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Debunking the myth about China’s low consumption

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  • Jun Zhang
  • Tian Zhu

Abstract

This article argues that the generally held belief about China’s consumption being too low is a myth based on the misapplied Keynesian theory and inaccurate official statistics. The article identifies three sources of underestimation of household consumption by China’s official statistics: housing consumption is grossly underestimated, private consumption paid by companies is not accounted for, and most importantly, high income households are significantly underrepresented in the household surveys on which household consumption statistics are based. A re-estimation suggests that the rate of China’s consumption is more than 60% of GDP, not the official 48–49%, and it is comparable to the level experienced by the high income East Asian economies during their rapid growing years.

Suggested Citation

  • Jun Zhang & Tian Zhu, 2013. "Debunking the myth about China’s low consumption," China Economic Journal, Taylor & Francis Journals, vol. 6(2-3), pages 103-112, October.
    • Handle: RePEc:taf:rcejxx:v:6:y:2013:i:2-3:p:103-112
    DOI: 10.1080/17538963.2013.860679
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