China Catalyst: Powering Global Growth by Reaching the Fastest Growing Consumer Market in the World

CHAPTER 3

Catalysts for Consumption

China's economy continues its transition from an export-driven growth formula to an economy that is increasingly consumer-driven. As that transition has begun, many significant challenges are being addressed to eliminate barriers and increase its pace. China's export-driven model funneled business-focused investment capital into the SEZs targeted for growth.

To facilitate a smooth and quick transition, a broad-based infrastructure is necessary. This includes an interstate freeway system to enable market access. The infrastructure for the transition must include more than the physical, concrete type of assets like roads, railways, and airports. There must also be a social infrastructure to promote stability and greater discretionary spending. Today's state-run banking system is a barrier for entrepreneurs and small businesses seeking capital. The infrastructure for a consumer-driven economy also requires freer access to capital beyond what is currently in place.

These kinds of challenges are being addressed—all at once and rapidly—to promote the economic transition. Unlike mature economies that are constrained by debt and cautioned by austerity, China continues to act boldly in these areas. This boldness can be seen in the government's stimulus actions to uphold the economy during the global downturn of 2009. The Chinese government announced a $580 billion stimulus package in the fall of 2008.1 With its large account surplus, China easily committed ...