The Chinese economy is in a state of imbalance, between high corporate profits, and relatively low consumption. This imbalance is as much demographic as it is economic, and the question is, what does the central Beijing government plan to do about it?
The 12th Five Year Plan, approved March 14, 2011, and due to take effect later the same year, indicates the government plans to increase the pace of urbanization by easing internal passport restrictions. In one stroke, the government could deal with rural under-employment, over-investment in the industrial sector, weak household consumption, income disparity and chronic current account surpluses.
These characteristics of internal imbalance are if anything more important that China’s disproportionate role in the global economy as net exporter. Indeed, “fixing” the internal imbalance could go a long way to right the external imbalance.
1. MasterCard Asia/Pacific