Li Qiang believes it. For the Chinese prime minister, his country can become “an important power of consumption”, while “will implement a strategy to develop domestic demand,” he said on Tuesday, June 25 in the World Economic Forum in Tianjin (China).
This ambition has been hammered in recent months by Beijing, which promises to balance its economic model more, so far very oriented to exports of industrial products to the detriment of household consumption.
In China, household consumption represents only 32% of GDP, indicates the General Directorate of the Treasury. By way of comparison, in France it is 55% (and these data explain 30% of the variation of GDP in each quarter. And in the United States, consumption represents more than 64% of GDP and has even increased in recent years to almost 69%. China, therefore, accuses a shameless delay in Western economies.
In the eyes of many observers, this structural imbalance has become more problematic. Seen from China, the increase in commercial tensions could slow the country’s exports and, therefore, its growth (estimated around 5% this year).
Seen from the rest of the world, particularly seen in Europe, the Chinese commercial surplus (almost 1,000 billion euros) runs the risk of causing a competition shock, which makes many jobs disappear. Therefore, European countries also have interest in demanding in China, to further absorb the enormous industrial production of the country Xi Jinping.
Gogo subsidies
Since last year, a series of measures have been deployed to stimulate domestic demand, through direct rate reductions and the abolition of certain restrictions on the purchase of housing.
Beijing has also published $ 41 billion, including subsidies, financed by public debt, for the purchase of certain products (cars, smartphones, appliances, etc.).
This plan aims to boost sales and retail prices, while China is trapped in a deflation dynamic, just as problems (or even more) than inflation of European consumers.
The first positive effects seem to have been observed in spring. Retail sales increased 6.4% in May, Bloomberg reported. Electronic devices purchases increased 53% compared to the previous year, the fastest rate ever registered. Sales of mobile phones and other communication equipment also believed that 33%.
The Bloomberg agency adds, however, that subsidy funds in certain regions are already exhausted.
Consumer confidence is still in a mast medium. It remains sealed by the real estate price accident that has swallow an important part of home savings. Therefore, a durable revival probably represents more than a punctual impulse.
The model touches its limits
This imbalance is an old problem in China. Structurally, it was directed towards production and industrial exports, its economy is more inclined towards investment than consumption. This situation has not evolved significantly, despite the development observed since the 1980s.
The latter pointed out that the income of Chinese workers is much less important than those of their neighbors and that the social system is very low compared to the level of development.
In the long term, “this is an important problem for the sustainability of the Chinese economy, it estimated François chimits. Productivism weighs a lot in demographic dynamics and, in particular, in births.”
Despite the initiatives to increase the birth rate, China should be depopulated by the end of the century. The number of inhabitants will be divided there by two (from 1.4 billion in 2025 to 633 million) according to INED estimates (National Institute of Demographic Studies).
Source: BFM TV
