Updated: 2011-11-01 08:05
The introduction of a promotion month next year to boost domestic consumption is a laudable effort by the Chinese government to expedite transformation of China's growth pattern.
The Ministry of Commerce, the Ministry of Finance and the central bank announced last week that they will make joint efforts to boost consumption in a bid to let consumption play a larger part in the country's economic growth.
The commerce ministry said it will make one month a promotion month starting in 2012, while the finance ministry promised to guide funds to improve market logistics and the central bank will encourage credit support for consumption.
Such targeted measures will help address some of the obstacles to a much-needed consumption boom in the world's second largest economy.
But stronger consumer spending in a month will not be enough to drive the country's economic growth.
To substantially increase the role that consumption plays in sustaining China's long-term growth, Chinese policymakers need to extend and expand the supportive measures in this consumer honeymoon as soon and far as possible.
After more than three decades of export and investment-led growth, Chinese policymakers are fully aware of the increasing urgency of the need to boost domestic consumption into a key growth engine during the 12th Five-Year Plan period (2011-2015).
Any delay in easing its dependence on exports will only increase the pressures on the country's environment and resources and make its growth more unsustainable.
Meanwhile, the fragile global recovery has propelled the international community to pin their hopes on Chinese consumers who, in theory, have a good chance of helping rebalancing the world economy. As debt-laden Western countries undergo painful deleveraging to put their fiscal and financial house in order, a Chinese consumption boom would mean as much abroad as at home. Unfortunately, in spite of all the obvious benefits from raising consumption as a share of the country's gross domestic product, Chinese consumers largely remain reluctant to loosen their purse strings, and for good reasons.
On the one hand, stubborn inflation is eroding people's economic gains. On the other hand, corporate profits and government revenues still account for an excessively large slice of the growing pie of economic growth in this country.
The proposed promotion month is surely needed to improve the domestic environment for Chinese consumers. But some tax holidays may be also needed to sweeten the honeymoon.
Targeted tax incentives have proven quite effective in stimulating consumption of certain goods like energy-saving household appliances and cars. There is no reason not to make them part of that month.
(China Daily 11/01/2011 page8)