1/10
It seems like Beijing is determined to manage an economic recovery. "The party’s Central Committee stressed that priority in 2023 will be given to ensuring steady growth, employment and stable prices."
caixinglobal.com
It seems like Beijing is determined to manage an economic recovery. "The party’s Central Committee stressed that priority in 2023 will be given to ensuring steady growth, employment and stable prices."
caixinglobal.com
2/10
The statement they released says that “further efforts will be made to expand domestic demand and give full play to the fundamental role of consumption and the key role of investment.”
The statement they released says that “further efforts will be made to expand domestic demand and give full play to the fundamental role of consumption and the key role of investment.”
3/10
Expanding consumption of course makes sense, but they have promised (unsuccessfully) to do this since 2007. And while it's easy to expand non-productive investment (and they certainly will), to expand productive investment also requires an expansion in consumption.
Expanding consumption of course makes sense, but they have promised (unsuccessfully) to do this since 2007. And while it's easy to expand non-productive investment (and they certainly will), to expand productive investment also requires an expansion in consumption.
4/10
But how can they sustainably expand consumption? The only way to do that is to reverse a system built up over 40 years in which implicit and explicit transfers from the household sector were used to subsidize investment in manufacturing and infrastructure.
But how can they sustainably expand consumption? The only way to do that is to reverse a system built up over 40 years in which implicit and explicit transfers from the household sector were used to subsidize investment in manufacturing and infrastructure.
5/10
It is not enough simply to propose boosting consumption, which is what nearly everyone has been saying for years anyway. It requires a significant institutional transformation which, among other things, must substantially reduce the role and prominence of local governments.
It is not enough simply to propose boosting consumption, which is what nearly everyone has been saying for years anyway. It requires a significant institutional transformation which, among other things, must substantially reduce the role and prominence of local governments.
6/10
This automatically involves not just a reorienting of the distribution of power between Beijing, local governments and households, but it also require undermining local elites and the system that props them up.
This automatically involves not just a reorienting of the distribution of power between Beijing, local governments and households, but it also require undermining local elites and the system that props them up.
7/10
It isn't impossible, of course, but there's a reason why doing something similar in other countries has proven so hard, and why 15 years of promising to do so in China have been largely unsuccessful.
It isn't impossible, of course, but there's a reason why doing something similar in other countries has proven so hard, and why 15 years of promising to do so in China have been largely unsuccessful.
8/10
Next year they may very well seem to be pulling it off: the consumption share of growth is likely to surge.
But this will be only for temporary reasons. Part of this year's unwanted increase in household savings is likely to reverse as the country opens up.
Next year they may very well seem to be pulling it off: the consumption share of growth is likely to surge.
But this will be only for temporary reasons. Part of this year's unwanted increase in household savings is likely to reverse as the country opens up.
9/10
In the end, however, the only way to increase consumption sustainably requires that the household share of GDP rise by 10-15 percentage points, which of course means that someone else's share (mainly local governments, I assume) declines by that amount.
In the end, however, the only way to increase consumption sustainably requires that the household share of GDP rise by 10-15 percentage points, which of course means that someone else's share (mainly local governments, I assume) declines by that amount.
10/10
That's why it will be so difficult, and impossible to manage without significant political conflict. Diverting such a huge share of national wealth and income from politically powerful groups is never an easy thing.
That's why it will be so difficult, and impossible to manage without significant political conflict. Diverting such a huge share of national wealth and income from politically powerful groups is never an easy thing.
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