China Needs Consumption for Recovery, Researcher Says

A government researcher today recommended that only boosting domestic consumption would help China recover from the global financial crisis and international demand is still weak. From Bloomberg:

China has to boost domestic consumption by increasing household income and not just through gains from property and stocks, Xia said. The central bank should send a signal for stable money supply in the second half or “early next year” to guard against the risks of asset-price inflation, Xia said.

“Wealth effects from stock and property investments can help consumption in the short term but it won’t last,” Liang Futao, a research manager at Changjiang Pension Insurance Co. in Shanghai, said by phone. “Rising asset prices can form a bubble, which will hurt the economy when it bursts.”

China’s central bank Governor Zhou Xiaochuan said yesterday that boosting the nation’s consumer spending to redress global imbalances is “easier said than done.”