1/8 Very interesting SCMP article on the urgent debate within China on how best to bolster domestic consumption: "One point of contention is whether to set measurable consumption targets, in a similar fashion to...

2/8 other headline benchmarks like GDP growth. Some have called for indicators such as the share of consumer spending in GDP to be written into the blueprint, while others argue that such metrics are not operationally feasible as policy goals."

3/8 I don't know if setting measurable consumption targets makes sense, but I can say that there is some simple arithmetic, which no one seems to be doing, that easily illustrates the scale of the problem.

4/8 For example, if Beijing tries to raise the consumption share of GDP by ten percentage points over the next five to ten years, we can easily calculate the relationships between average GDP growth, average investment growth, and average consumption growth during that period.

5/8 Assuming average GDP growths during the period of between 0% and 5%, this would require that average consumption growth exceed average GDP growth by 2-4 percentage points and that average GDP growth exceed average investment growth by 3-6 percentage points.

6/8 Consumption growth targets, in other words, imply investment growth targets. More importantly, they also clarify the problem: China must get consumption growth rates to rise by 2-4 percentage points even as it drives down investment growth rates by 3-6 percentage points.

7/8 Is that possible? Yes. Other countries have rebalanced, but the process has always been extraordinarily difficult. Among other things it means that China can no longer think of more investment as the solution to every economic problem.

8/8 It must instead reduce investment growth rapidly, especially before the associated surge in the country's debt burden forces a chaotic adjustment, even as it is getting consumption growth to surge. This implies some pretty substantial transfers.