Increasing consumption in China

 

The government of China is seeking to reengineer local consumption. However, boosting consumer spending is all the more difficult because Chinese consumers tend to save a lot for education, housing, retirement and health care. By some estimates China’s citizens save over 30% of disposable income.

www.marketplace.org reports that high unemployment, trade tensions and the property crisis have made people spend more cautiously.

Consumption contributed 45% to China’s economic growth last year, down from 58% just before the pandemic. Domestic demand continues to be weak. In the first two months of this year, China’s imports took an unexpected 8.4% tumble. In February, the consumer price index decreased 0.7% from a year earlier, signaling deflation.

The U.S. buys far more from China than the other way around. That trade deficit was $295 billion last year. President Donald Trump has called the trade relationship unfair and said he wants Chinese consumers to buy more. That would increase American exports to China and perhaps mean that more goods produced in China would be purchased there, rather than exported to the U.S. But getting Chinese consumers to spend more is no easy task.


Source: www.marketplace.org

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U.S. wants Chinese consumers to spend more and shrink the trade gap. That won’t be easy.