Domestic demand has transformed economic growth: trade minister
China maintained rapid growth in consumption and international investment and relatively lesser declines in foreign trade in 2015, which made a "satisfactory" contribution to domestic and global economic growth, Commerce Minister Gao Hucheng said Tuesday.
The Chinese economy still enjoys a comparative advantage over other economies in terms of consumption, trade and investment, but challenges still exist amid a slowdown in the economy, analysts noted.
Consumption reached 30.1 trillion yuan ($4.61 trillion) in 2015, rising 10.7 percent from a year earlier, and accounted for 66.4 percent of China's GDP growth, up 15.4 percentage points from 2014, Gao told a briefing in Beijing.
"In other words, China has successfully transformed economic growth, from being mainly driven by investment and foreign trade to being driven by domestic demand," the minister said.
The rapid growth in consumption was largely induced by a burgeoning e-commerce sector, which saw a 31.6 percent growth in online retail sales from the previous year, according to Gao. The trend will spill over this year, he noted.
But consumption hasn't become the economy's main engine of growth, said Tian Yun, director of the Research Center of the China Society of Macroeconomics.
"Consumption is certainly a highlight of the Chinese economy, but I don't believe that China has fully made the transformation," Tian told the Global Times on Tuesday.
The current slowdown in the Chinese economy shows that consumption failed to support growth like exports and investments had done in the past, Tian said.ECNS
He added that whether consumption will maintain its rapid pace remains to be seen, because supply-side reforms, including a reduction in overcapacity, could result in some layoffs, which could have an impact on consumption.…
'Satisfactory' consumption fuels growth
Global Times — Editor: Li Yan
1 comment:
"The current slowdown in the Chinese economy shows that consumption failed to support growth like exports and investments had done in the past, Tian said."
Consumption spending multipliers are much lower than investment multipliers here?
"He added that whether consumption will maintain its rapid pace remains to be seen, because supply-side reforms, including a reduction in overcapacity, could result in some layoffs, which could have an impact on consumption.…"
The reason why economies based off of domestic consumption demand rather than investment and export demand are much easier to manage. Both exports and investment are largely supply side factors and as such have longer lag time implementation (shovel ready is largely a myth and any interest rate changes take a long time to filter thru the economy, if they work at all on net) and are heavily dependent on other factors. Domestic Govt's dont have control of the domestic policies of their trading partners for example.
Domestic consumption otoh is the most controllable and efficient lever that Govt's have to manage the economy. Whether its just sending out checks to every citizen every month until consumption reaches the target level or cut payroll taxes.
IOW demand management is a nominal project and investment\exports are on the real side of the ledger.
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