Global News Journal

from Reuters Investigates:

China’s rebalancing act puts consumer to the fore

Wal-Mart, the world's largest retailer, now has 189 stories in China, according to its website. Soon it will have many more.  The U.S. chain has announced plans to open a series of "compact hypermarkets", using a bare-bones model developed in Latin America, the Financial Times said.

Wal-Mart stores are a bit different than the one's you might find in, say, Little Rock Arkansas. They sell live toads and turtles for one thing, The Economist reported. But they also sell the appliances, gadgets, and housewares that Wal-Mart stores merchandise everywhere.

And business is booming. Third-quarters sales in China soared 15.2 percent from a year earlier, according to the Financial Times story, compared with a paltry 1.4 percent inthe United States.

China's consumption has been growing. Quite fast, in fact. Yet it still acounts for just a third of GDP, compared with around 60 percent in Europe and about 70 percentin the United States. But that is starting to fundamentally change. A Reuters Special Report by Alan Wheatley, "The Chinese Consumer Awakens" notes that wages are rising fast. People are moving into new cities in China's vast interior, and manufacturers and retailers are following them. Call it China's great rebalancing act, as the government tries to promote more consumption and rely less on cheap exports from "the workshop of the world" for future growth.

Timothy Geithner certainly hopes to see this. The U.S. Treasury Secretary is counting on hundreds of millions of Chinese to spend more and save less. That way, Chinese factories would produce more for domestic consumption and less for export, helping to narrow the trade imbalances that are destabilizing the global economy.

Photo caption: Chinese vegetable vendor sleeping in open air market in Changzhi, Shanxi province. REUTERS/stringer

from MacroScope:

Spend Save Man Woman

Far from being lauded as a virtue, China's high savings rate has been blamed for the economic imbalances underlying the global financial crisis. The criticism being that the Chinese spend too little and rely too much on exporting to Western consumers.

The IMF and World Bank have long called for Beijing to ramp up social spending so its citizens will feel less need to save for a rainy day and instead consume more.

But in their intriguingly named paper,  'A Sexually Unbalanced Model of Current Account Imbalances', New York-based researchers Du Qingyuan and Wei Shang-Jin suggest China's gender imbalance could also be a significant factor in the persistence of its high savings rate.

The pair argue that intensifying competition in the Chinese marriage market is causing men -- or indeed parents with sons -- to raise their savings rates to improve their relative allure among a shrinking pool of potential brides.

A draconian one-child policy, coupled with a traditional preference for male offspring and the availability of selective-sex abortion, has left the country of 1.3 billion facing its most serious demographic crisis.

An estimated 119 boys are born per 100 girls and the Chinese Academy of Social Sciences has warned that this could leave more than 24 million Chinese men of marrying age without spouses by 2020.

This anxiety over the worsening marriage prospects for men could explain why Chinese household savings as a share of disposable income has risen from 16 percent in 1990 to 30 percent in 2007.