At the same time, better conditions in rural areas have reduced the flow of cheap labor into coastal cities. As the Chinese population ages, the ratio of retirees to working-age people is forecast to rise from 39 percent last year to 46 percent in So the Chinese must save prodigiously to provide for their welfare and retirement.
Chinese households save close to 30 percent of income on average, in large part to cover old age and medical costs. Yes, the Chinese saving rate will be pushed down in time by aging Chinese who still consume but no longer work, much as it has in Japan. Chinese consumers buy only about one-tenth of those in Europe and the U. As the euro zone remains troubled, and the U. A square meter of property in China costs an estimated times per-capita income, compared with 33 times in high-priced Japan.
The stimulus package also spurred consumer price inflation to a year-over-year acceleration of 5. Food prices are very sensitive politically because so many Chinese are at subsistence incomes, and they rose If we want a normal growth rate we have to depend on investment, and especially on government investment.
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Skip to main content Skip to main menu Skip to search Skip to footer. Search for:. Manage subscription. Subscribe to the Monitor. Monitor Daily current issue. Monitor Weekly digital edition. Community Connect. People Making a Difference. Points of Progress. I suspect that the global recession, and the dramatic transformation by U. They probably planned to encourage consumer spending and domestic-led growth, but later -- much later.
They were enjoying a well-oiled growth machine. Growing exports, especially to American consumers, stimulated the capital spending needed to produce yet more exports and jobs for the millions of Chinese streaming from farms to cities. Wages remained low, due to ample labor supplies, and held down consumer spending. So did the high Chinese consumer saving rate. Because Chinese could not invest offshore, much of that saving went into state banks at low interest rates.
The money was then lent to the many inefficient government-owned enterprises at subsidized rates. In a country where stability is almost worshipped, why would any leader want to disrupt such a smoothly running economy?
Because China has 1. Just to maintain this gap at current levels, Chinese GDP will need to grow at double-digit rates for four years before tapering off, or rise sixfold in three decades assuming that U.
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