A few years ago I remember reading that Xi said something to the effect that consumerism is bourgeois. That’s obviously not the right attitude for a leader who needs to increase consumer spending.
Professor Roach’s comment on a lack of a good social safety net encouraging savings at the expense of spending makes perfect sense.
I was told that the per capita dollar amount needed to meaningfully increase consumer spending is actually quite small, perhaps several hundred dollars. I don’t know if that is correct.
Separately, I think that the inability of the government to have real estate taxes in most of the country is a problem: if municipalities don’t have that source of income they will be pressured to keep selling land, which creates excess real estate inventory, with the attendant negative consequences. My opinion, anyway.
Your feedback is spot on — especially the reliance on the churning of property sales to generate local tax revenues. Underscores China’s difficulties of addressing the property bubble head on. Many thanks for your comments.
Stephen, I wonder whether there is a limit to the relevance of the Japanese comparison. Japan was already a developed country when the bubble burst; Chinese GDP per capita remains less than half that of Japan even today. Isn’t this relevant to the demand side comparison? A substantial portion of the Chinese population continues to live at very low levels of income; how realistic it to expect consumption to assume as great a role as suggested while thus remains so? Reducing residential real estate as a share of the economy has been an objective, although progress has been slow and not necessarily arising from only from government policy. Regarding the social safety net, while the government has said there remains room for further development, Xi has also warned against “welfarism” leading to laziness and high cost. Plenty of cautionary examples in Western countries on this front.
It used to be common to wonder if China would rich before it got old. It’s hard to imagine that it could have run any faster than it did over the past years to try to win that race, but as yet the danger persists that it will not. Excesses and gaps arose accordingly during that sprint. It made hay while the sun shone (WTO membership was the sun) but clouds have returned before all the crop was in. Now what - just add 1-2 generations to the time scale perhaps?
Thank you for this very thoughtful comment. I agree that the Japan comparison has its limits. But it is not clear to me that the “lost decade syndrome” is as sensitive to per capita income disparities, as you seem to be suggesting. Like Japan, countries with sluggish productivity are vulnerable to debt-intensive asset bubbles, irrespective of income levels. That remains my key macro concern about China.
A few years ago I remember reading that Xi said something to the effect that consumerism is bourgeois. That’s obviously not the right attitude for a leader who needs to increase consumer spending.
Professor Roach’s comment on a lack of a good social safety net encouraging savings at the expense of spending makes perfect sense.
I was told that the per capita dollar amount needed to meaningfully increase consumer spending is actually quite small, perhaps several hundred dollars. I don’t know if that is correct.
Separately, I think that the inability of the government to have real estate taxes in most of the country is a problem: if municipalities don’t have that source of income they will be pressured to keep selling land, which creates excess real estate inventory, with the attendant negative consequences. My opinion, anyway.
Your feedback is spot on — especially the reliance on the churning of property sales to generate local tax revenues. Underscores China’s difficulties of addressing the property bubble head on. Many thanks for your comments.
Thank you very much.
I try to keep up, but of course miss a lot, which is why I like to read people like you, who know more than I do.
I wonder if you’re familiar with Bill Overholt?
Stephen, I wonder whether there is a limit to the relevance of the Japanese comparison. Japan was already a developed country when the bubble burst; Chinese GDP per capita remains less than half that of Japan even today. Isn’t this relevant to the demand side comparison? A substantial portion of the Chinese population continues to live at very low levels of income; how realistic it to expect consumption to assume as great a role as suggested while thus remains so? Reducing residential real estate as a share of the economy has been an objective, although progress has been slow and not necessarily arising from only from government policy. Regarding the social safety net, while the government has said there remains room for further development, Xi has also warned against “welfarism” leading to laziness and high cost. Plenty of cautionary examples in Western countries on this front.
It used to be common to wonder if China would rich before it got old. It’s hard to imagine that it could have run any faster than it did over the past years to try to win that race, but as yet the danger persists that it will not. Excesses and gaps arose accordingly during that sprint. It made hay while the sun shone (WTO membership was the sun) but clouds have returned before all the crop was in. Now what - just add 1-2 generations to the time scale perhaps?
Thank you for this very thoughtful comment. I agree that the Japan comparison has its limits. But it is not clear to me that the “lost decade syndrome” is as sensitive to per capita income disparities, as you seem to be suggesting. Like Japan, countries with sluggish productivity are vulnerable to debt-intensive asset bubbles, irrespective of income levels. That remains my key macro concern about China.
Lower prices, greater savings, declining population growth, low government reliance on social safety net … hmmmmm … and the problem is?