China will add measures in its next five-year plan to encourage private consumption and address widening income disparity, according to JPMorgan Chase & Co.
“The goal of the central government is to improve the living standards of the poor,” Jing Ulrich, chairwoman for China equities and commodities at JPMorgan Chase & Co., ranked first in China equity strategy by Institutional Investor, said in a Bloomberg Television interview today. “In the past 20 years when reforms began, many people have gotten very wealthy. However, the provision of social welfare has lagged behind.”
China surpassed Japan as the world’s second-biggest economy last quarter. The country of 1.3 billion led the world out of last year’s global recession with an economy that’s more than 90 times bigger than when leader Deng Xiaoping ditched hard-line Communist policies in favor of free-market reforms in 1978.
The boost to China’s “national pride” from the second-quarter milestone may not count for much if it fails to boost domestic consumption and reduce its reliance on exports and investment for growth, said Brian Jackson, an emerging-markets strategist at Royal Bank of Canada in Hong Kong.
The share of China’s domestic consumption fell to 35 percent of gross domestic product, the lowest of any major economy, from 45 percent a decade ago, according to Societe Generale AG.
The central committee of the ruling Communist Party will meet in Beijing in October to discuss the formulation of China’s 12th five-year plan, the official Xinhua News Agency reported July 22. The plan, which lays out the major policy objectives for the economy, will run from 2011 to 2015.
Measures to improve health-care coverage and education are likely to be included in the plan, as China retains its focus on bolstering domestic consumption to reduce a reliance on exports and investments, JPMorgan’s Ulrich says.