00:00Let's talk to Lo Baocheng, the Dean of the Center for International Business Ethics at the University of International Business
00:07and Economics in Beijing.
00:09Welcome to the program. Good to see you. I guess first question is, what about this concentration on domestic demand?
00:16That seems to be very, very high on the agenda. Why is it so important?
00:22Yes. I think in the past few decades, China has spent a great deal on investment to pave the infrastructure.
00:31And also, China has stepped up with all the efforts to boost its export.
00:38And now it is time, as the government see it, to change the gear of economic growth by boosting domestic
00:46consumption.
00:46A given, one is that the Chinese savings rate is still very high as compared with all the major economies
00:54by more than 40 percent.
00:57And in the meanwhile, to compare with the advanced economies, which consumption contributes to more than 70 percent of the
01:06GDP,
01:07China's contribution is a little more than the 50 percent.
01:12So, which has a large potential to really to unfold the purchase power of the Chinese consumers.
01:21So, this will be able to change the Chinese structure of economic growth while benefiting the people,
01:30which is really the end of economic growth.
01:33And a look at a whole package of the measures that are there to stimulate the consumption are really on
01:42the agenda.
01:43So, therefore, this is really a strategic move rather than an ad hoc approach.
01:51OK. Weak consumption has been a pretty persistent concern in China's economy for many years.
01:56I mean, why are Chinese households so cautious about splashing the cash, about spending?
02:03Well, I think there is one traditional reason.
02:06Frigality is considered to be a virtue by generations of Chinese people.
02:13And so, therefore, high savings rate has always been there for household management.
02:19And the second reason is that there are structural imbalances.
02:25While we can really buy a lot more of the electronics, the clothes, et cetera,
02:33the access to fast-track Medicare, to the better high-quality education,
02:43and also for the improvement in housing are not really there to be adequate enough.
02:50So, on the supply side, we need structural reform to really cater to people's needs.
02:56And then precautionary saving is something that is understandable and rational by individual,
03:04to the household because they care more about their stability of income together with the job security.
03:15And also, the public spending is also needed to be able to alleviate some of the worries of the people
03:23in case of family crisis, et cetera.
03:26So, pension funds are also there to be elevated to enable people to be able to generously open their wallet
03:37and spend more.
03:38Lu Baocheng, good to see you.
03:39Lu Baocheng, the Dean of the Center for International Business Ethics
03:42at the University of International Business and Economics in Beijing.
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