But there’s a catch in Beijing’s plan.
For consumption to drive growth, many analysts say, the Chinese Communist Party would have to restore the consumer confidence of a generation of Covid graduates that is struggling to own a home or find a job. It would also require triggering a cultural shift, from saving to spending.
“China’s extraordinarily low consumption level is not an accident,” according to Michael Pettis, a senior fellow at the Carnegie Endowment for International Peace. “It is fundamental to the country’s economic growth model, around which three-four decades of political, financial, legal and business institutions in China have evolved. Changing this won’t be easy.”
The more households spend, the less there is in the pool of savings that China’s state-controlled banks rely on to fund key industries – currently that includes AI and innovative tech that would give Beijing an edge over Washington, both economically and strategically.
That is why some analysts doubt that China’s leaders want to create a consumer-driven economy.
“One way to think about this is that Beijing’s primary goal is not to enhance the welfare of Chinese households, but rather the welfare of the Chinese nation,” David Lubin, a research fellow at Chatham House wrote.
Shifting power from the state to the individual may not be what Beijing wants.
China’s leaders did do that in the past, when they began trading with the world, encouraging businesses and inviting foreign investment. And it transformed their economy. But the question is whether Xi Jinping wants to do that again.
