The figure, which marks a rise of 100 million over five years, was released at a time when the authorities are looking to domestic consumption to boost growth.
I guess I still don’t really understand how it is useful. The reason is, if it’s transitory debt, how is consumption increased? You take out a loan for X amount from the state bank, spend it on a spiffy new electric car or whatever, but then later on pay X amount + a little interest back to the bank, i.e. the money you now have to spend on this new purchase is definitionally equivalent to (or a bit less than) the money you will eventually need to pay the bank. Obviously I understand how it is useful to a person, because when a transaction happens might be important for them, but for overall consumption, it seems like it either balances out or is a slight net negative, assuming we are excluding usury from the banks. What is actually being accomplished? As I think I said earlier, I’m not an Econ Guy.
The idea here is that the material conditions will continue to improve, and people continue being lifted into higher income brackets. Your argument is assuming no social mobility, but social mobility in China is actually quite high with millions of people moving into higher income brackets every year. For example, from 2010 to 2019 (the most recent period for which uninterrupted data is available), the income of the poorest 20% in China increased even as a share of total income. https://data.worldbank.org/indicator/SI.DST.FRST.20?end=2019&locations=CN&start=2008
I think social mobility refers to an the ability for an individual within a society to rise or fall in standing in the existing social order, not the whole social order changing shape, but I understand your use of it. I’m nonetheless pretty sure this doesn’t answer my overall question, “How does this increase net consumption?”, even though you have there made a good argument for debt being useful to individuals (something that I already conceded).
The context here is that China’s economy contracted during the pandemic, and contracting economy is a problem because companies rely on consumer revenue to continue operating. If consumption starts dropping beyond a certain level then companies start to close down, which leads to people losing jobs, and so on. This is what China is aiming to avoid happening as opposed to simply encouraging people to take out loans to increase net consumption for its own sake.
I guess I still don’t really understand how it is useful. The reason is, if it’s transitory debt, how is consumption increased? You take out a loan for X amount from the state bank, spend it on a spiffy new electric car or whatever, but then later on pay X amount + a little interest back to the bank, i.e. the money you now have to spend on this new purchase is definitionally equivalent to (or a bit less than) the money you will eventually need to pay the bank. Obviously I understand how it is useful to a person, because when a transaction happens might be important for them, but for overall consumption, it seems like it either balances out or is a slight net negative, assuming we are excluding usury from the banks. What is actually being accomplished? As I think I said earlier, I’m not an Econ Guy.
The idea here is that the material conditions will continue to improve, and people continue being lifted into higher income brackets. Your argument is assuming no social mobility, but social mobility in China is actually quite high with millions of people moving into higher income brackets every year. For example, from 2010 to 2019 (the most recent period for which uninterrupted data is available), the income of the poorest 20% in China increased even as a share of total income. https://data.worldbank.org/indicator/SI.DST.FRST.20?end=2019&locations=CN&start=2008
I think social mobility refers to an the ability for an individual within a society to rise or fall in standing in the existing social order, not the whole social order changing shape, but I understand your use of it. I’m nonetheless pretty sure this doesn’t answer my overall question, “How does this increase net consumption?”, even though you have there made a good argument for debt being useful to individuals (something that I already conceded).
The context here is that China’s economy contracted during the pandemic, and contracting economy is a problem because companies rely on consumer revenue to continue operating. If consumption starts dropping beyond a certain level then companies start to close down, which leads to people losing jobs, and so on. This is what China is aiming to avoid happening as opposed to simply encouraging people to take out loans to increase net consumption for its own sake.
Fair enough