The author's advice is probably but correctly influenced by the failure of Basle (BIS) and Western macro prudential regulation pre crisis. For consumption to take a larger share of GDP in China policy makers must allow a greater redistribution of incomes from the state to the larger population and the fast growing private sector. Without higher disposable incomes and social safety nets consumption growth will hit natural barriers.



Besides China will be better advised to follow the traditional and effective banking regulations in places such as Hong Kong and Singapore that has system level regulation induced limits on lending to real estate, minimum loan to value ratios, liquidity ratios that curb credit expansion beyond acceptable levels, etc. Such policy prescriptions are now being introduced by BIS and Western regulators.