Saturday, November 16, 2013

CHINA 2 CHILD CONSUMPTION POLICY

 The recent reform polices in China indicates one thing very clearly that within the next 30 years Chinese economy would be the world largest economy followed with and stable GDP growth. The base of an economy is its human capital and the same needs to be nurtured for a stable economy. Currently we all know that china is facing the problem of lack of young man power and has an aging population. Further the labor market of china is no cheaper. China took the first step by removing the 1 child policy regime followed with abolishment of “re-education through labor” camps, significantly curtailing two policies that for decades have defined the state’s power to control citizens’ lives.

It is estimated that the policy could lead to one million to two million more births in China every year, on top of the approximately 15 million births a year now. The prospective baby boom “will provide more laborers to be ready for future economic activities in the long run. Further this new baby boomers would help the Chinese economy to solve pension pressure in the long run and will be good for care for the elderly within the household. This also reduce the government burden on social cost as well as helps the economy to design its taxation polices in the coming decades. The reason behind the reform policies further indicates that the Chinese economy is focusing on to perfect and develops the socialist system with Chinese characteristics and move ahead with the modernization strategy. Further as china is shifting it economy from export oriented to domestic the baby boomers over the next 20 years would provide the consumption based strong growth. Moreover china becomes the 2nd largest economy riding on the horses of export in developed economies and dumping its goods in emerging economies. But now with the current economic conditions that possibility no longer exists and hence consumption based stable economic growth is required for the next journey of becoming the largest economy.

 This new child policy would spook up the consumption growth and would spook up the demand of goods and services within the economy. Chinese citizens would plan more for the secured child future which would spook up the investments climate within the economy. Real estate, Gold, new investments would spook up the investments since planning for child’s future is a global phenomena. On the other side the major reform being laid are the "market-determined" reforms in the sectors including water, oil, natural gas, electricity, transport and telecommunications will create a more competitive environment in the former state-owned industries. It will further add more efforts to open up services sectors including finance, education, culture and health. China will allow companies and individuals to contract overseas construction and labor service projects at their own risks and endorse innovative ways of going abroad that include Greenfield investment, mergers and acquisitions, portfolio investment and joint investment.

On an overall basis this new economy policy is driven to boost up the consumption market within the Chinese economy which would lead the china into an super economy within the next two decades.
Written By Indraneel Kripabindu Sen Gupra and Hardik Bhatt

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