How do you get 1.3 billion people to spend more? Make them feel better about their future. On this front, the Chinese government certainly has the right idea: spending on universal education and health care is seen as critical to achieving a higher level of domestic consumption. Increased wealfare spending is alos a way to give households a bigger shre in the benefits of China’s development.
The problem is, Beijing just isn’t spending enough. The Chinese public’s response is to squirrel away cash to pay for health care and education. China’s saving rate hovers at about 30% of household income, not a natural state of affairs.