1/8
Good article. It cites prominent labor economist Cai Fang as arguing that further reform to the hukou system could unleash more than 2 trillion yuan in consumption. "Even without an increase of incomes," he notes, "it would raise...
via @scmpnewssc.mp/q3j6?utm_sourc…
Good article. It cites prominent labor economist Cai Fang as arguing that further reform to the hukou system could unleash more than 2 trillion yuan in consumption. "Even without an increase of incomes," he notes, "it would raise...
via @scmpnewssc.mp/q3j6?utm_sourc…
2/8
migrant workers’ spending power by 30 per cent because of improvements to their social safety net."
He's certainly right that reforming (i.e. eliminating) the hukou system would boost consumption, but this is also why it is so difficult to do.
migrant workers’ spending power by 30 per cent because of improvements to their social safety net."
He's certainly right that reforming (i.e. eliminating) the hukou system would boost consumption, but this is also why it is so difficult to do.
3/8
It would boost consumption, he notes, because it would mean an improvement in the social safety nets for tens of millions of migrant workers.
But this improvement isn't free. It would be the obverse of a huge increase in social spending by the major cities.
It would boost consumption, he notes, because it would mean an improvement in the social safety nets for tens of millions of migrant workers.
But this improvement isn't free. It would be the obverse of a huge increase in social spending by the major cities.
4/8
If that increase in spending is funded by transfers from other households, it's net impact on consumption would be minimal. If it is funded by transfers from businesses, it would mean reducing their subsidies and so undermining their international competitiveness.
If that increase in spending is funded by transfers from other households, it's net impact on consumption would be minimal. If it is funded by transfers from businesses, it would mean reducing their subsidies and so undermining their international competitiveness.
5/8
Finally if it is funded by governments, it would require the liquidation and transfer of local-government assets which, in turn, implies a fairly major transformation of the institutions around which local political, business and financial elites have formed.
Finally if it is funded by governments, it would require the liquidation and transfer of local-government assets which, in turn, implies a fairly major transformation of the institutions around which local political, business and financial elites have formed.
6/8
The point is that there's no secret to boosting the role of consumption. It requires direct and indirect transfers that raise the share of GDP retained by households which, in turn, requires reducing the share retained by businesses and/or governments.
The point is that there's no secret to boosting the role of consumption. It requires direct and indirect transfers that raise the share of GDP retained by households which, in turn, requires reducing the share retained by businesses and/or governments.
7/8
But to the extent that China's economic, political, financial and legal institutions, along with its manufacturing competitiveness, were structured around 3-4 decades of transfers from households to businesses and governments, reversing these transfers is easy enough to...
But to the extent that China's economic, political, financial and legal institutions, along with its manufacturing competitiveness, were structured around 3-4 decades of transfers from households to businesses and governments, reversing these transfers is easy enough to...
8/8
propose, but it cannot be done without structural adjustments that, among other things, will result in a very different economy, a reduced reliance on manufacturing, and a redistribution of political power away from local governments and towards households and Beijing.
propose, but it cannot be done without structural adjustments that, among other things, will result in a very different economy, a reduced reliance on manufacturing, and a redistribution of political power away from local governments and towards households and Beijing.
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