Chinese shoppers

0 CommentsPrint E-mail China Daily, March 10, 2011
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With a per capita gross domestic product (GDP) far below that of rich economies, it is really galling to know that Chinese consumers have to pay more at home than they would overseas for "Made-in-China" goods.

Chinese policymakers should no longer ignore the problem.

A thorough examination of the situation is badly needed if China is to boost domestic consumption into a key growth engine as soon as possible to sustain its long-term growth.

At a press conference on Monday, Commerce Minister Chen Deming pointed to the higher costs of domestic distribution and taxes as two of the reasons Chinese consumers are charged more in the domestic market, not only for high-end imports, but also re-imported "Made-in-China" products.

Efforts to improve domestic sales networks and strengthen regulations in retail markets to reduce the costs of distribution are certainly needed. And more cuts in import taxes are essential for China to balance its trade account.

Yet, these measures are still not enough to fundamentally improve domestic consumption and to realize the potential purchasing power of China's consumers.

China is expected to become the world's biggest consumer market over the next decade thanks to its large population and rising incomes.

But it is far too early to say that is a sure bet if Chinese policymakers just keep tinkering with an economic policy framework that was largely devised for export-led growth.

The current system has served remarkably well during most of the past three decades in supporting China's rise to be the world's largest exporter.

The country's growing clout as a global manufacturing power has, in turn, expedited its ascent to become the world's second largest economy by 2010.

Nevertheless, both the 2008 global financial crisis, which hit Chinese exporters hard, and the considerable share of the global market that China has already taken suggest that China, as a major economic power, can no longer rely on external demand for growth.

It is now time to set in motion a domestic consumption boom to facilitate the transformation of China's development model toward consumer-led growth.

The concern that Chinese consumers feel about the price differences for certain goods sold at home and overseas is only the tip of the iceberg. No less demanding tasks include a substantial increase in people's income as a share of GDP, narrowing the huge wealth gap between the rich and the poor and enhancing protection of consumer rights.

Efforts to reduce some consumption costs and taxes are welcome. But to do more than just scratch the surface, Chinese policymakers must change their mindset to put domestic consumers above export sectors.

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