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Most people agree that the future engine of China’s economy comes from the urban-rural integration, AKA the township development. Besides huge investment lying in this process, we can’t ignore the emerging purchasing power, especially from the township level, or even the village level. However, the problem is do households’ income increase fast enough (compared to our GDP growth), how income effect and substitution effect matter to Chinese households. I argue that we do see increasing consumption arose from either the middle class or the rural area, but overall, households sector are still in financial distress, subsidizing SOEs and banking system through deposit with negative interest rate, trapped in the corrupted and speculated stock market, further investing in the “booming” real estate market. Moreover, the unstable social security system forces us to save rather than consume. We have to save more money for the education of our kids, health care of our parents and pension funds for ourselves. To conclude, China’s economic structure can be adjusted to a healthy way only by reforming the financial system and let people enjoy the economic growth, moreover, solving people’s concern(民生问题) in an effective and efficient way. Fortunately, we witness government is progressing.
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