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China’s Consumption Conundrum

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China’s Consumption Conundrum

Can Xi Get Chinese Citizens to Stop Saving and Start Spending?

Foreign Affairs,

5 mins. de lectura
3 ideas fundamentales
Audio y Texto

¿De qué se trata?

China needs to stimulate domestic consumption if it wants to be the world’s biggest economy. 

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Editorial Rating

8

Qualities

  • Analytical
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Recommendation

China finds itself in a quandary: More concerned with its security and with quick fixes to jump-start its economy, the government is failing to play the long game, say scholars Damien Ma and Houze Song in this solid analysis. The authors argue that robust domestic consumption would allow China to become the world’s biggest economy by 2035, and they also advocate for the continuing involvement of state enterprises, a critical component of any strategy to cut households’ savings and boost their spending. Readers interested in China’s long-term challenges and its place in the global economy will find this an informative report.

Summary

China’s less than ambitious growth target reveals susceptibilities unique to its economy.

Now freed from government-mandated COVID-19 restrictions, China’s economy is recovering. Yet the government has issued a 2023 growth target of only 5%, a modest goal that speaks to the precarity of its economy: Local governments are cash-strapped, and property developers are hurting. Even exports, barely affected by the coronavirus shutdowns, could become a liability if a global downturn results in less overseas demand for Chinese products.

The bigger issue is a lack of robust domestic consumption, China’s last hope for economic growth. The government has struggled for years to pivot from state investment and exports to consumption. Adding to the challenge have been high savings ...

About the Authors

Damien Ma is the managing director of MacroPolo, a think tank at the Paulson Institute, where Houze Song is a fellow.

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