Slack aggregate demand and excess capacity will last for a period of time

The third question People’s Daily raised was about the pressure of the economic downturn. The insider responded that people should be prepared, since slack aggregate demand and excess capacity will last for a period of time and strong measures should be taken to tackle these issues.

He stressed that investment has a vital effect on economic growth: “Seen from the stage China is at right now, whether it can transfer savings to effective investment will be the key to stable economic growth.”

The insider also mentioned that on the one hand the Chinese people are having trouble getting sustainable property income with the high rate of household savings, and on the other hand the real economy and key construction projects lack funding. As a result, more financing channels should be explored to exploit the potential of private capital and transfer more savings into investment.

As for consumption, the insider said that raising wages and improving the social security system are both necessary; at the same time supply side policies are required to provide consumers with an effective supply of goods and services and high quality products.

He noted that the shrinking of global and domestic aggregate demand is not going to change in the short term. It is not enough to simply continue to endure these difficulties; neither will a stimulus plan solve the problem. Innovation is the key to dealing with this dilemma and turning the crisis into opportunities.