The World Bank sees hopes about an economic recovery in China as “premature”, according to David Dollar, country director for China. The main reason for the World Bank’s doubts about China’s recovery is low private investment. While stimulus measures have helped boosting fixed-asset investment and stabilizing the Chinese economy, private investment lags far behind government spending. Private investment is seen as the main driver of sustainable growth and job creation. For China, with its export sector down and large-scale stimulus packages unsustainable over the long run, private consumption is necessary to achieve sufficient growth over the next years.
China is intensifying its efforts to boost domestic demand by offering consumers a 10 percent subsidy for home appliance purchases. To make up for the continued lack in export demand, China desperately needs to push domestic consumption. Together with the home appliance stimulus, Beijing also announced that it would continue and expand an existing stimulus program for the automobile industry. Owners of old, less fuel-efficient vehicles are encouraged to trade them in for new cars by financial incentives such as purchase tax cuts. The new home appliance stimulus with a total volume of Rmb2 billion ($292 million) is aimed at China’s wealthiest cities, including Beijing, Shanghai and Guangdong.
Vivek Arora, the IMF’s chief representative in China, urged Beijing to step up efforts for a social security reform in order to push domestic consumption. Mr. Arora emphasized that reliable and secure social security, such as health care, pension funds and education, were needed to encourage higher consumer spending. China’s current social security system is far from being reliable and so far fails to cover the majority of the people. As a result, Chinese saving rates were at a record 49.9 percent in 2007, compared to 4.2 percent in the U.S. and between 5 and 12 percent in the EU. By securing a sufficient level of social security China could encourage private consumers to spend a larger part of their income, thereby boosting economic growth.
A few months ago, I wrote about the early stages of the conflict in Ukraine through the lens of Sun Tzu’s The Art of War. While it appears likely that the war will carry on into the foreseeable future, enough time has passed for us to make an honest assessment of each side’s relative […]
The Ukrainian Army has made dramatic strides in the last few weeks. Ukraine’s tactical commanders have outfoxed their Russian counterparts, and by issuing a feint towards the south the UA has been able to earn substantial gains in the north of their country. The impact of these efforts have been compounded by the steady stream […]
In mid-May the Irish political party, Sinn Féin, won the plurality of seats in the Northern Ireland Assembly. Many American readers might not fully understand the significance of Sinn Féin’s political victory- but rest assured that subjects of the United Kingdom and a wide range of political movements the world over have heard the message […]
The first wave of the Russian offensive in Ukraine has fallen short of Russian autocrat Vladmir Putin’s ambitions. Most analysts deduced that Putin had hoped to achieve a decapitation strike of the Ukrainian government- taking Kiev and replacing Ukrainian President Vladimir Zolinski with a pro-Kremlin voice. Kiev has been threatened repeatedly through the course of […]
On the weekend of March 26th, the notorious MS-13 gang went on a massive killing spree in El Salvador which left more than 70 people dead by Sunday. Even for a country where powerful gangs hold massive sway, this recent tragedy stands out considering that it was the bloodiest day on record since the civil […]
