You will hear an interview. Li is the journalist of Caijing Newspaper: Shen Minggao is Caijing’s chief economist. They are explo

Woman: Mr. Shen, could you analyse the current situation of stimulating domestic demand?
Man: As I said in the fifth edition of Caijing Macroeconomic Weekly Review, released September 16, the core Issue for China’s future sustainable growth lies in stimulating domestic demand by encouraging spending among the nation’s consumers. And this step requires a fundamental change in policy support from export-oriented to domestic consumer growth.
Woman: What are the "major economy" effects of China?
Man: China has been showing more "major economy" effects recently in two ways: external demand growth contributed less toward supporting China’s export growth, and, at least to some extent, China’s growth rate has influenced international commodity prices.
Therefore, China’s export growth is approaching a bottleneck that has nothing to do with the U.S. subprime crisis, yuan appreciation, cuts in export, or value-added tax rebates. The impact from external and internal policy tightening did no more than speed up this process.
Woman: China’s export growth has shown some weakness. Did it suggest something?
Man: Growth in shipments to Europe and Japan apparently fell for exporters such as Russia, India, Brazil as well as China. Economic setbacks in the European Union and Japan dragged down growth in emerging markets. I predicted that it would be unwise for China to wait for the United States to recover. Bad news for the old, large investment banks could mean two or three more years of sluggishness for the global economy.
Man: Hence, the only way out is to spur domestic demand. For the near term, Chinese domestic consumption appears to be robust, as monthly retail sales growth has accelerated so far this year, partially offsetting slowed exports.
Woman: Any other impact?
Man: Yes, just like the consumption growth faces several obstacles. First, the real estate and automobile sectors — two pillars for local economies — have turned weaker. Second, in the long run, as deteriorating external demand drags down exports, investment in export-related industries will fall. Third, growth in industrial output continues to slow. Bankruptcy or idled factories may drive up unemployment rates and affect household income growth. Relaxing monetary policy will somewhat loosen credit constraints for companies. But because of the limited scale of consumer leverage, interest rate cuts are more likely to stimulate production rather than consumption. As uncertainties prevail, commercial banks are reluctant to lend. Therefore, easing monetary policy may have only a limited effect, unless such steps are implemented in combination with structural changes and corporate transformation.
Woman: Any strategy to achieve this goal?
Man: To achieve this goal, the government needs to set a medium-term objective to stimulate domestic demand, clarify market expectations, and build investor confidence. The strategy should include:
—Normalizing prices by abolishing price controls on
major inputs:
—Fiscal support through tax cuts, less government
spending and upgrading structure of fiscal
expenditure:
—Adjusting inflation targets by allowing higher inflation,
leaving room for policy changes:
—Stimulating employment by ensuring healthy
growth of small and medium-sized enterprises,
encouraging consumption growth, and creating new
job opportunities.
Woman: So it means that China’s economic adjustment is an unavoidable and natural process, and that the nation’s falling inflation rate could be explained by the slowing pace of monetary transactions. Any large-scale fiscal stimulus is unlikely. And even if taxes are cut, the government should also reduce fiscal expenditures and avoid boosting the fiscal deficit. Thank you, Mr. Shen.