Reshuffle Supply-consumption Structure

Now that the government has little leeway left to stimulate domestic demand through formulating stimulus packages, the State should consider reshuffling the country's supply and consumption structure to remedy the country's recent sluggish consumption.

Helping consumers build a new consumer mentality and creating new consumption fields are two feasible solutions available to encourage the sustained and steady growth of consumption demand, said an article in China Economic Times.

Since this year, the State has hammered out a series of measures designed to goad people into spending.

Those measures, which include raising urban citizens' income, allowing housing to be commercialized and increasing individual consumer loans, have born bountiful results. They have played a crucial role in kickstarting China's lackluster demand.

From January to August this year, total volume of social consumer goods' retail sales has increased by 9.9 per cent over the same period last year. In general, the consumer goods market is rebounding and has become a major force behind the country's continuing economic growth and progress .

In the first half of this year, consumer demand contributed to nearly 60 per cent of total economic growth.

Many favourable factors still exist, and they ensure the domestic demand will continue to increase in the second half of this year, the article said.

Currently, China's national economy has stopped slowing down and is taking a turn for the better. Analysts now expect the growth rate of China's economy for this year will be higher than that of last year. Analysts also claim China's economy will continue to grow at a high speed for the next 10 years.

And just as the growth of the consumer market contributes to the growth of the economy, so does the growth of the economy help boost the consumer market.

The issuance of national debts this year will play an important role in expanding domestic demand.

The deepening reforms of China's State-owned enterprises, coupled with country's campaign to develop its western regions, will also help to stimulate domestic demand, the article said.

This rosy picture, however, masks many unfavourable factors which lurk ahead and could stifle the growth of consumer demand.

One of these is the fact that the rural market has not yet been fully tapped.The snail-paced growth of farmers' income has discouraged them from opening their wallets for anything but necessity.

In the first half of this year, farmers' per capita cash income has only increased by 1.8 per cent over the same period last year. That means a 2.9 per cent cut in income growth from last year.

The reduction of China's grain output this year plus plummeting agricultural prices are the two major reasons behind this gloomy picture, the article said.

Although the consumer environment in rural areas has improved in the wake of the government's move to earmark 300 billion yuan (US$36 billion) to upgrade China's rural power grid, problems such as inconvenient transportation, communication and frustrating after-sale service still continue to bother potential consumers.

It is unrealistic to expect farmers' incomes will increase by a large margin anytime soon, the article said.China's rural consumption is believed to have been maintaining a steady but not impressive growth pace, and analysts expect that situation to continue in the near future.

In light of this, the stimulation of China's domestic demand will have to rely mainly on urban citizens' income growth, banks' repeated interests rate cuts and the governmental macroeconomic control.

Urban citizens have been reluctant to spend of late, and efforts to inspire their thirst for goods have largely failed. The host of dramatic changes, social as well as economic, generated by China's transition from a planned economy to market-driven economy has led many people to save for emergencies rather than spend freely.

Many Chinese people, especially those above the age of 40, consider it morally wrong to spend tomorrow's money for today's pleasure.

China's State-owned enterprises have been limping towards a self-sustainable recovery. Evidence of a pickup in personal consumption, however, has yet to emerge due to stagnant incomes and deep-seated consumer worries, which stem from the lack of a well-entrenched social security network.

The State should launch a publicity campaign to help consumers shrug off old-fashioned concepts about spending and consumption concept and build a new moral system which fits in with the market-driven economy.

China should, at the same time, deepen reform of the consumption mechanisms.

The country's individual consumer structure has undergone nothing short of a revolution. People are no longer satisfied with a basic livelihood. Cars and houses are the new must-have goods.

China's consumer system should adapt itself to this change and eliminate depressive spending policies and various additional levies which have made things difficult for car buyers.

Meanwhile, the State should speed up the commercialization of housing and take actions to accelerate the development of a second-hand housing market. (Source: chinadaily.com.cn)

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