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The Chinese government consumes less on its citizens than most other countries with a similar or higher revenue level, shows analysis in the financial time, potentially underpinning the efforts in Beijing to encourage consumption to strengthen the marking economy.
Earth leaders will announce new economic goals at the annual meeting of his parallement of rubber stamp next month and discover stimuli measures to overcome poor domestic demand After the burst of assets.
The Chinese state consumes only about 6 percent of GDP on what is known as individual consumption – services ranging from health care to social security that directly uses citizens – while households consume another 38 percent according to the World Bank data.
Data analysis has shown state consumption on individual consumption in Chinawhich classified the World Bank as a state of higher medium income, lags behind most members of the BRICS group, including Brazil and Russia. It is also lower than that in many other emergence and developed economies.
Robin Xing, Chinese economist from Morgan Stanley, said the analysis emphasized the need for Beijing to increase state consumption on social welfare to unlock consumption.
“Without a deeper social welfare reform, people will retain all these precautions instead of consuming,” Xing said.
Economists expect that Beijing will increase the planned Central Budget Deficit of 3 percent of GDP to 4 percent next month and announce additional issuing of government bonds to increase growth.
Prime Minister Li Qiang, Chinese second leader, said Thursday that home demand should play a “dominant role” in the economy. In the last few years the country has Introduced subsidies to buy consumer as part of the effort to strengthen consumption.
In recent decades, China has quickly expanded its social welfare system to expand pensions into rural areas and health care to most of its 1.4 billion people. But monthly payments and payment of health insurance in rural pensions can be low.
Economists have said that each additional consumption should go directly in the incentive of household consumption, not traditional areas such as infrastructure investments.
Data, which use the figures 2021-most, comparable numbers available-have been available to the Government of India, a lower country than a medium income whose exit per capita is approximately fifth in China, spent less on individuals with only about 4 percent of GDP. The US and Mexico, meanwhile, spent about the same as China.
But economists have said that even these countries have still managed a much higher level of private consumption than China, which underwent the status of the second largest economy in the world as extraordinary for the total low consumption rates.
Economists have said that there are structural and cultural reasons for differences between countries. For example, the US had a better developed social welfare system with stronger participation in the private sector, which could give consumers more confidence.
“The American households are on average more comfortable with their safety net,” said Lynn Song, Chinese Chief Economist from I ING. “In China, pensions payments are less lower.”
He said that in China most pensioners “should eventually use their savings at the top of pensions, and there may be a generational built -in caution that Chinese households rely on themselves.”
In the US, on the other hand, consumers were also more willing to use debt than their Chinese counterparts, raising private consumption, Song said.
Alicia Garcia-Herrero, the main economist of the Asian Pacific Ocean in Natixis, said that countries like the US also had more developed insurance markets that allowed families to protect themselves from unforeseen situations.
In China, life insurance was advanced, but other forms of insurance also lacked.
“There is no way to ensure – neither the government nor the private sector offer you that protection. So, you have to save you,” Garcia -Herrero said.
Michael Pettis, an older contributor to Carnegie for international peace based in Beijing, said that the best way to increase consumer trust in China would be great, direct investing in pensions of existing pensioners.
“You really have to spend more money now. So, all those people who are already retired, double their pensions – who will appear in consumption, “Pettis said.