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China Expands Consumption by Upgrading Supply
   2016-03-08 12:14:46    CRIENGLISH.com      Web Editor: Xu Leiying

Cai Jiming, a deputy to the 12th National People's Congress and a Professor from Tsinghua University, accepts interview from CRI in Beijing on March 4, 2016. [Photo:CRIENGLISH.com/ Li Linxi]

As part of the attempt to drive domestic consumption and keep personal spending from flowing outside the country, Chinese authorities have been instituting so-called supply-side reforms.

CRI's Qian Shanming on how the reforms are impacting the daily lives of people in China.


 

A Chinese family sits down for dinner together. They are discussing arrangements for the forthcoming one month birthday party for the young couple's first baby.

Grandmother, Tang Lina, is also the sales director for two international companies. She bought almost everything needed for the baby from abroad.

"The cradle for the baby, as well as its five prams, were bought from either the UK or the US. I've never bought anything for the baby at home. The only exception, the towel, which I bought from a shopping mall in Beijing, and that was produced in Japan."

Tang says, she used to shop at home, but now prefers to go abroad because of the high quality and relatively reasonable prices, free of tariffs.

"If the prices of the products at home were similar to those in foreign markets, I would definitely do my shopping here."

And that is what the government is working towards. In a speech delivered on Saturday, Chinese Premier Li Keqiang said the government would remove policy barriers, improve the consumer environment, and safeguard the rights and interests of consumers, as a means of changing the trend towards high-end consumption.

"We will cut import tariffs on some consumer goods and increase the number of duty-free stores. We will work to strengthen the growth of consumption in elder-care, health services, housekeeping services, educational and training services, and cultural and sports services."

Cai Jiming, deputy of China's National People's Congress, is responsible for reviewing the government work report. He believes the new policy will play a big role in expanding domestic demand.

"I agree with adjusting our policies towards customs to attract more people to spend money at home. That way, the contribution of domestic demand to GDP growth will be substantially increased."

Investment and international trade used to be the two main drives for growth in the Chinese economy. Both sectors saw a slump after the 2008 global financial crisis, prompting China to move towards an economy where consumption contributes most to the growth in GDP.

According to official statistics, consumption accounted for 66.4 per cent of GDP growth last year, increasing by over 15 percent than that was in 2014. Some experts say the figures show China is successfully making the transformation.

But not everyone agrees with that view. Professor Yin Xingming from Fudan University in Shanghai, says China stills faces many challenges, such as a mis-match between supply and demand, and a big income gap between urban and rural people.

According to the draft of the next five-year plan, China will make further efforts to transform itself into a manufacturer of advanced and quality products, with the scientific and technological sector to provide sixty per cent of economic growth.

As for income differences, professor Yin says one solution would be to provide more education opportunities for people living in poor and remote areas, so as to increase their productivity and help them to get a better paid job in the city.

"It's unlikely any low productivity labor will be able to buy luxury products. So the best way for the government is to improve labor quality. In other words, the Chinese government needs to spend more money on education for low skilled workers."

According to the draft five year plan, the government plans to tackle this problem over the next five years by a gradual expansion of secondary vocational education.

For CRI, I'm Qian Shanming.

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