Move to Consumption: Asian Style
16:00-17:15, April 10, 2010
Moderator: Yansong BAI, Anchor, China Central Television
Panelists:
FAN Gang, President, National Economic Research Institute, China
CHEN Zhiwu, Professor, Yale University
LIU Changle, Chairman and CEO, Phoenix Satellite TV
Steven KEHOE, Vice President, PepsiCo
Is consumption in essence an economic phenomenon, or a cultural one? What defines appropriate consumption? What role
does the government play in stimulating or regulating consumption? Moderator Mr. BAI Yansong introduced these probing
questions, to which panelists responded with insightful and constructive discussion.
Trends in consumption stem from trends in income distribution and institutional factors
Panelists agreed that relative to the economic might of Asia, consumption in the region is notoriously weak. Professor Chen
Zhiwu said the reason lies in the fact that China is rich on a national level but that a vast majority of its population remains
poor. Additionally, culturally savings is emphasized over spending. Mr. FAN Gang, President of the National economic
Research Institute, shared his views that we cannot pointedly criticize China's high savings rates and correspondingly low
consumption levels without taking into account the role extremely rapid economic development has played. He added high
consumption inherently conflicts with the creation of a low-carbon economy, so we cannot increase living standards without
having negative environmental impact. Thirdly, in recent years, consumption has increased rapidly in emerging countries in
Asia, and the main source of future growth is demand from the emerging middle class. Finally, Professor Chen pointed out
that consumption is directly related to income and to institutional frameworks.
Consumer attitudes will change
Regarding changes in mindset, Professor Chen suggested that consumption also results from investment. Mr. Fan Gang
discussed changing consumer attitudes since the 1980s and 90s; Mr. Liu Changle encouraged society to abandon its
Communist-era hatred of the wealthy, and rather recognize that the wealthy upper classes have enormous spending power
and thus the ability to elevate society as a whole through consumption. However, Mr. Fan Gang stressed that more attention
should be paid to the 70% of society that is still made up of low-income people. Their consumption still represents a majority
share of society's total consumption. He argued that their unequal income distribution and institutionalized disadvantages
will hold the economy back.
What is appropriate consumption?
On this subject, Mr Steven KEHOE of PepsiCo discussed concepts of consumption in American society, pointing out that the
development of consumer credit products makes it possible to "make ends meet" without the real income to support a certain
lifestyle. In this context, Professor Chen redefined the term "living within our means," where an individual's "income" is
actually lifetime income, and young people's consumption models are based not on the money they earn today but on the
money they expect to earn in the future. Thus, with the help of financial and credit products, they advance along the path of a
highly consumption-oriented lifestyle without the cash in hand to support it. These models of consumption are neither
appropriate nor sustainable.
The government should focus on reform
In discussing what role the government should play in stimulating spending, Mr Fan Gang said that investment is also a form
of consumption; for instance, government spending on infrastructure in a given city can lift consumer demand. In addition,
he suggested that the government focus not on individual consumers but rather focus on structural reforms, such as tax cuts
for middle income populations.