Flagging car sales fuel undue concern over economic vigor
As China taps deeper into what it calls high-quality growth, economists had better learn to look beyond mathematics for a meaningful path to prosperity.
While a green and sharing economy topped the agenda at the national economic work conference held in Beijing last week, some economists remained unduly worried about subpar car sales or over-confident about urbanization per se.
In fact, neither car sales nor urbanization per se can provide a key to understanding China’s economic potential.
According to a Xinhua report on Sunday, the economist Liu Shijin said car sales in China have declined by around 10 percent this year. He also said that China has about 170 cars per thousand people, leaving much to be desired compared with the situation in the US, Europe and Japan.
Although sales of high-end cars registered a growth rate of 10 percent in the first half of this year, he noted, sales of low-end ones, typically those priced at or below 100,000 yuan (US$14,286), nosedived by 23 percent.
According to his estimate, low-income people have little money in their pockets to afford even a low-end car. If this estimate is proved right, he concluded, a wealth gap, as revealed in opposite performances of car sales at two different ends, will constrain China’s growth in the future.
Less dependent on cars
The observation is flawed on two fronts. One is that the lackluster sales of low-end cars do not necessarily mean low-income people have little left in their pockets.
The fast development of high-speed trains that link an increasing number of cities and towns have made more and more people less and less dependent on cars.
Another is that, even though poorer people have less money to buy a car, it may not hurt the potential of a fledgling green and sharing economy, which inherently negates any growing demand for oil guzzlers.
The economist Huang Yiping also said that China can guarantee a stable growth of consumption if the urbanization rate rises from today’s 56 percent (the official figure is 59 percent by the end of 2018 — editor) to 80 percent 30 years later.
A policy implication from this view would be: The more farmers move to cities, the better. But the recent national economic conference placed a revival of the rural economy high on the agenda for next year’s work.
A quick review of last year’s national economic work conference shows that China has been aiming at making two-way labor flow between cities and the countryside possible, instead of being obsessed with urbanization alone. Indeed, moving more people from cities to the countryside, either for agriculture or for creative jobs, also works wonders in making the best use of land and talent.