1、1The Greatest Consumption Story in Modern HistorySTEPHEN S.Roach,chairmanof Morgan Stanley Asia,hasquipped that Chinas 12th Five-year Plan is likely to spark thegreatest consumption story in modernhistory.He pointed out that the 12thFive-year Plan focuses on three majorpro-consumption initiatives,wh
2、ich willboost private consumption as a share ofChinese GDP from its current reading ofaround 36 percent to somewhere in the42 to 45 percent range by 2015.It wouldalso be a huge boost for Chinas majortrading partners-not just those in EastAsia,but also in the growth-constrainedEuropean and U.S.econom
3、ies. The backdrop for this is how Chinaweathered the 2008 global financial cri-sis.The meltdown did produce a dip inChinas economy.In fact,the PurchasingManagers Index (PMI) of Chinas manu-facturing sector dropped to a record lowof 38.8 percent in November of 2008.PMI can reflect the entire economy
4、of acountry.A reading below 50 percent ringsan alarm bell for economic slowdown.Inside Job The Chinese government reacted im-mediately to warning signs by adoptinga stimulus package estimated at RMB 4trillion and a series of loose monetarypolicies.The main contents of the pack-age plan 2were: first,
5、to boost domesticdemand; second,to implement an in-dustrial rejuvenation program; third,toencourage progress and innovation inscience and technology; and fourth,toraise the level of social security.Thesemeasures did not disappoint.“Chinaseconomy resumed stable and briskgrowth last year.A key indicat
6、or was itsrational growth rate for the later half ofthe year,“ stated Zheng Xinli during thisyears session of Chinese Peoples Politi-cal Consultative Conference (CPPCC)in March.Zheng is a CPPCC delegateand vice chairman of the China Centerfor International Economic Exchanges(CCIEE).He also made the
7、optimisticprediction that “Chinas economy willmaintain last years growth dynamics in2Ol1,“ In 2010,while the worlds economygrew by only 4.5 percent,Chinas GDPexpanded by 10.3 percent.The gain is11.9 percent in the first quarter and 10.3percent in the second.In the second halfof 2010,the Chinese gove
8、rnment shiftedits monetary policy stance from relativelyloose to a more prudent firmness by rais-ing the bank reserve requirement ratioand hiking interest rates.The countrysGDP growth rate slowed down in re-sponse but still achieved 9.6 percent and9.8 percent in the third and fourth quar-ter respect
9、ively. 3Other figures also show the robustrecovery of Chinas economy: actual uti-lization of foreign investment increasedby 17.4 percent; the number of newlyapproved foreign-funded enterprises inChina totaled 27,406 in 2010,up by 16.9percent over the previous year.“Privateinvestment is going up even
10、 faster thangovernment investment,which means anendogenous economic growth has beenformed thanks to the government stimu-lus policies,“ explained Zheng Xinli. Consumption,Export and Investment Model Chinas vice premier Li Keqiangpointed out in an article written in 2010: “In the past the government
11、investmentmainly focused on industrial develop-ment and infrastructure construction,but now Chinas economy has entered a new phase; therefore more governmentinvestment should go to employment,social security,education,healthcare,science and technology research and in-frastructure building in rural a
12、reas.“ In fact,because of the financial crisis,Chinas economic growth pattern haschanged from one driven by export andinvestment in infrastrueture construc-tion to one led by a troika of consump-tion,export and investment.The poli-cies to 4boost domestic demand includeincreasing peoples wages,reduci
13、ng taxburdens on businesses and individuals,and encouraging rural consumption ofhome appliances and autos.At the sametime,the government infuses into themix more financial support for agricul-ture and farmers. The pro-consumption policies haveproduced speedy results.Taking theauto industry as an exa
14、mple,govern-ment initiatives such as tax and subsidyincentives,greatly spurred demand.According to statistics released by theChina Association of Automobile Manu-facturers,China sold over 13.64 millionvehicles in 2009,overtaking the UnitedStates to become the worlds largestauto market.Of these,7.2 m
15、illion,or59.65 percent,are cars with an enginecapacity under 1.6L,marking a suddengrowth of 71.28 percent per annum.Thissteep increase was the immediate resultof a 5o percent cut in the purchase taxon smaller cars. According to statistics newly re-leased by the General Administration ofCustoms (GAC)
16、,Chinas total trade in2010 reached nearly US $3 trillion,anddemonstrated increases of up to 34.7percent year-on-year.Imports surgedby 38.7 percent and the countrys tradesurplus fell by 6.4 percent to US $183.1billion.Wang Han,an economist at theShanghai-based advisory firm CEBM,told Reuters:“The Chi
17、nese economy isadapting 5to growth in domestic demand.Imports are much stronger than we ex-pected,indicating that domestic invest-ment and internal demand are mainlywhats pushing up domestic consump-tion.“ Chinas changing economic growthpattern also benefits manufacturers allover the world.South Kor
18、eas JoongAng Daily reported that more and moreKorean manufacturers of consumerproducts such as home appliances andcars are riding on the coattails of Chinaseconomic ascent.Makers of liquid crystaldisplay (LCD) televisions are one of theluckiest.Statistics show that about 4.96million Korea-made sets
19、were sold in thefirst quarter of 2009 in China,more thandouble the number sold during the sameperiod last year.Encouraged by theirsudden and massive lead in the market,South Korean companies,including LGand Samsung,are setting up more LCDpanel production lines in China. New Opportunitiesfor the 2011
20、-2015 Period The Chinese economy will sustain itsmomentum during the 12th Five-yearPlan period (2011-2015),largely by stim-ulating and satisfying domestic needs. From 2011 to 2015,investment andconstruction in the renewable energyand environmental protection indus-tries will stay on track.China is g
21、oingto 6invest more than RMB 8oo billion inhydropower projects and around RMB1.058 trillion in subway constructionin urban areas.In the countrys centraland western areas,more investment willbe put in industrial upgrades,factorybuilding,equipment manufacturing andtechnology park construction.China wi
22、llincrease funding for affordable housingprojects and speed up the renovation ofold and unsafe buildings.The govern-ment has set a construction target of 10million government-subsidized apart-ments,72.4 percent more than last year.In addition,water infrastructure inrural areas becomes a major focus.
23、Thecentral government plans to put aboutRMB 988.55 billion into dealing withissues in agriculture,farmers and ruralareas,up 15.2 percent compared withlast year. To fatten wallets with more dispos-able income,China is gearing up to fundits public service sector.In the 2Oll to2o15 window,the central g
24、overnmentwill spend RMB 441.434 billion on socialsecurity and employment,an increase of16.6 percent compared with the 2005-2OlO period.RMB 129.266 billion is dedi-cated to subsidized apartments construc-tion,an increase of 14.8 percent.Finally.,RMB 172.758 billion has been set asidefor healthcare an
25、d RMB 296.357 billion ineducation,both up 16.3 percent. An ANZ bank report in February2011 estimates that 7the new medicalcare scheme alone will trigger aboutRMB 852 billion in consumption.Thatfigure may reach RMB 1.47 trillion if thedownstream effects of better medicalcare for the population come into play.Similarly,reforms to the Pension sys-tem will also unleash shopping spreesthat send domestic consumption trendsupwards.
