Guangming Daily website, a major Chinese Communist Party mouthpiece, recently published a theoretical article suggesting that Beijing re-orient its economy stimulus policies around consumer spending rather than investment. The article stated that, to stimulate consumer spending, the focus should be on delivering money to residents through reasonable, legal, compliant, and economically-sound channels. Macro-economic policies need new measures and targets, shifting the focus from investment to consumption, addressing current economic bottlenecks and weaknesses more directly.
The article suggested that reforming the residence identification system (户籍制度) can have an immediate and substantial impact on consumption. (Editor’s notes: The reform here refers to giving people more freedom to move between cities and also letting migrant workers (peasants) enjoy the same benefits given to city dwellers.) According to the article, studies show that migrant workers’ consumption is suppressed by 23 percent due to limited access to public services and social security given the migrants’ lack of urban household registration. Reforms that alleviate this suppression could raise consumption by almost 30 percent even without considering income growth.
The article also suggested improvement of the social security system, as China has a rapidly aging population. Between 2022 and 2035, the ratio in China of elderly to working-age population will grow significantly, increasing the pressure on pension funds and eldercare services. The author argued that a substantial expenditure in the area of social security would serve as a short-term economic stimulus.
Source: Guangming Daily, July 17, 2023