Ramping Up China's Domestic Consumption: What's Taking So Long?

One of the most insightful and articulate commentators on China’s economy is my counterpart at Peking University, Michael Pettis. In a Wall Street Journal op-ed in March, he offered this succinct summary of the current situation:

China’s recent economic problems come courtesy of declining American demand for Chinese exports, and have sparked renewed talk of how Beijing needs to shift from export-dependent growth to a greater focus on domestic consumption. If only saying it could make it so. In reality, history has shown that such transitions are wrenching, and China will be no exception.

Everyone wants to see growth in Chinese domestic demand. China’s leaders see it as an immediate solution to the slowdown in exports and employment, and as a way to reduce the country’s exposure to future external shocks. Pettis and other economic observers, including myself, see it as necessary to correct an unsustainable imbalance in the global balance of savings and consumption. Time magazine even speculates, in a recent cover story, that China might be able to “save the world” if only it can get its own consumers to buy more.

So why should it be so hard? Why should boosting Chinese domestic demand require, as Pettis suggests, a “wrenching” transition? China certainly does not lack for consumers, and collectively, at least, they’re rich (the country is sitting on over US$2 trillion in foreign currency reserves). And at least part of China’s stimulus package is designed to give consumers rebates and other incentives to go out and spend. But later in that same op-ed Pettis observes, ”China can and will eventually make the transition away from export-led growth, but no one should expect it to be quick or easy.” Why not, exactly? That is the question I’d like to explore in depth today.

Pettis himself attributes the difficulty, correctly, to factors deeply embedded in China’s export-led growth model. But in doing so, he tends to focus his attention on the demand side of the equation. In another Wall Street Journal piece, he notes that “consumption is still repressed thanks in part to very low deposit rates, constraints on consumer financing and low wages.” In particular, he notes how China’s preoccupation with funding manufacturing industries led it to neglect the development of consumer finance lending and the country’s service sector.

All of these are valid and important points, but only half of the picture. It’s natural, when talking about consumption, to look immediately towards the demand side of the equation. In everyday language, we tend to use “consumption” and “demand” as synonyms. In fact, the amount demanded or consumed (think “q” on your supply-demand charts) is as much a function of supply as demand. And it’s the supply side of the equation — which determines where along a given demand curve the economy ends up — where the really big problem lies.

When we talk about Chinese domestic consumption “picking up the slack” for exports, we tend to imagine a Chinese company losing a foreign customer for its product, only to gain a replacement customer in China. Hence we wonder, what’s the problem? Why can’t the Chinese, who seem to have plenty to spend, just buy what they used to sell abroad for their own consumption?

The answer becomes clear when you look at who China’s export producers actually are. The vast majority of them are contract manufacturers. They do not sell their own products abroad under their own brand names, using their own sales and distribution channels. They make somebody else’s product and ship it to them abroad. Many of them have no direct contact with the end buyer, but contract through an intermediary. In most cases, they played no role in design and have no rights to the product itself. Having come on-line during a booming period of globalization, when capacity was stretched thin, their experience in marketing was usually limited to picking up the phone to take orders. These descriptions do not just apply to sweatshops producing low-end consumer goods. Even highly skilled Chinese companies making advanced parts and components tend to be deeply embedded in global supply chains, often with dedicated production lines for specific foreign customers.

The situation is so extreme that Chinese who travel abroad often go shopping for better-quality made-in-China goods that they can’t find back in China, in order to bring them back home. Even when such goods do appear in Chinese stores, they often cost more (in absolute terms) than they would abroad, because they have to be re-imported.

The point here is not to criticize Chinese exporters. These businesses have responded to the opportunities the global marketplace has presented to them, and their operational capabilities represent a huge leap forward compared to the China of 30 years ago. The point is that a sizeable portion of China’s production base is geared almost exclusively to feed into highly developed external markets. Reorienting them to serve China’s less developed domestic markets will be no easy feat. Chinese exporters will have to reinvent themselves, dramatically altering their business models and mastering entirely new business skills. They will struggle with the long lead times and new investments involved in acquiring new customers or developing brands. Many existing companies will fail and go out of business, while entirely new ones will emerge to seize the new opportunities.

Pettis is absolutely right that China’s service industries, which could help expand domestic consumption, are extremely underdeveloped. They represent a prime area where new companies can come to the fore. But the problem goes far deeper than suppressed demand. As I pointed out in my previous post on SME lending, Chinese banks need to radically reform their collateral-based approach to lending, which excludes asset-light service companies from access to capital. Boosting domestic consumption will mean that banks, too, must push outside their “comfort zone” to adjust to new market conditions.

The process of “creative destruction” necessary to boost domestic consumption will be uncertain and disruptive. The problem is that China’s government, at this moment, is scared to death of uncertainty and disruption, and is doing everything it can to minimize them. The whole thrust of the stimulus has been to freeze the economy in place, as it was before the crisis, by extending working capital loans to keep failing companies afloat and front-loading the next generation of infrastructure development to keep existing industrial capacity filled. China seems to want to “lock in” the economic accomplishments of the past 30 years, with “no company left behind.” But as long as it continues to do so, it prevents capital and other resources, including labor, from being reallocated into sectors that serve domestic demand.

Every month, analysts pour over the latest statistics released for signs that China’s efforts to stimulate domestic demand, including rebates or cuts in purchase taxes, are bearing fruit. But even if these temporary measures were to succeed in permanently shifting the domestic economy’s demand curve, which is unlikely, the supply curve hasn’t budged. Their effect, therefore, is likely to be temporary and limited, NOT the structural change everyone is looking for. In fact, that structural change is being blocked by the rest of China’s stimulus, including export rebates and a flood of cheap loans, designed to preserve employment. The net effect is negative. In his March WSJ piece, Pettis describes implicitly the supply-side dilemma I just tried to make explicit:

The service sector is almost nonexistent and it is proving fiendishly hard to boost consumption directly. So in Beijing’s effort to support domestic demand, most stimulus spending goes to investment and to the manufacturing sector, especially to the large state-owned enterprises that dominate the economy . . . The effects of these measures in terms of boosting “excess” production — in other words, production beyond China’s ability to consume domestically — far outweigh Beijing’s direct attempts to stimulate household spending via measures like subsidies on appliance purchases and cutting purchase taxes on cars . . . As much as Beijing would like to change its model, it cannot do so quickly except by tolerating a massive collapse in manufacturing output.

The debate over China’s economy is often framed in terms of success or failure — China saving the world versus China crashing and burning. But I prefer to speak in terms of seized or missed opportunities. I sometimes wonder, for instance, what would happen if instead of providing life-support to troubled companies, the Chinese government just let some of those companies fail and spent the same money on temporary support payments and small business start-up loans to unemployed workers. Nobody would starve, nobody would have cause to riot, but at least they would be freed to do something productive rather than stand around a dormant factory all day long.

Back in the early 1980s, China also had an unemployment problem, of sorts. Millions of people were returning from the countryside, where they had been “sent down” during the Cultural Revolution, and many were unable to secure jobs with state “work units” due to their dubious political status. The government responded — almost by accident – by allowing them to create their own employment by peddling goods on the street. These getihu (single household units) were initially spurned as delinquents and undesirables, but eventually were allowed to hire employees of their own. Many of these entrepreneurs built hugely successful private companies, some even listed on the Hong Kong exchange or Nasdaq, becoming multi-millionaires in the process. Why couldn’t the same thing happen again, if we let today’s export workers turn their creativity loose on China’s domestic market for goods and services? What kind of miracle are we holding back by freezing them in place?

One of the major reasons lurking behind the Chinese preference for the status quo – not just in official thinking, but popular thinking as well — is the ingrained notion that exports are “good” while imports are “bad.” This may have made sense 30 years ago, when China desperately needed to earn precious foreign exchange to pay for much-needed machinery and other investments. But it makes no sense now, when China’s compulsion to keep exporting forces it to pile up more foreign currency than it wants.

In the midst of this current crisis, China’s leaders, and its population, see boosting internal demand for Chinese-made goods as an immediate way to save Chinese jobs and perhaps de-link themselves from the world’s economic troubles. But in order to resolve the underlying imbalance in global savings and consumption that Pettis and others point out, rising Chinese demand must not only absorb more of China’s own production, it must also spend more on imports from abroad. This would be, in effect, another way to shift the domestic supply curve outwards. When the Chinese hear this, however, it sounds to them like foreigners are “stealing” part of China’s recovery.

I have written in other posts about how Chinese companies actually need foreign competition in order to spur their business to a higher level and facilitate the development of domestic consumer markets. A classic example of this is the Chinese fast food industry, where the presence of McDonald’s (MCD) and KFC has inspired countless Chinese emulators catering to the new consumer trend they introduced. But on a macro level, as well, China needs imports. In a recent post on his website, Pettis mentions that he has been reading Akio Mikuni and R. Taggart Murphy’s book Japan’s Policy Trap: Dollars, Deflation, and the Crisis of Japanese Finance. One of my favorite books, at least along these lines, is Murphy’s The Real Price of Japanese Money, which covers similar ground. In it, he shows not just how structural factors, such as cheap lending, fueled a persistent trade imbalance, but how the proceeds from that imbalance (the accumulation of foreign currency from trade surpluses) fueled a domestic bubble in both stocks and real estate. If China wants to avoid a similar trap, it needs to come to terms with the fact that greater domestic consumption will mean more imports, and that this is actually a “good” thing.

Everyone agrees, in principle, on the need for China to boost domestic consumption. But making that actually happen – allowing it to happen — is much tougher than it looks, because it involves disruptive change and an openness to new ideas about what China’s economy will look like. It’s an interesting fact of psychology that, once human beings find something that works, they tend to keep doing it. The problem comes when circumstances change and whatever they were doing stops working. Do they recognize the change and try something new? Or do they just keep doing what used to work? The answer marks one of the main differences between success and failure not only among individuals, but companies and countries as well.

I’ll close by making an equally important but much broader point. Over the past year, in response to the global financial crisis, we’ve seen a resurgence of Keynesianism and its focus on demand-side solutions. “Supply side economics” has been ridiculed and declared dead. But as important as fiscal and monetary stimulus may be in priming the pump, or keeping the pump from clogging in the first place, by keeping credit and revenue flowing when markets over-contract, the health of the supply side — and its ability to adapt unhindered to changes in economic conditions — remains vitally important. Stimulus may avoid the unnecessary destruction of wealth due to panic, but ultimately an economy must create wealth to prosper, and stimulus measures must be careful not to get in the way.

Comments

[huangthomas:]

This is not an intelligent article. Do you spend more money because of the wealth of Bill Gate or Warren Buffet? Would Chinese spend more because of their GDP is ranked the third in the world or foreign exchange reserve is No. 1? You don't spend national GDP or forein currency reserve. They are just the number on the paper. The average annual per capita GDP is $2,000.00 for Chinese, instead of $46,000.00 for American. How much spending power Chinese have when retirement income, health care, and education are not properly provided?

Aug 21 11:35 PM

[HaavBline:]

The author, and Prof. Pettis, are among westerners who have shown in depth understanding of China's current challenges. Yet they seem to also have similar blind spots that makes their observations perhaps off the mark. And they sometimes seem frustrated for the wrong reasons.

The most fundamentl chellenge for China to develop its potential of domestic consumption is not the underdeveloped service sector, although that IS a major challenge. The most fundamental challenge is that the average Chinese remains very poor. It GDP may ranked #3 moving toward #2, but its per capita GDP still ranked near #110 in the world. In addition most of the wealth are concentrated in the hands of goverment and corporations, not individuals. Chinese consumers seemly do not have the frivolous spending power that western consumer enjoyed (until last year). When they have any money to spend beyond necessities, it is generally focused on futher enhancing productivity (first fridge, first phone, first car, higher education, etc.)

Chinese policy makers seem quite awared of the need to restructure and develop internal consumption, but they also correctly know that this can not be done very quickly. That's why their near-term stimulus package put top priority on domestic investment, which can boost economy quickly and keep people employed. Policies that can boost long term sustaiable domestic consumption need to be put in place over time and can not be expected to gain quick results.

Service industries ARE being encouraged. But unlike factories and roads, you can not seemly dump money on it and expect service industries to pop up. It will also take time.

I did read about goverment programs to lend to college grads who tries to start their own business (there are supposedly millions of those). And similar programs to those exporter workers who returend to their home village. I seems the author did not noticed these.

I am amazed that still so many westerners doubt China's resolves and abilities to navigate "disruptive change and an openness to new ideas". After all, China in modern histories have definitely seen the most and longest periods of disruptive changes. And in the last 30 years, they have navigated the most structural reforms and have tries all kinds of ideas totally foreign to their original communist ideology. Still, changes does not happend over night, it is done in a deliberate, continuous, incremental manner that at the same time frustrates westerners who wants instant results and yet outruns others over time.

Aug 22 02:03 AM

[Alphameister:]

Thank you for a profoundly enlightening article in support of the tenet that the transition in which China is engaged is a long-term program and nobody should expect short-term miracles. As for the idea that Chinese people can't increase consumption because they are "too poor," it should be noted that very modest marginal increases within such a huge population could could go a long way toward offsetting losses in export markets. China's version of capitalism has many faults, but they are better positioned than developed countries like the U.S. to tolerate inefficiency in their stimulus programs.

Aug 22 08:38 AM

[Al-USA:]

It's true, Chinese domestic consumption will never happen, not in a level to replace the consumption lost by the masses of USA or Europe simply because of the per capital argument already mentioned above.

Recall that the masses of the USA enjoyed relative prosperity, and increased incomes, only as a result of successful widespread unionization after the dominance of USA industry with victory of the democratic capitalists vs. the fascists (non-democratic capitalists) of WWII.

Of course, the period after WWII was dominated by the Cold War, with the democratic capitalists of the Western powers vs. the anti-capitalists of the USSR which provided fertile ground for continued successful unionization on the capitalists home ground b/c, to be honest, the Western capitalists were scared to "death" that the masses would, heaven forbid, look towards the anti-capitalists' economies as any proper economic model to aspire to.

It was only under the favorable conditions explained above that the masses were able to achieve and maintain relative prosperity. However, with the decline of the anti-capitalist competitors, the Warsaw Pact countries, the capitalists of the Western democracies were less compelled to allow a greater portion of their profits towards boosting labors' wages so, starting at about 1974 or so, with the opening up of China, the race was on to increase profits at the expense of masses of the working/middle class.

This is always the case, in fact, it is the definition of capitalism, but it intensified by orders of magnitude with the introduction of first, the billion plus workers in China , and later, the hundreds of millions of workers of the collapsed USSR, all paid at "slave" level wages, relative to the working/middle classes of the Western democracies such that, only by the introduction of massive debt was the illusion of wealth able to be maintained for the masses of the Western democracies and allowing economic "game" to continue...

Until now, or rather 2007, where the maximum extent of credit had been met, and in fact, surpassed, since as recently as 2007 the savings of the American consumer were negative, so, the "game was up". The conditions which favored the masses relative prosperity in the Western democracies don't exist in China, so, I see no forces which can compel a similar relative prosperity among Chinese workers, in a scale which would replace, to any appreciable level, that which was lost by the American working/middle class starting with the 1974-1975 opening up of China, and later the collapsed USSR. In other words, it has now come full circle, and the crisis of capitalism, a crisis of over-production, has no fundamental solution, within the limits of the profit system...

If you made it this far, thanks for reading.

Aug 22 02:12 PM

[bz1516:]

Interesting article, but at odds with my personal experience importing from and dealing with small to medium size Chinese companies. Many of these companies that started with exports are producing more and more for the domestic market. Off hand I can't think of a consumer product category that is not/cannot be produced in China in large increasing quantities. Cell phones and autos come to mind immediately. Now the quality may not be quite as good, but that is not an issue for the Chinese consumer right now.

Aug 22 03:05 PM

[emerich:]

A very insightful article. I was in Japan from 1987-94 and remember that one reason constantly given for why Japan is so successful and will continue to grow is that it saves and invests so much. In the 90's Japan saw all that investment go up in smoke because it turned out that investing in unproductive assets--which is what they'd been doing--brings you low or negative returns . Another parallel is that Japan used "administrative guidance" to limit competition from foreigners, which helped keep Japanese industries (such as the financial industry) weak. Let's hope China doesn't have to learn these lessons the hard way.

Aug 22 03:47 PM

[johnqh:]

Insightful article, yet completely wrong.

Yes, a lot of Chinese buy better quality made-in-China products abroad. However, they are a very small portion of the whole population. The domestic market is still very immature, and cheap price is the main factor that the demand side looks for. Branding and quality are not a huge factor.

And Chinese consumption has been increasing at 8% to 9% for the last decade or two. That's a good pace no matter how you look at it. Its weight in the economy has been decreasing, only because export and investment have been increasing at a higher pace.

Consumption is a psychological behavior, and that puts a limit on how fast it can grow. A migrant worker from the country side may make $50/month on the farms, but $200/month in the city, but it is natural to save most of the income. You would do the same if you were in that situation, and it is completely psychological.

So, sometimes, the consumption behavior take generations to change. The first generation of the new wealth will be savers, because they have their parents to support and kids to send to school. Their children, if college educated, will become the middle class and will spend money. However, if not college educated, they will repeat what their parents do.

In any case, be happy with China's 8% to 9% yearly chance in consumption, because no matter how the economy does, that number will be pretty consistent for the next 30 years.

Aug 22 07:42 PM

[onebir:]

Interesting but deeply flawed analysis. The supply-side in China is hamstrung by numerous structural factors that the government's loath to change - because they're the reason they make *being* the government worthwhile...
1) "Many existing companies will fail and go out of business, while entirely new ones will emerge to seize the new opportunities." Or not. Government guanxi pose a significant barrier to entry to people who (in other countries) would be potential entrepreneurs. Once you're in business, keeping guanxi sweet may involve taking commercially non-optimal decisions. So, for medium to large enterprises, 'creative destruction' in China is likely far less creative than in "true" capitalist countries.
2) 'Chinese banks need to radically reform their collateral-based approach to lending, which excludes asset-light service companies from access to capital.' From what I hear, it also excludes guanxi-light companies, favouring SOEs with political connections, reinforcing the conclusion in 1)
3) There's a chicken-and-egg problem. As the export-orientated companies close, the domestic economy is deteriorating, discouraging investment to service (non-existent) demand.
4) 'but at least they would be freed to do something productive rather than stand around a dormant factory all day long'. There might be some concern about laid-off workers becoming politicised...
5) 'export workers turn their creativity loose on China’s domestic market for goods and services?'
a) What domestic market? (see 3)
b) Is there much creativity? If so, why are contract manufacturers the 'vast majority' of export manufacturers?
c) There are plenty of private street traders now. See 1), 2) (+ a poor education system) for why very few of them will end up listed on Nasdaq.
6) 'China’s service industries, which could help expand domestic consumption, are extremely underdeveloped.' One factor behind this may be sheer lack of trust &/ legal vagaries. Disputes over quality etc of services can be very difficult to resolve. Vaguely worded contracts, lack of precedent and a less-than-independent legal system further add to the risks of doing service business (on any scale).
7) 'One of the major reasons lurking behind the Chinese preference for the status quo... is the ingrained notion that exports are “good” while imports are “bad.” ' I don't think this is true at all. The political regime's raison d'etre is self-perpetuation. The decentralisation involved in shifting to a true capitalist model - loss of control/influence over banks, companies, courts etc - would be a kind of suicide. Individuals seem pretty open to imports.
8) 'If China wants to avoid a similar trap' Hasn't it fallen into this trap (a domestic bubble in both stocks and real estate) already? For the government the question is how to get out of it without creating political unrest.

Aug 22 09:27 PM

[huangthomas:]

There are three legs to the Asian development model. The first two are well known: export and saving. The third leg is rarely mentioned, which is to subsidize export by the domestic consumption. The same export items are sold at a higher price in the domestic market than in the foreign market. Even if they are sold at the same price abroad base on the artificial official foreign currency exchange rate, they are more expensive for Chinese domestic market if we take into consideration of the purchasing power parity (PPP). For China the PPP is 3.5 based on the data from the World Bank. If an item is sold in China at the same price as in the US based on the official exchange rate, it is 3.5 time more expensive for Chinese consumers.

Aug 23 01:51 AM

[Pax Americana:]

Knowledgeable and insightful comments, by all above, it would seem that it will take, possibly a few generations for the Chinese to aquire Western spending habits, I agree that this generation will concentrate on Capital/preservation, not excessive consumerism. Another unknown factor is the reaction of the Communist/party, will it have the confidence to change a wining formula, many Party Officials have much to lose, in any shift away from manufactoring in their provinces.
I also believe the increasingly complex nature of Chinese capitalism,wll stretch the body-politic of the Chinese State.

Aug 23 07:14 PM

[Gary A:]

Maybe if we had let our own bank fail the consumer here could have spent like a madman with all that money that went to the banks. Geithner made a big mistake. There is only inflationary money left to give Americans and the federal reserve cannot tolerate inflation or higher interest rates.

Aug 23 08:04 PM

[LilBob:]

I'm quoting my own previous comment again: "One of the side effects of globalization is a balancing out of incomes amongst working class people in all economies. Growth in developing world markets will never over-balance declines in developed nation markets because there is not a sufficient pool of amassed capital waiting to be exhausted (in the US that pool of capital was the savings of relatively well-paid manufacturing workers of the WWII generation). Recent gains in developed world wages will never catch up with developed world growth expectations.

Another catch, as soon as any developing world nation does see it's average wage rate move up to the point where it's citizens are able to approximate Western living standards, that country has lost the competitive advantage that made that country an attractive center of production in the first place-low wages; ergo the factories close up and move to a poorer country and the country is thrust back into national poverty until citizens of that country are "conditioned" to the point where they'll accept a reduced standard of living. It is virtually impossible for any country to consistently manage a transition to western style standards of living without seeing significant job loss due to significant increases in the cost of labor.

Aug 23 08:25 PM

[robert.b.fe...:]

While the developed coastal areas and large citties are seeing some increase in consumer wages and therefore consumer discretionary spending most of the countrie's citizens remain rural and relatively poor. This situation will only be changed slowly and consumer discretionary spending may never reach levels seen in the industrialized west. Thus the idea that Chineese consumers will pick up the export slack is a non-starter they don't have the resources.

Aug 24 09:39 AM

[Alvis:]

Totally agree.

Most of wealth is in the hand of government or very few rich people.
Why rich guys transferred their money offshore, mostly to Hongkong, and they buy high value stuff in Hongkong or Europe.

Most regular citizens are poor, they just buy everyday grocery. Without personal bankruptcy law, ordinary persons will not buy most stuff through loan.

The only commodity (not really a commodity) that people will get a loan is housing. And the most of tax revenue for local governments are from the land transaction. The government has the desire to drive up house prices.

For small business, the door to borrowing from banks is almost closed. Lending rate in underground market for small business was once as high as 10% per month. Who will try to do small business at that rate and why take the risk?


On Aug 22 02:03 AM HaavBline wrote:

> The author, and Prof. Pettis, are among westerners who have shown
> in depth understanding of China's current challenges. Yet they seem
> to also have similar blind spots that makes their observations perhaps
> off the mark. And they sometimes seem frustrated for the wrong reasons.
>
>
> The most fundamentl chellenge for China to develop its potential
> of domestic consumption is not the underdeveloped service sector,
> although that IS a major challenge. The most fundamental challenge
> is that the average Chinese remains very poor. It GDP may ranked
> #3 moving toward #2, but its per capita GDP still ranked near #110
> in the world. In addition most of the wealth are concentrated in
> the hands of goverment and corporations, not individuals. Chinese
> consumers seemly do not have the frivolous spending power that western
> consumer enjoyed (until last year). When they have any money to
> spend beyond necessities, it is generally focused on futher enhancing
> productivity (first fridge, first phone, first car, higher education,
> etc.)
>
> Chinese policy makers seem quite awared of the need to restructure
> and develop internal consumption, but they also correctly know that
> this can not be done very quickly. That's why their near-term stimulus
> package put top priority on domestic investment, which can boost
> economy quickly and keep people employed. Policies that can boost
> long term sustaiable domestic consumption need to be put in place
> over time and can not be expected to gain quick results.
>
> Service industries ARE being encouraged. But unlike factories and
> roads, you can not seemly dump money on it and expect service industries
> to pop up. It will also take time.
>
> I did read about goverment programs to lend to college grads who
> tries to start their own business (there are supposedly millions
> of those). And similar programs to those exporter workers who returend
> to their home village. I seems the author did not noticed these.
>
>
> I am amazed that still so many westerners doubt China's resolves
> and abilities to navigate "disruptive change and an openness to new
> ideas". After all, China in modern histories have definitely seen
> the most and longest periods of disruptive changes. And in the last
> 30 years, they have navigated the most structural reforms and have
> tries all kinds of ideas totally foreign to their original communist
> ideology. Still, changes does not happend over night, it is done
> in a deliberate, continuous, incremental manner that at the same
> time frustrates westerners who wants instant results and yet outruns
> others over time.

Aug 24 02:27 PM

[User 357705:]

China is allot smarter than Duhmerica. China doesn't want its populace to become addicted to consuming the latest and greatest widget with new and improved whatever..... Interesting that FUCapitalists from Duhmerica are looking for their next victims in China.

Aug 24 02:31 PM

[cerebraite:]

"The process of “creative destruction” necessary to boost domestic consumption will be uncertain and disruptive. The problem is that China’s government, at this moment, is scared to death of uncertainty and disruption, and is doing everything it can to minimize them. The whole thrust of the stimulus has been to freeze the economy in place, as it was before the crisis, by extending working capital loans to keep failing companies afloat and front-loading the next generation of infrastructure development to keep existing industrial capacity filled."
It's all about pace of change. It takes time for people to adapt. This is not a matter of days or months, but years.

Sep 02 06:58 AM

[DavidThinks:]

There needs to be "inspiration" in the "mainland" Chinese mentality to dream and build a better life for themselves. Hong Kong already has that going on. We need to explore what created the American Dream.

The answer is that Hollywood had a lot to do with it. Through Hollywood movies over the last century we have been fed ideas on what the "American Dream" is or should look like. We've modeled for the most part our very existence at what Hollywood told us through film what or who we are or should be. Communist "mainland" China needs to see a "Chinese" version of the "American Dream" to inspire them to desire and create their own version of their "individual" dream and life for themselves.

They need heros and model/mentors to inspire them to aspire to become happy, successful and balanced people surrounded with like minded sorts through their families and friends with equal or similar ambition. They need John Wayne, Angelina Jolie, Marilyn Monroe, Elvis, Betty Davis, Clark Gable, Brad Pitt, Meryl Streep (Chinese style of course) to see themselves in and develop.

The best way to get the Chinese on track to developing a viable and prosperous domestic market is to get Chinese "individually" thinking about who they are and what they want of their future. They need to see themselves thorough example so they can be inspired and aspire to "be".

Instead of looking at the collective in a revolutionary sense all suffering together..they need to expand their view with hope and desire and they possibility of making it happen.

Film (Hollywood) laid out the pattern for Americans and their culture. This could happen in China too if they explore what made America .."America" and what tools guided Americans to become who they are. Look to the movies and the power of the big screen to motive the masses to dream and live.

India has developed BollyWood modeled after HollyWood. The Chinese "mainlanders" need to see themselves on such a scale and find their place in the world.

In time they will become consumers, mall shoppers with the will, want and ability to join the world community and build a global economy that works for all and not just "Made in China".

Sep 12 11:48 AM

[DavidThinks:]

The power for change in a culture can be motivated by the big screen or the little one in your home. We grew up with examples the greatly contributed to who we thought we are/were and how we wanted to live. From the Brady Bunch to the Cosby Show to the Sopranos, Desperate Housewives, Dynasty etc. We watched through their lives the things they owned, the clothes they wore, the cars they drove. Psychologically this stayed locked in our minds when we went shopping and motivated us to be like what we saw on screen or TV. Chinese need to see fellow Chinese in that light and this will encourage them to become their own little version of their favorite actor/actress or whatever motivates them to aspire to be like or live like. The power is through "example" and Americans got their examples via "Hollywood" movies, film, tv, music, stars etc. Everyone dreams no matter where you're from.

Sep 12 12:02 PM

[DavidThinks:]

The movies inspired America...it could work in China too.


On Sep 02 06:58 AM cerebraite wrote:

> "The process of “creative destruction” necessary to boost domestic
> consumption will be uncertain and disruptive. The problem is that
> China’s government, at this moment, is scared to death of uncertainty
> and disruption, and is doing everything it can to minimize them.
> The whole thrust of the stimulus has been to freeze the economy in
> place, as it was before the crisis, by extending working capital
> loans to keep failing companies afloat and front-loading the next
> generation of infrastructure development to keep existing industrial
> capacity filled."
> It's all about pace of change. It takes time for people to adapt.
> This is not a matter of days or months, but years.

Sep 12 12:04 PM

[DavidThinks:]

They need a "new" cultural awareness and not a text book version of the revolutionary or dynastic one. They need to see a new free individualistic Chinese dream.. Like the "American Dream". Hollywood was the story teller to Americans. The big screen lured us and enchanted us with the "American Dream". The mindset of Chinese needs to be inspired to develop themselves as "individuals". The individual needs to search their dream and have the means to make it happen. This is how you turn things around.


On Aug 21 02:53 PM Joshua P wrote:

> So it sounds like China needs to develop a strong retail sales and
> marketing infrastructure to boost consumption? If this is the case
> sounds like a tremendous opportunity!

Sep 12 12:08 PM