Beijing’s official announcement that China’s 2010 growth target is 8% is not a surprise. The figure has become a benchmark for the government in recent years, even during times when the economy has performed far better.
Nor is it a surprise that China will pursue more of the same policies in its quest for positive growth next year. Beijing has admitted since July that it plans to curb excess production capacity by expanding industrial production by about 11% next year, compared to 12% in 2009, while reducing its reliance on exports.
It is the target of boosting consumer spending, another well-communicated aim for next year, where Beijing may come up against problems in 2010, a fact that was all but admitted by Industry and Information Technology Minister Li Yizhong when announcing the GDP figure on Monday.
Li said that Beijing would have to find new ways to get Chinese consumers to spend rather than save their money, especially as tax breaks on cars and subsidies for household appliances cannot last forever. The government knows that it is a mentality – one that still places Chinese people as the biggest savers in the world – that must be changed if domestic consumption is to rise, thereby reducing the nation’s reliance on investment- and export-led growth.
This is a big challenge for the government next year. While curbing excess production capacity is a move that is well within Beijing’s grasp, getting Chinese consumers to open their wallets is not. Short of marching people from their homes and into the malls, the government cannot persuade consumers to buy, and, as Li said, subsidies can only go so far.
But China’s save-not-spend attitude is not some abstract cultural trait possessed by the Chinese since the beginning of time, it is borne out of the neccessity of living in a country without even the most basic social safety net. The reality is that while medical bills, redundancy or an impoverished retirement are all very real threats for China’s middle class – not to mention the country’s poor – they are not likely to blow their savings on cars, TVs, apartments and luxury brands.
Beijing has talked a good game about poverty reduction in 2009 – just as it did in 2008, 2007 and 2006. And there’s no denying that the government has put its money where its mouth is, increasing spending in key areas. Yet we still hear of insufficient affordable housing, patients being denied access to medical care, and how attempts to loosen the stringent hukou system – which condemns so many of China’s migrant workers to abject poverty in the country’s cities – are falling flat.
It is to be hoped that the 12th Five-Year Plan provides for substantive efforts that fill the still gaping holes in China’s social safety net. At the same time, it must be understood that when it comes to eliciting national-level change in a continent-sized economy, progress can be painfully incremental.