Austerity policy good for economy

The growth rate of consumption during Spring Festival dropped because of the central government's strict policy against extravagance and waste, with some high-end restaurants' revenue witnessing negative growth. But that does not mean austere practices are detrimental to consumption, says an article in China Youth News. Excerpts:

Ministry of Commerce figures show that the revenue of high-end catering companies fell by 35 percent in Beijing and 20 percent in Shanghai after the implementation of the new policy. But if we think rationally, we will realize that the use of government funds for extravagant events such as official banquets and receptions - and the subsequent generation of waste - are good neither for the economy nor society.

Some media reports have said that such a decline will reduce demand in the market, but this view is mistaken. If domestic consumption is led mostly by luxury consumption using public money, it would reflect an unsustainable consumption pattern, which is bad for economic growth and social development.

Although excessive consumption using public money largely boosted high-end luxury products and services, it was a misuse of resources, and even eroded the related companies' development potential.

More importantly, excessive luxury consumption squeezes common people's normal consumption. An increase in commodity prices because of rising consumption of high-end products will weaken the consumption capability of common consumers.

In fact, the decline in luxury consumption has caused a drop in prices of other products, benefiting the common people. For example, prices of flower during Spring Festival dropped but the total revenue of flower sellers increased. And an increasing number of top restaurants today are offering special packages at lower prices to attract non-luxury consumers.

The public money saved because of the austerity drive in the government can be used in projects to improve people's livelihood and thus boost common people's consumption. Therefore, the government's policies should be seen as a necessary pain for the healthy development of society.