Desperate measures? In a rather unusual editorial today the NY Times urges China to spend more money to pick up the slack of reduced spending by the US and Europe, and thus help keep the global economy lubricated.
China has grown 13-fold over the last 30 years, thanks to hypercharged exports and white hot investment. But its economy is lopsided. Consumer spending amounts to little over a third of economic production, probably the lowest share in any country in the world. And its overwhelming dependence on exports has made it overwhelmingly vulnerable to changes in world demand.
The government in Beijing, which is running a huge budget surplus, also has money to spare.
The government has announced some measures to fuel domestic spending —including a tax cut on home purchases to revive an ailing housing market and a vague plan to invest in public works. But it must do more to unlock the savings of its citizens and encourage them to spend.
To do that it needs to rebuild the system of social insurance that fell apart when state-owned industries collapsed and were replaced by the private sector. Government investment in things like health care, education and pensions would help develop China’s middle class and its domestic market.
A boost to consumer spending would undoubtedly help China weather the economic storm. But by raising Chinese imports and reducing its dependence on exports, it would also help the rest of the world.
Are you listening, China? This isn’t just anybody telling you what you should do, it’s the New York Times!
Actually, there’s nothing in the editorial I disagree with. And if nothing else, it’s certainly confirmation of just how huge a role China now plays in the world economy – almost as if the pedestal has shifted from being the US to China. Is that what the editors meant to imply? I’m not sure, but the title of the editorial is “As China Goes, So Goes …” There’s definitely a new order rising.
Meanwhile, it’ll be interesting to see how receptive China is to this well-meaning if unsolicited advice from The Gray Lady.
Richard Burger is the author of Behind the Red Door: Sex in China, an exploration of China's sexual revolution and its clash with traditional Chinese values.