China’s economic recovery is being held back by lagging private sector, household concerns, senior adviser warns
- Slow growth of household incomes has suppressed people’s willingness to consume, says Liu Yuanchun
- And while private business confidence has improved, ‘they are still relatively depressed’
The widening gap in the rate of recovery of China’s private sector and its state-owned enterprises has become a big hurdle for a full economic rebound, a senior government adviser warned this week.
More proactive fiscal policy – especially from the central government – was needed to support smaller firms and households, said Liu Yuanchun, president of the Shanghai University of Finance and Economics.
“The current policy implementation is not strong enough to support a full-scale economic recovery,” Liu told a webinar organised by the China Macroeconomy Forum on Monday.
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Ministry of Finance statistics showed that the first-quarter profits of state-owned enterprises rose 12.4 per cent year on year to 1.12 trillion yuan (US$158.7 billion).
But Liu said small and medium-sized enterprises in the private sector, especially those at the downstream ends of supply chains and those in the services sector, had seen profits decline further.
A pillar of China’s economy, the private sector contributes more than half of the country’s tax revenue, 60 per cent of its gross domestic product, fixed-asset investment and foreign direct investment, and more than 80 per cent of urban employment.