The Chinese economic data from January to February was better than expected. Meanwhile, on Sunday, China revealed a “special action plan to enhance consumption” by increasing income, stabilizing housing and securities markets, and improving medical pension services and pensions. Indeed, the balance of the economy has been out of investment towards local consumption has been an explicit goal in China since the Central Economic Labor Conference in December 2004. However, three main structural restrictions prevent any meaningful effort to enhance the role of roles consumption in the economy, according to the BBH FX report.
Financial reforms to help China achieve the consumer investment axis
1) Low family income levels. Chinese family income represents 61 % of GDP while in Western families maintains a greater share of what they produce, usually 70-80 % of GDP. Investment-based growth model means that local governments pick up an important part of economic production due to land sales control and investment in sense. ”
II is high precautionary savings. Families provide a large part of their income (more than 30 % of gross domestic product) due to weak weak social safety networks, low job security, aging. total income reached 95 % in Q4 2024. ”
“From our point of view, the financial reforms that lead families to have a larger part of the economic pie with a gradual reassessment of China’s currency can help China achieve the investment axis to the long consumer.”
