Limited financing options for private enterprises, especially due to capital controlīenefits of making use of offshore markets.Notorious for its persistent incentives to lend to state-owned enterprises.RMB appreciation → increase purchasing power → rebalance growth from investment and export-led economy to consumption-based economy.Meet twin objectives of high growth and low inflation.More exchange rate flexibility → more autonomous monetary policy in macro-economy.Foreign Exchange Reserves (USD billion)įoreign Exchange Reserve Stocks: 2005Q1 – 2011Q1Īccumulation of Foreign Exchange Reserves: 2005Q1 – 2011Q1 But, a U-turn would be more disastrous to employment, household income and the willingness to lendįigure 10.The Chinese government embarked on massive fiscal and monetary stimulus, which worsened the problems of high inflation and asset bubbles.still prefers direct investment and public expenditure to build the economy.the government remains sceptical of the contribution that domestic consumption could make to economic growth.increasing consumption would require the government to relinquish, rather than increase, its control over the economy.More difficult to combat these fundamental issues.High inflation, combined with weak employment growth, a weak social safety net, a poor government-funded health care system and low public confidence on China’s social institutions and prospects are the key issues.Although the government has planned to stimulate consumption through consumer subsidies etc, these measures are not likely to offer quick results.Why is it so difficult to boost private consumption ? Personal Disposable Income as Share of GDP (in percent) Labor Income as Share of National Income (in percent)įigure 6. Sources: National Bureau Statistics Haver CEICįigure 5. Inflation (12-month inflation rates based on CPI indexes) Shares of Private Consumption and Investment in GDP (in percent) Note: Shaded regions in each bar show the contributions (in percentage points) of each component to total GDP growth. In any event, China’s economy is facing significant downward pressure due to the Euro crisisįigure 3.According to the NEA data, the service industry and residential power consumption expanded much faster than that of the industrial sectors.
The decrease in electricity consumption is due to structural transition to the service sector, which is less energy intensive.Non-manufacturing PMI, which tracks construction activity, is also well below the ten-month high in March.Sharpest decline in factory output since March.An eleventh successive month-on-month deterioration.Manufacturing PMI down from 49.3 in July 2012 to 47.8.Construction and manufacturing sectors account for 75% of total energy consumption.As electricity consumption decreases, the demand for coal also decreases hence the increase in coal storageĭecelerating construction and manufacturing sectors.Coal storage reached record high at Qinhuangdao, Tianjin, Caofeidian and Lianyungang, according to Wood Mackenzie.Centres of heavy industry: Shandong Province and Jiangsu Province reported 10% drop in electricity consumption.National Energy Administration recent figures shows slow down in electricity consumption.All other figures, especially GDP statistics, are “for reference only,” he said smiling. By looking at these three figures, Li said he can measure with relative accuracy the speed of economic growth. amount of loans disbursed, which also tends to be accurate given the interest fees charged.volume of rail cargo, which is fairly accurate because fees are charged for each unit of weight and.electricity consumption, which was up 10 percent in Liaoning last year.When evaluating Liaoning’s economy, he focuses on three figures: (c) GDP figures are “man-made” and therefore unreliable, Li said.Even so, incomes for Liaoning farmers are only half that of urban residents. Liaoning ranks among the top 10 Chinese provinces in terms of per capita GDP, yet the number of its urban residents on welfare is among the highest in the country and rural disposable incomes are above the national average. (c) Describing some of the challenges he faces as Party Secretary, Li related that despite brisk economic growth of SIPDIS 12.8 percent in 2006, Liaoning’s income gaps remain severe.Energy consumption – a more reliable indicator?
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