Middle-income group can be a bridge to sustainable growth
The authorities’ latest call for efforts to expand the middle-income group is much needed, because China’s sustainable growth in the long run is dependent on the formation of a significantly larger middleincome group who will increase consumption and reward supply-side reforms that best serve their needs.
At a meeting of the Central Leading Group for Financial and Economic Affairs onMonday, President Xi Jinping particularly stressed efforts to expand the middleincome group and improve the income distribution mechanism.
This newly-found sense of urgency to further increase the number of middle-income workers is surely related to the role that consumption is now playing in ensuring the stable, moderate growth of the world’s second-largest economy.
The latest statistics show that final consumption contributed 84.7 percent of China’s economic growth in the first quarter while capital investments’ contribution came in at 35.8 percent and net exports of goods and services dragged growth down by 20.5 percent. The consumption share marked a significant jump from the 66.4-percent ratio at the end of 2015.
Although China’s economy expanded by only 6.7 percent year-on-year in the first quarter of 2016, the slowest since early 2009, indicating considerably strong headwinds, it is fairly reassuring, if not surprising, to see the rapid rise of consumption as a leading growth engine while traditional growth drivers such as investment and exports are losing steam.