china-needs-shortterm-boost-to-domestic-demand

China needs short-term boost to domestic demand

J.P. Morgan's Frank Gong says long-term investment is not enough to sustain growth and warns the Chinese authorities against complacency.

The recovery in Chinese domestic demand is fragile and at an early stage, says Frank Gong, chief China economist at J.P. Morgan, and a short-term boost to consumer spending is needed to prevent the spread of deflationary expectations.

Gong, who was sharing his thoughts about the recently ended annual session of China's National People's Congress to a packed press conference in Hong Kong last week, has a radical plan for stimulating short-term demand, which he believes the Chinese government is considering.

Income tax cuts for the wealthy, he thinks, are a poor tool because beneficiaries would be likely to save the extra cash, while coupons issued to buy necessities would produce no...

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