Boost consumption by increasing labor prices

The Ministry of Commerce recently disclosed a number of concrete actions to boost domestic demand and consumption.

China’s high saving ratio means China does not lack money. But on the other hand, Chinese manufacturing industries are thirsty for cash.

The two extremes can be explained by the income gap in Chinese society. The richest Chinese have bought almost everything they can. But the majority common wage-earners are trying hard to restrain their desire for consumption.

The weak demand at homes is not from the common consumers’ reluctance to spend money or the bad consumption environment, but from empty wallets.

If the authority really wants to stimulate domestic demand and consumption, it should first reform the national revenue distribution system and fill the growing income gap among citizens.

Ignored for a long time is the fact that private enterprises, the largest employer in China’s job market, have been an obstacle in this regard.

Chinese private enterprises have been an important manufacturing powerhouse for China’s exports for so long because of the cheap labor costs.

Now that increasing the laborers’ earnings is already a necessary trend, these enterprises must look for new strengths, such as technological innovation. The process is painful because many of them will be outdated and replaced by more-competitive and advanced ones.

The global crisis and slowing of China’s economic growth force them to face up to this problem, a process that is overdue.

Boosting domestic demand and consumption will not be a problem after Chinese labor is priced rationally. It involves both the State’s system reform and reshuffling of China’s industrial sector, especially the privately owned companies.