For the first time in eight years, the Chinese government’s annual growth target has been lowered, to 7.5 per cent GDP growth for all of 2012…..
The new number represents Beijing’s recognition that the investment-driven, export-dependent growth model that has propelled it from an impoverished backwater to the world’s second-largest economy in just three decades is running out of steam……
The goal is to shift growth away from investment in polluting, energy-intensive, unsustainable industries and towards domestic consumption, particularly of services and “green goods”, such as energy-efficient vehicles and environmentally friendly building materials.
“We will move faster to set up a permanent mechanism for boosting consumption,” Wen Jiabao, the premier, said at the opening session of China’s rubber stamp parliament on Monday. “We will vigorously adjust income distribution, increase the incomes of low- and middle-income groups and enhance people’s ability to consume.”
via China’s growth model running out of steam – FT.com.
Comment:~ The trap China faces is that raising wages in order to promote domestic consumption will reduce competitiveness in export markets and harm its current export-driven growth model. Not only are exports likely to fall but, with a high propensity to save, there is no guarantee that Chinese consumption will rise as fast as wages.
What a ridiculous statement by the leader of the Chinese Military Dictatorship. Where is he going to take the income from to redistribute it to? His fellow multi-billionaire generals and their Western colleagues. That is an unlikely outcome. More likely outcome is
1 – that taxes on industry increase forcing companies to look for lower cost poverty stricken regimes in order to maintain their economic objective.
2- China puts a tax on exports for redistribution of income. It will not change the price of subsidised Chinese goods much and it doesnt matter because they are sold at prices far below comparable western products.
When the west realises that Chinese production is a threat to democracy and sovereignty, they will rethink their stupid socialist strategies and start to make goods. Watch the conversion to personal consumption in China at that stage.