Ironically, China’s leadership has long recognised the importance of boosting domestic consumption, at least publicly. Over the past two decades, successive leaders have talked up the country’s supersize market with a booming middle class estimated at 400 million people and 140 million households, and rising.
But during the same period, consumption’s share of China’s gross domestic product stalled at just above 50 per cent, compared to more than 70 per cent in major economies.
“EATING BITTERNESS” AND THE GREATER GOOD
Much has been written about why China’s consumers are reluctant to spend. The main reasons include their propensity to save and lack of adequate social welfare and healthcare.
Little has been written about the fact that boosting consumption has always been a lower priority for China’s leadership, compared to exports and investments, the other two traditional engines of growth.
This has much to do with the party’s ideology and its management philosophy.
After the founding of the People’s Republic in 1949, Mao Zedong promised to build the country into a socialist paradise but directed a significant amount of resources to push for industrialisation and national defence, paving the way for China to possess all the industrial categories in the United Nations industrial classification – widely believed to be the only country in the world to be able to do so.
The concept of consumption or welfare did not enter the equation, particularly at a time when most people barely had enough to fill their stomachs.
