China pushing domestic consumption


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Looks like they are moving towards higher levels of domestic consumption to sustain output and employment.

(must be reading my blog…)

China’s Central Bank Pledges to Keep Money Flowing

China to Start Trial Rural Pension System to Boost Consumption

China’s Central Bank Pledges to Keep Money Flowing

June 25 (Bloomberg) — China’s central bank pledged to keep
pumping money into the financial system to support a recovery in
the world’s third-biggest economy.

The economy is in a “critical” stage and the central bank
will maintain a “moderately loose” monetary policy, the
People’s Bank of China reiterated in a statement on its Web site
today after a quarterly meeting.

The central bank triggered an explosion in credit by
scrapping quotas on lending in November to back the government’s
4 trillion yuan ($585 billion) stimulus plan. Record lending is
stoking concern that a recovery may come at the expense of asset
bubbles, bad debts for banks and inflation in the long term.

Banks are set to lend more in June than in May, the same
newspaper reported June 22, citing unidentified sources. Last
month, new loans more than doubled from a year earlier.

China to Start Trial Rural Pension System to Boost Consumption

June 25 (Bloomberg) —China, home to 700 million rural
residents, approved a pilot pension program as the government
tries to encourage farmers to spend more
to help revive economic
growth.

The new system, which aims to cover 10 percent of rural
counties this year, will help narrow a wealth gap with cities
and spur domestic demand, according to a statement today from
the State Council, China’s cabinet.

China has expanded its social safety net to reduce
precautionary saving by citizens planning for ill health and old
age. Premier Wen Jiabao has pledged to boost domestic
consumption to help the world’s third-biggest economy recover
from its deepest slump in a decade and lessen dependence on
exports and investment.

“The rural pension system has been almost non-existent,”
said Kevin Lai, an economist with Daiwa Institute of Research in
Hong Kong. “Once you build a stronger social safety net, people
will be more inclined to spend without having to worry about the
future.”

The government in late January also announced it would
spend 850 billion yuan ($124 billion) over three years to ensure
that at least 90 percent of its 1.3 billion citizens have basic
health insurance by 2011.

China’s economy grew 6.1 percent in the first quarter, the
slowest pace in almost a decade.


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King Says U.K. Recovery May Be ‘Long, Hard Slog’


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So how about recommending a suspension VAT for a bit???

King Says U.K. Recovery May Be ‘Long, Hard Slog’

by Robert Schmidt

June 24 (Bloomberg) — “There has to be a risk that it will be a long, hard slog” because of the problems in the banking system, King told lawmakers in London today. “I feel more uncertain now than ever. This is not the pattern of a recession coming into recovery that we’ve seen since the 1930s. Having an open mind and not pretending to foresee the future when it’s so uncertain is important.”

King said that there’s “not much evidence to change our view” since the bank released forecasts in May showing that the economy won’t return to growth on an annual basis until the second half of next year.


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