China’s transition from an investment-driven to a consumer-led economy bears similarities to driving a hybrid car. While the driver may prefer to use the car’s greener electric engine, he can find that, when it lacks torque, he is compelled to switch back to the more traditional gas-guzzling form of propulsion.
This analogy, which comes from Tim Adams, president of the Institute of International Finance (IIF), an industry association, frames the challenge for Beijing as it seeks to boost the power of a consumer-oriented “new economy” that relies on service industries, technological upgrading and greener living.
“Over time, the hybrid will increasingly provide the needed propulsion, though it currently lacks the torque to get over the hills or when it is facing headwinds,” Mr Adams said.