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China to its consumers: spend please

Beijing announces new steps to boost consumption. Will they work?
China wukan protest people power 2012 01 04Enlarge
Villagers at a rally in Wukan in China's Guangdong province on Dec. 21, 2011. (Mark Ralston/AFP/Getty Images)

One of the biggest and most important long-term questions facing the global economy is the following:

Can China successfully transition from an export-driven economy to one that relies more on consumer spending?

This is not just an academic exercise that economists, China-watchers and political scientists fret over (though, they all do). 

A smooth transition to this economic composition would help China weather the ups-and-downs of global demand, trade flows and currency movements.

It would also help stabilize China's growing annual gross domestic product, now the world's second largest.

So we all have a stake in this arcane question, which has been going on for years and has accelerated dramatically since the 2008 global financial crisis. 

We got a bit more clarity on the trend today as Beijing announced it will take new steps to boost consumption.

The latest word came from Chen Deming, China's commerce minister.

Chen gave few details, but here's how the Financial Times summed-up the news:

Mr. Chen said Beijing was researching a series of new measures to boost spending on energy-saving products, tourism and online shopping. He also said that the government was looking to replace subsidies for vehicle and appliance purchases that expired at the end of last year and had been very successful.

The announcement comes as China's economy struggles with slowing exports and rising worries about its own real estate market bubble.

The sharper focus on consumer spending — rather than on strict government stimulus spending or greater foreign investment — is a shift from how Beijing handled the early days of the 2008 crisis when it dumped billions into infrastructure projects.

So will Jing Six-Pack come through to save the day? 

There's certainly plenty of room in this department.

Household spending accounted for just 33.8 percent of China's GDP in 2010, according to the Financial Times.

It's double that in the US. 

For more from Thomas Mucha on Twitter: 

http://www.globalpost.com/dispatches/globalpost-blogs/macro/china-economy-consumer-spending