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More specific policies needed to stimulate consumption

(People's Daily Online)

14:14, July 30, 2012

When mentioning the consumption engine, we often talk about how to push the consumption of middle class up because people generally believe that they have a higher income and are the main group with stronger consuming power and desire.

During talking with them, however, we found that the middle class of China have different incomes and they are divided into two groups according to different propensity to consume formed by houses.

The first group refers to the beneficiaries of soaring housing prices. They normally have one or several houses. Their consumption of necessaries of life has occupied an ever-decreasing share of the incomes and they will get nothing to worry about when they have saved enough to cope with the problems of children's education, medical treatment and pension, and so this group of middle class has a stronger consuming power.

When asked what other consuming desires they had, they normally would think for a little while, which indicates that they have not too strong desire of material consumption upgrade. When again being asked the question, they showed only interests in service-typed consumption.

The second group is the "house slaves" or "house slaves-to-be." They save money laboriously to pay down and the mortgage is the biggest expenditure every month. Therefore, they will tighten all the other expenditures for many years.

Housing consumption occupies a too large proportion of the residents' consumption and has become an important factor influencing the consumption level of middle class. It is very common that a suit of house can overwhelm a person of middle class. Under the pressure of children's education and medical treatment, they even do not think themselves belong to the middle class.

A rational structure of social stratum should be movable. The middle class can be expanded only by the joining in of the low-income group, thus a continuous consuming power can be formed. However, the high housing prices and expensive educational and medical treatment charges in the first- and second-tier cities have blocked the expansion of the new middle class. Therefore, many scholars began worrying about the fall of the middle class in recent years.

Although a lot of policies have been introduced to stimulate the consumption, most of them laid stress on stimulating specific industries and commodities but ignored the consuming conditions of different middle-class groups. If the relevant policies become more exact and detailed, they may be more helpful to start the consumption engine and maintain a sustainable development.

Read the Chinese version at: 刺激中产消费 政策应精确制导, Source: People's Daily, Author: Shen Yin

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