Don't count on it

The parade of spending pledges announced since the government unveiled its stimulus package makes it clear why economists think China's contribution to the world economy in the coming months will come from its public works, not its shoppers.

The Ministry of Railways is targeting 600 billion yuan of investment next year. The Ministry of Housing and Urban-rural Development said it would spend 900 billion yuan in the next three years to build affordable homes. The country's civil aviation chief promised 250 billion yuan for airport projects.

Among the details of the stimulus plan, the government made a commitment to spend more on healthcare and education.

Economists say this is exactly why ordinary people need to free up more of their cash for shopping, but they doubt that the government can bolster public services in short order.

China's flimsy welfare net means that households still save about 30 percent of their incomes. In terms of its contribution to GDP growth, private consumption actually fell last year.

Michael Kurtz, an analyst with Macquarie Securities, said in a research note on Thursday that the world is likely to be disappointed if it is counting on Chinese shoppers to replace prostrate US consumers any time soon.

"A game-changing paradigm shift toward Chinese private consumption-driven growth would require deep structural reforms taking effect over years, not months," Kurtz says.

(China Daily December 1, 2008)