Nobel Prize laureate in economics Robert A. Mundell recently suggested that the Chinese Government issue shopping vouchers worth 100 yuan ($15) to every citizen to boost domestic demand. The suggestion came at a time when exports, China's most important growth engine, showed a downtrend as a result of the global economic crisis. In order to prop up the economy, the government has worked out a 4-trillion-yuan ($586 billion) economic stimulus package, while pledging every means possible to tap the country's huge consumption potential.

Before Mundell made the suggestion, Chengdu, capital of southwest China's Sichuan Province, had already announced to issue 37.91 million yuan ($5.42 million) worth of shopping vouchers to local low-income earners. So far 379,100 people have each received a 100-yuan voucher.

However, many people argue that China is lacking in the economic environment to encourage consumption by issuing shopping vouchers as some countries and regions have done, because people in these countries and regions are covered by an effective social security network and enjoy higher income. In addition, these countries and regions are already used to excessive consumption.

As far as China's middle class is concerned, they hold the key to expanding China's consumption demand. What this group needs is not shopping vouchers, but sound job and income expectations. They will spend, especially when stock and property markets are bullish. Tax reductions are also considered an effective way to relieve the burden on the middle class to some extent.

Directly benefit the people

Xue Shijun (Guangzhou Daily): The Chinese Government has announced a 4-trillion-yuan economic stimulus package, expecting to stimulate productive consumption by increasing government investment. However, the country has to wait for some time before the investment brings returns. To expand consumer spending is undoubtedly the most effective approach and will bring immediate returns.

The embarrassing thing is that, nowadays, consumer confidence is weak in China. Statistics show that Chinese households' bank deposits increased by 262.8 billion yuan ($37.6 billion) in November, an increase of 84.5 billion yuan ($12.1 billion) year on year. People are saving money for a rainy day. If the government issues shopping vouchers and imposes a time limit, consumer sales will rise within a very short time. As Mundell has predicted, if the shopping vouchers are spent within three months, they will boost consumer sales by 1.33 trillion yuan ($190 billion), equal to 18 percent of the average quarterly gross domestic product of China in 2007. Once consumption is up, many industries will recover.

The shopping vouchers will not only increase per-capita consumption, but also represent a chance for the focus of China's public finance to shift from construction to services. More importantly, it is also an opportunity for the national economy to move from the current exports-driven growth model to a consumption-driven model.

Xiao Hua (National Business Daily): Though a shopping voucher worth 100 yuan might be insignificant for some people, it's a big sum of money for the needy, which will bring a lot of happiness and convenience. Unlike cash, which some people may choose to save for future use, shopping vouchers, however, require the holders to spend them in a specified period of time, so it is the most effective way to boost consumption.

Investment in construction projects will surely expand domestic demand, but the returns will come slowly. Shopping vouchers, however, have a time limit and thus will make immediate impacts on promoting domestic consumption.