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Home » China Needs to Stimulate Its Consumers to Spend More

China Needs to Stimulate Its Consumers to Spend More

September 2, 2009
McKinsey Quarterly

The development paradigm that brought China two decades of rapid growth and lifted millions of people out of poverty is reaching the limits of its utility. Well before the U.S. credit bubble imploded, China's leaders recognized that this old economic model, with its heavy reliance on exports and government-led investments, was straining at the seams.  The global recession that followed Lehman Brothers' collapse put the model's drawbacks into sharp relief. When exports plunged, factories closed, and millions of Chinese migrants lost their jobs, Beijing responded with a $600bn stimulus package and a torrent of new lending by state-owned banks.

But those remedies, while highly successful in restoring short-term growth, risk aggravating structural distortions that made China's economy vulnerable to external-demand shocks in the first place. As the global crisis ebbs, China's leaders realize more clearly than ever that they must unleash consumer spending to achieve sustainable growth.

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Business Strategy Alignment Global Supply Chain Management HR & Labor Management Regulation & Compliance Consumer Packaged Goods China
KEYWORDS Business Strategy Alignment China consumer packaged goods Global Supply Chain Management HR & Labor Management Regulation & Compliance
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