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Wages central to consumption drive

2014-10-27 15:12 Global Times Web Editor: Qin Dexing

Cai Fang, deputy director of the Chinese Academy of Social Sciences, said recently that increasing wages too quickly would put additional financial pressure on certain enterprises.

In theory, Cai's remarks make sense. But in practice though, ordinary wage earners need money for more than just their own daily expenses - they need to sock away money for housing, education, healthcare, and retirement savings. With all of these expenses, many people have little left over for discretionary spending.

There is evidence to support this observation, which many wage earners can doubtlessly identify with. Research from the University of Science and Technology in Beijing indicates personal consumption accounted for 35.42 percent of GDP in 2011, down from 48.79 percent in 1978.

In certain areas, some employees' salaries have indeed risen at a rapid clip. Unfortunately, there are many people in China who haven't seen a raise in years. Unless this changes, efforts to build a consumption-led economy may prematurely run out of steam.

Under current conditions, it doesn't make sense to focus on the downsides of higher pay.

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