A leading Chinese economist on Friday urged the government to invest more in
social security for rural people in order to boost domestic consumption.
Zuo Xiaolei, chief economist at China Galaxy Securities, the country's
biggest stockbrokerage, said the government should convert the nation's savings
into funding for healthcare, education and social welfare in rural areas, rather
than simply increasing investment.
A World Bank report says China's savings among individuals, companies and the
government exceed those of every other nation except India.
By the end of May, corporate deposits totaled 10.13 trillion yuan (1.27
trillion US dollars), a rise of 15.7 percent over May last year, while
individual deposits were 15.4 trillion yuan, up 17.6 percent.
The government is seeking to encourage domestic consumption in order to
lessen the dependence on increasing investment and the trade surplus for
economic growth -- and China's 800 million farmers are regarded as a huge
potential market.
It has striven to curb investment and lending and cool economic growth in the
first half year, but the gross domestic product (GDP) growth forecast is still
10.4 percent.
Zuo said if the government spent more on rural healthcare, education and
social welfare, farmers would be more confident about spending.
Greater rural consumption would also help reduce individual savings, she told
the Xinhua-run China Securities Journal.
Zuo's call echoed that of US economist Nicholas R Lardy, of the US Institute
for International Economics, during a visit to China last month.
A reduction in both savings and investment would help balance the trade
surplus.
She suggested encouraging microfinance services to allow poor rural
households to obtain small loans or savings schemes.
Microfinance, especially for non-farming projects, would increase rural
incomes and stimulate consumption.
She said two private microfinance agencies had been formed in Pingyao City,
North China's Shanxi Province, offering small loans to farmers for small and
medium-sized business projects.
A similar agency had been established in Southwest China's Sichuan Province,
said Zuo.
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