A freer China would stimulate spending

[FT News]

The root cause of the country's problem is political, not economic. The lack of democracy disenfranchises the groups that would otherwise pressure ruling elites to provide social services, write Minxin Pei and Ali Wyne.

The global economic crisis has caused a sharp decline in China’s exports, placing renewed pressure on Beijing to raise domestic demand, particularly household consumption. With net exports accounting for 20-25 per cent of its growth in the past five years, China will have to increase domestic demand significantly to compensate for the loss in external demand.

Although this challenge has acquired greater urgency today, it is not new. Chinese policymakers and Beijing’s biggest trading partners have been warning about the massive imbalance between the country’s levels of exports and domestic consumption.

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