About That Rebalanced Economy . . .

2009-04-30

One of the "must do" goals these days is to shift China's economy from being export based to being consumption based. This has been a goal for many years, as pushed by academics, but has not really been taken all that seriously by the government until recently.

The Great Recession has emphasized, in a particularly nasty way, why being export dependent is a bad thing. So the goverment is now spending quite a bit on projects aimed at domestic production and local spending. Sounds good, but how are the folks at home responding?

This is not promising:

Shanghai consumers are spending less for the first time in a decade even as they are making more.

Per-capita consumption fell 3.1 percent to 5,004 yuan (US$733) in the first quarter compared with the same period last year, the Shanghai Statistics Bureau said yesterday on its Website.

The downturn signaled a cautious attitude among consumers as the financial crisis continues to rattle confidence.

"The spending decline was in line with the macroeconomic trend and the Consumer Price Index," said Xu Jin, an analyst at Shanghai Securities Co.

"We expect consumer confidence to recover in the third quarter, but the outbreak of swine flu has added uncertainty to the situation as it may greatly dampen spending on travel and food," Xu said.

The biggest drop came in spending on transport and travel. (Shanghai Daily)

It's tough to get people to spend money during a recession, isn't it?

Tags: China Business & Economy, china savings rate, domestic consumption