INCREASE CONSUMPTION, CHINA TOLD
World Bank economists have called on China to focus policy efforts on raising consumption rather than new measures to restrain investment, saying the country's most pressing economic problem is its soaring trade surplus.
The bank, in its quarterly report on China, said moves such as shifting fiscal spending toward health, education and social security would help reduce the economy's reliance on investment while also easing pressures for current account surpluses.
“Policymakers remain concerned about over-investment that triggered the mid-year tightening measures. But the main short-term macro imbalance is an external one: the surging trade surplus,” the bank said.
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Taken on its own, Beijing's effort to slow investment growth could actually aggravate the external imbalance, which was complicating monetary policy and upsetting trade partners, it said.
“These considerations put a premium on measures to boost consumption alongside those already taken to reduce investment growth,” the bank said, adding that new tightening measures appeared “unwarranted”.
There are already signs that government success in slowing investment in some sectors is feeding through into trade data. China's trade surplus climbed to a record $24bn (?8.7bn, ￡12.6bn) in October amid import growth of a relatively anaemic 15 per cent. Exports soared 30 per cent.
The resulting influx of foreign currency is pushing up China's reserves and making it harder for the central bank to control money supply growth and limit financial system liquidity.
Beijing has long been trying to promote consumption and wean the economy off high investment levels, with some success.
Recent consumption has been strong
