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China faces challenges in boosting consumption, economists say
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CHINA is facing considerable challenges in boosting domestic consumption as the world’s second largest economy is trying to break away from over-dependence on export and investment, economists said today.
“A package of reforms covering financial sector, state-owned enterprises, fiscal system, land ownership, and household registration system is underway in China,” Shao Yu, chief economist with Oriental Securities, said at the annual conference on cash, treasury and risk management organized by EuroFinance, a part of the Economist Group, in Shanghai today.
“Ongoing reforms are expected to create three new engines for economic growth, which are in-depth urbanization, upgraded consumption and a shift from cargo exports to capital exports as a result of the yuan’s internationalization,” Shao said.
But Richard Duncan, chief economist at Blackhorse Asset Management in Singapore, said China is facing sever difficulties in maintaining rapid growth of domestic consumption as export growth is loosing momentum.
“Booming exports have been creating factory jobs in China so that people can have money to consume goods,” Duncan. “This source of growth is going to slow down due to a feeble US economy.”
Duncan expected the current economic recovery in the US would not last as the Federal Reserve is ending its quantitative easing stimulus program.
Duncan added that rising wage level in China would also lead to a relocation of factories to countries such as India, where at least 200 million people would be happy to work at five dollars a day.
Duncan, who had predicted the 2008 global economic crisis in his 2003 bestseller The Dollar Crisis, said he would not rule out the possibility of an economic crisis in China given the slower export growth in the backdrop of global economic slowdown and the huge shadow banking system.
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