Weak domestic consumption remains a “real concern” for China’s growth prospects, according to investment guru Fang Fenglei, but the Chinese government is serious about moving towards an economy more centered on income growth and consumer spending. There are encouraging signs that efforts are being made.
“Over the past few decades, China has had to focus on development, so it has gotten used to neglecting increasing the spending power of farmers and ordinary consumers,” he said. “Now, regarding GDP, [gross deomestic product] Once per capita income reaches $13,000, the fundamental problem of increasing income levels should be solved. ”
China has 80 million civil servants and many more state-owned enterprises waiting for pay increases. Fang said that as long as the income situation of this huge population improves, spending power will be released.
The Chinese government is keen to reignite confidence in the overall economy after September’s consumer price index was flat year-on-year, indicating weak demand.
In a fireside chat at the forum, Fang said the real estate sector’s woes, local government debt and small and medium-sized banks’ debt are also currently “facing China.”
“The direction is very clear,” he said, noting that the Singapore government provides 80% of affordable housing, while in China it supplies 20%. “It’s about increasing affordable housing.”
Although the problem is not as serious for China as it was for Japan or the United States in the late 1990s, Fang said 300 million Chinese will be waiting to buy their first home within the next three to five years.
11:11
Why China’s youth unemployment rate is high
Why China’s youth unemployment rate is high
Regarding local government debt, which totals $10 trillion, Fang said most of the money is spent on infrastructure development, and China’s debt-to-GDP ratio is 20%.
“[It] It is the worst of all our governments,” he added. “So solving this problem doesn’t seem to be that complicated.”
For small and medium-sized banks, Fang said restructuring is possible.
“There are more than 3,000 banks in China, but the six largest banks account for 60% of total financial assets, and these are stable,” he said.
However, Fang emphasized concerns about the interest rate differential between the United States and China, saying, “We cannot tolerate this long-term difference.”
02:39
China’s economy is expected to recover faster than expected in the third quarter
China’s economy is expected to recover faster than expected in the third quarter
Focusing on US-China relations, Huang cited figures showing that the combined GDP of both countries now accounts for 40% of global GDP, and that figure is likely to reach 60% by 2050. did.
He noted that relations between China and the United States have recently stabilized, saying, “Both countries are huge countries and need to fulfill their responsibilities.”
Regarding cross-strait relations, Fang believes that “as long as Taiwan seeks independence, there will be conflict.”
