OPINION> Commentary
Creating spenders
(China Daily)
Updated: 2009-01-13 07:35

With no end to the global recession in sight, it becomes increasingly evident that China has to boost domestic consumption more aggressively to sustain its economic growth.

Premier Wen Jiabao's assertion that the country has achieved initial success from the policies adopted to counter the financial crisis is surely reassuring. It shows that, at the macroeconomic level, the country has braced itself for the hard days ahead.

And if economic conditions in December were better than expected, as Wen said, the country has every reason to show full confidence in the 4 trillion yuan (US$586 billion) stimulus package, which just begins to deliver early results.

However, at the business level, efforts to fuel domestic consumption have yet to take effect.

The urgent task is to turn the Chinese consumers who usually would save more for rainy days into spenders to buffer the economy from the shrinking external demand. To that end a much more favorable consumption environment is badly needed.

One of the key measures the government adopted to boost rural consumption is to extend subsidies for farmers' purchase of home appliance and mobile phones.

The pilot program in three provinces and one city since December in 2007 was a big success. With a 13 percent discount jointly subsidized by the central and local governments, local farmers have bought more than 3.5 million units of TVs, refrigerators or mobile phones by the end of last October, up 40 percent year on year.

But the drastic deceleration of the economy since late last year has considerably changed farmers' income expectation, making the subsidy program less attractive.

A report by Morning Post, a Beijing-based newspaper, showed that only 370 units of home appliances were sold during the first 20 days since the program was carried out in Shaanxi Province. Such a result will disappoint not only home appliance manufacturers but also policymakers. But it is a sharp reminder of how vulnerable rural consumers are to the impact of an economic slowdown.

In this case, either the manufacturers should offer bigger discounts or the government needs to come up with more subsidies.

For relatively rich urban consumers, a pressing problem that prevents them from loosening their purse strings is the quality of service.

For instance, the coming Spring Festival is a good time for tourism. Yet the daunting prospect of traveling in an overcrowded train has forced many people to postpone their trips again and again. Such bottlenecks have to be cleared if a tourism-cum-consumption boom is to be ushered in.

(China Daily 01/13/2009 page8)