1/5
We're hearing this almost every day now: "Well-targeted policy steps are needed to keep the tasks of boosting domestic demand and shoring up consumption high on China's work agenda, with more forceful measures needed to increase household incomes."
chinadaily.com.cn
We're hearing this almost every day now: "Well-targeted policy steps are needed to keep the tasks of boosting domestic demand and shoring up consumption high on China's work agenda, with more forceful measures needed to increase household incomes."
chinadaily.com.cn
2/5
But while everyone now seems to agree that consumption must play a larger role, and that for this to happen there must be an increase in household income, no one seems to be discussing what the costs and constraints of such a shift are likely to be, and how to manage them.
But while everyone now seems to agree that consumption must play a larger role, and that for this to happen there must be an increase in household income, no one seems to be discussing what the costs and constraints of such a shift are likely to be, and how to manage them.
3/5
It's not enough for household income to rise. For consumption to play a larger role in the economy, the household share of GDP must rise, which means that after decades of transfers from households to subsidize manufacturing and investment, these transfers must be reversed.
It's not enough for household income to rise. For consumption to play a larger role in the economy, the household share of GDP must rise, which means that after decades of transfers from households to subsidize manufacturing and investment, these transfers must be reversed.
4/5
This implies a transformation in the structure of the economy, and requires that the adjustment costs be absorbed by some sector, most probably local governments. Economic policy advisors should be specifying how these costs are to be distributed.
This implies a transformation in the structure of the economy, and requires that the adjustment costs be absorbed by some sector, most probably local governments. Economic policy advisors should be specifying how these costs are to be distributed.
5/5
Until they do so, China risks following the path of Japan, where they've been talking about boosting the role of consumption in driving growth since the Maekawa report of 1986 -- and are still doing so today.
Until they do so, China risks following the path of Japan, where they've been talking about boosting the role of consumption in driving growth since the Maekawa report of 1986 -- and are still doing so today.
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