When more than 1.3 billion people want to spend more money, it is a huge boon to the economy. That is what the Chinese government has been trying to achieve, putting more consumption power into the hands of its people. But it won't be easy.
China might be the world's second-largest economy, but its per capita income in global rankings doesn't look nearly as impressive. It is true that China has a rising middle class that is more capable of spending, but the situation remains quite patchy as China's Gini-coefficient is now somewhere near 0.47, indicating a yawning wealth gap.
Even as the Chinese become wealthy, their desire to spend might be held back by a thin safety net. People have to save for a rainy day. China's savings rate now stands at a staggering 52 percent, while the U.S. has maintained its savings rate at well under 10 percent, despite the protracted economic crisis.
Against the backdrop of declining demand, boosting demand is the right way forward for China if it wants to sustain its growth, but it must boost its investment to increase people's incomes and reduce the savings rate.
So how can China encourage its people to spend more? And where does the greatest potential lie in boosting domestic consumption?
Ni hao, you're listening to  People In the Know, bringing you insights into the headline news in China and around the world. I'm Zheng Chenguang in Beijing.
We speak to Professor Zhang Jun, Director of the China Center for Economic Studies at Fudan University, and Professor Kamel Mellahi, Professor of Strategic Management at the Warwick Business School. |
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