Many economists have called on China to boost its social safety net to rebalance the economy. Yao was unswayed and would prefer consumer vouchers, which some local governments in China have issued, but in amounts too small to matter at a macro level. Local governments, while cash poor, are asset rich. Michael Pettis, senior fellow at Carnegie China, estimates that if Beijing forces local governments to transfer 1-1.5% of GDP to households, China could maintain current growth. "One of the really big conflicts is likely to be between Beijing and the local governments over how to allocate the various adjustment costs.

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Persons: Erin Yao, Juan Orts, Orts, Tokyo's, Yao, joblessness, Jens Eskelund, Wang Jiliu, Wang, Michael Pettis, Laurie Chen, Kripa Jayaram, Marius Zaharia, Sam Holmes Organizations: Fathom Consulting, Communist Party, Reuters Graphics, European Chamber of Commerce, Carnegie China, Thomson Locations: BEIJING, HONG KONG, China, Beijing, United States, Hainan