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Prof. Yao Yang: Catalyzing Consumption While Accommodating Inflation

Feb 28-2023   



Of the 5% GDP growth that China aims to achieve in 2023, at least 3% will have to come from consumption, said Prof. Yao Yang, Dean of the NSD, in a media interview. The overriding role of consumption is largely due to the limited growth expected of investment as the global supply chain lumbers in its recovery after the pandemic.

 

Prof. Yao observed that the market has regained vitality with such signs as an increasing number of new enterprises and ‘revenge spending’ in many areas. In particular, he believed that the real estate industry and the automobile market are getting back in shape, providing solid support for consumption recovery.

 

However, he underlined the quality of consumption and cautioned against a rapid decrease in the savings rate, since a proper level of savings is indispensable for sustaining high-quality economic growth through the provision of accumulated capital and funding for technological research and innovation. From now to 2049, China should maintain a savings rate at no less than 25%, he said.

 

To safeguard economic momentum, Prof. Yao also advocated more tolerance towards inflation against the backdrop of expected interest rate decrease for a fairly long period of time into the future. Last year the inflation target was 3%; he argued that a 5% line can be drawn for this year to take into account the likelihood of economic overheat.

 

Prof. Yao proposed that four important measures be implemented simultaneously to spur consumption: increase employment and residents’ incomes, manage demand via special treasure bonds, improve the social security system, and continue to develop consumption loans.

Prof. Yao Yang: Catalyzing Consumption While Accommodating Inflation

Feb 28-2023   



Of the 5% GDP growth that China aims to achieve in 2023, at least 3% will have to come from consumption, said Prof. Yao Yang, Dean of the NSD, in a media interview. The overriding role of consumption is largely due to the limited growth expected of investment as the global supply chain lumbers in its recovery after the pandemic.

 

Prof. Yao observed that the market has regained vitality with such signs as an increasing number of new enterprises and ‘revenge spending’ in many areas. In particular, he believed that the real estate industry and the automobile market are getting back in shape, providing solid support for consumption recovery.

 

However, he underlined the quality of consumption and cautioned against a rapid decrease in the savings rate, since a proper level of savings is indispensable for sustaining high-quality economic growth through the provision of accumulated capital and funding for technological research and innovation. From now to 2049, China should maintain a savings rate at no less than 25%, he said.

 

To safeguard economic momentum, Prof. Yao also advocated more tolerance towards inflation against the backdrop of expected interest rate decrease for a fairly long period of time into the future. Last year the inflation target was 3%; he argued that a 5% line can be drawn for this year to take into account the likelihood of economic overheat.

 

Prof. Yao proposed that four important measures be implemented simultaneously to spur consumption: increase employment and residents’ incomes, manage demand via special treasure bonds, improve the social security system, and continue to develop consumption loans.