June 11 — Nomura China chief economist Lu Ting said in Beijing that boosting
consumption over the medium-to-long term requires institutional reforms, notably
an improved social security system. He estimated strengthening social security
could reduce precautionary savings among about 300 million flexible workers and
thereby lift consumption. Lu called social security reform a necessary step for
China’s move toward a middle-developed economy and said the next few years are a
key window for reform. He recommended central fiscal spending be shifted sharply
toward social security, basic healthcare, inclusive elderly care and broad-based
consumption subsidies, arguing direct central cash injections to help households
repair balance sheets and ease education, healthcare and retirement burdens are
needed to reverse high precautionary saving and restore sustainable domestic
consumption growth.
