Gov't wealth seen as key to boosting consumption

China's ongoing efforts to boost consumption can be significantly enhanced if the government's substantial wealth and assets are mobilized to support household incomes and social welfare, leading economists said.

Liu Shijin, former deputy director of the Development Research Center of the State Council and a prominent economist, said that a relatively high share of State-owned equity in social wealth could be a key factor behind the country's insufficient consumption.

Liu explained that such an equity is primarily reinvested to generate new capital, rather than being spent to stimulate consumption.

Citing research results by the Chinese Academy of Social Sciences, Liu said that government net wealth accounted for 37.6 percent of total social wealth in China as of 2022, far exceeding the less than 5 percent seen in major developed economies in Europe and the United States.

Government net wealth, according to CASS, includes the assets minus liabilities of central and local governments, public institutions, State-owned enterprises and State-owned stakes of joint ventures, totaling 291.6 trillion yuan ($40 trillion) as of 2022.

Liu proposed that institutional mechanisms could be introduced to channel State-owned capital into promoting consumption in areas such as education, healthcare, and social protection, while also addressing income inequality through redistribution measures.

Transitioning State-owned equity from primarily supporting investment to also supporting consumption would not only significantly boost consumption, but also showcase the country's capacity to mobilize resources for major initiatives, Liu said.

Liu made the remarks on Sunday at the launch of the book China's National Balance Sheet 1978-2022, in which a CASS research team compiled the country's national balance sheets for 45 consecutive years since the country's reform and opening-up.

Zhang Xiaojing, head of the Institute of Finance and Banking at CASS and lead author of the book, said transferring some of the government's existing wealth to the household sector could help strengthen China's unconventional countercyclical adjustments and further support the economic shift toward consumption-driven growth.

The third plenary session of the 20th Central Committee of the Communist Party of China in July had called for exploring the introduction of national macro balance sheet management.

Last week, the Central Economic Work Conference further stressed the importance of coordinating the relationship between optimizing incremental resources and making good use of existing resources.

Zhang said compared with major developed economies, where real estate accounts for around 50 percent or more of total social net assets, China's figure is relatively low, less than 40 percent.

This, he said, leaves room for the development in the country's real estate sector and suggests that the opinion that China's real estate sector has reached its peak does not hold water.

Factors such as ongoing urbanization and the cultural importance Chinese people place on homeownership are expected to support the sector's high-quality development, Zhang said.

Liu added that the potential for long-term development in China's real estate sector could help promote greater consumption over time.