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WALK AND CHEW GUM AT THE SAME TIME Achieving this won’t be easy, because many of China’s most powerful growth engines are tapped out. The beleaguered property sector is likely to remain under downward pressure for years to come. China’s seemingly resilient export sector will almost surely be buffeted by rising protectionism. Even all-powerful fixed-asset investment, which currently accounts for around 40 per cent of Chinese GDP, is reaching its limit. By process of elimination, that puts the onus on the Chinese consumer to fill the gap. I have been hammering home this point since Wen first articulated the four uns, and others have come to the same conclusion. But while the Chinese government always mentions boosting consumer demand when discussing its economic challenges, it comes alongside a raft of other goals, from spurring employment growth and addressing income inequality to developing alternative energy and indigenous innovation. What an unbalanced Chinese economy actually needs is a single-minded focus on invigorating the Chinese consumer’s role as a more powerful driver of growth. I do not mean to suggest that China should walk away from all that it has accomplished over the past 50 years, especially its recent technological advances. Nor am I suggesting that China revert to its central-planning legacy in an attempt to steer its economy in a different direction. To me, a target and a plan are two different things: A plan provides a broad strategic framework, whereas a target specifies a numerical objective that is consistent with that plan. China can walk and chew gum at the same time – it can both plan and target. Admittedly, a household consumption-to-GDP ratio of 50 per cent would be a tough target to hit; my estimates suggest that it would require household consumption to grow twice as fast as the rest of the Chinese economy. That outcome may seem unlikely, but it is doable, given the weakness expected in housing, exports, and fixed-asset investment.
