{"id":644,"date":"2009-04-18T08:11:44","date_gmt":"2009-04-18T12:11:44","guid":{"rendered":"https:\/\/www.chinacenter.net\/?p=644"},"modified":"2023-04-07T13:29:51","modified_gmt":"2023-04-07T17:29:51","slug":"chinas-emerging-consumer-market-view-from-china-is-there-a-consumption-problem","status":"publish","type":"post","link":"https:\/\/www.chinacenter.net\/2009\/china-currents\/8-2\/chinas-emerging-consumer-market-view-from-china-is-there-a-consumption-problem\/","title":{"rendered":"China\u2019s Emerging Consumer Market View from China: Is There a Consumption Problem?"},"content":{"rendered":"
China saves, the U.S. consumes-or so the headlines say. Many analysts (including this author) have written about China\u2019s high savings rates and therefore low consumption, which reinforces China\u2019s dependence on exports for its growth.<\/p>\n
The problems with this dependence are first that China has been so successful with exports that most major buyers cannot absorb more of them and will not be a source of future growth. Secondly, that such high exports make China\u2019s economy vulnerable to the business cycles of other parts of the world. Even before the current financial crisis, which has caused exports to decline substantially, there was a vigorous debate within China about how to stimulate domestic demand to get around these problems.<\/p>\n
To date, very little has changed in China in terms of policy or institutions to address the domestic demand issue in sustainable ways. To be fair, the global financial crisis has caught the attention of policy makers everywhere, putting short-term fixes out front. Stimulus packages are popular, and China has its own version, which in essence means funding infrastructure projects combined with low-cost loans via the banking system for other government construction projects. Subsidies for rural families to buy consumer goods and a tax cut on auto sales have also been made available, but there is little evidence yet that many have taken advantage of the offers. The stimulus may be working to keep growth afloat, but in terms of changing the domestic-external demand imbalance, something more will be needed.<\/p>\n
So what might that be? Thinking through this question from the view of a typical family in China sheds some light on the nature of savings and consumption in this transition economy. Savings is defined as earned income minus consumption in a given year. Three aspects of how a family participates in China\u2019s impressive growth and development could be thought of as: 1) access to a better life; 2) worries about losing that better life; and 3) defining what it means to have a “better life.” The focus here is an average family, not one that has ties to government or party that provides access to exceptional opportunities. Some people in this second category live very well indeed, but their choices about employment, spending and saving cannot explain the overall trends in China\u2019s economy.<\/p>\n