China Stimulates Domestic Consumption

No long will it rely on other countries to consume to keep its economy afloat for now:

Facing slumping demand for Chinese goods overseas, China's government is trying to stimulate consumption at home — spending $2.25 billion to subsidize discounts on made-in-China fridges, washing machines, mobile phones, TVs and cars for its rural residents. But Chinese citizens' tendency to save their cash could prove to be a hurdle.
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"I saved 70 or 80 percent of my salary in a bank account," says MBA student Sherry Zhao, illustrating this trend. When she was working in a bank, she earned twice as much as her friends, but she lived at home. She was saving for her studies, but also because, she says, that's what Chinese people do.
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Zhang Jun, economics professor at the China Center for Economic Studies at Shanghai's Fudan University, says as people have gotten richer, they have saved more.

"What we see in the last 10 years is a declining share of consumption spending relative to GDP."

And when it comes to the national savings — which include savings by businesses and governments — according to Chinese figures in 2007, China saved the equivalent of 49.9 percent of its GDP. This has contributed to huge global trade imbalances: Chinese savings have in effect been funding American spending. So, according to Zhang, stimulating Chinese consumption can only have a limited effect. [NPR]