report more difficulty in getting bank loans and unfair treatment in entering fields monopolized by the centrally administered state-owned enterprises.
The government should open more sectors to private investors and expand their fund-raising channels, said Deng Feng, cofounder of Northern Light Venture Capital.
China should also boost energy efficiency and develop clean energy for sustainable growth, said Cheng, who is also chairman of the International Finance Forum.
The Chinese government faces a dilemma in balancing economic recovery, which so far is heavily dependent upon polluting industrial expansion, and meeting the energy austerity target, which is essential for the country's sustainable development.
(The authors are writers at Xinhua news agency.)
It serves no good for so-called economists to encourage China to consume more without specifying what to consume.
Buying cars and furs surely counts as consumption, but don't cars and furs damage nature and kill wildlife?
So-called economists say China needs to consume more, because it lags far behind the US in the level and scale of consumption. But hasn't the US already consumed itself into a financial crisis? Why should China follow the US model of conspicuous consumption?
So-called economists lament that China invests too much. Yes, huge investment in auto manufacturing is too much, but investment in education is far from enough. So one cannot make the sweeping statement that there's too much investment in China.
Li Baojie and Chen Yongrong
WITH the help of massive fiscal stimulus and record bank lending, China posted 9.1 percent growth last year, even as other major economies, like the United States, European Union and Japan, went into recession.
However, China remains a poor country, according to Vice Commerce Minister Yi Xiaozhun. "It is not rich and still faces many development bottlenecks."
Although it has overtaken Japan as the second largest economy and is the holder of the world's largest foreign exchange reserves, China has a very low per capita income, which ranks just 98th in the world, ahead of El Salvador and behind Albania.
Major problems China faces include unreasonable economic structure, weak capacity for scientific and technological innovation, rising resource and environmental constraints, uneven urban-rural and regional development and lack of coordination between economic and social development.
These issues were cited by Premier Wen Jiabao who addressed the opening ceremony of the World Economic Forum's Summer Davos session in Tianjin on Monday.
As pro-growth policies are phasing out this year, attention is shifting to whether China can achieve sustainable growth to continue to power the recovery and become a really strong country.
China needs to rebalance its economy to rely more on consumption, rather than on investment and exports, said experts at the three-day meeting, which ended yesterday.
Official data showed investment contributed to 92.3 percent of gross domestic product last year and 59.1 percent in the first half of this year. But in the US, consumer spending accounts for 70 percent of GDP.
Nestle Chairman Peter Brabeck-Letmathe said if China wishes to have sustainable growth, it must find new growth drivers other than exports and investment.
According to the 2010 Trade and Development Report released on Friday, the global recovery is still fragile and growth in most countries might slow down again next year if countries fail to find new growth engines.
High bank savings due to high housing prices, education and medical costs, and a lack of universal social welfare are widely regarded as the hurdles to consumer spending growth in China.
The fall in the share of China's household disposable income in GDP is "very undesirable," said Martin Wolf, associate editor and chief economic commentator with the Financial Times.
China needs to shift income to households using proper interest rates and higher wages, he said.
Tong Jiadong, vice president of Tianjin-based Nankai University, recommended that the government adjust income distribution, improve social welfare and keep inflation in check to spur consumer spending.
"We will pursue balanced growth of domestic and external demand and establish a long-term mechanism to expand domestic demand, consumer demand in particular," Premier Wen said.
Government investment can get quick results, but its impact cannot last long, said Cheng Siwei, former vice chairman of the Standing Committee of China's National People's Congress.
The Chinese government unveiled new rules in May to boost private investment since the US$593 billion stimulus is scheduled to last only through the end of the year.
But private businesses report more difficulty in getting bank loans and unfair treatment in entering fields monopolized by the centrally administered state-owned enterprises.
The government should open more sectors to private investors and expand their fund-raising channels, said Deng Feng, cofounder of Northern Light Venture Capital.
China should also boost energy efficiency and develop clean energy for sustainable growth, said Cheng, who is also chairman of the International Finance Forum.
The Chinese government faces a dilemma in balancing economic recovery, which so far is heavily dependent upon polluting industrial expansion, and meeting the energy austerity target, which is essential for the country's sustainable development.
(The authors are writers at Xinhua news agency.)
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