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China Center Chart Dive: China consumption at an important turning point—but coming up from an unusually low base
  • Authors:

    Yuan Gao

  • Publication Date:
    July 2017

China is exhibiting a consumption story similar to other Asian economies that went through significant investment-led growth stages.

Once per capita income levels reached approximately USD 14,000 in places like Japan, Korea, and Taiwan, the share of household consumption began to increase. China’s current level of development appears to have recently reached this turning point, and its household consumption ratio will likely move up if the pattern holds. However, China’s consumption level (37.1 percent) and the current upswing is coming from a much lower base than comparable countries. By contrast, when GDP per capita for the three comparison countries reached the USD 14,000 threshold, household consumption accounted for 55 percent of GDP for South Korea, 50 percent for Japan, and 45 percent for Taiwan. Why is China’s base so much lower?

In large part, institutional deficiencies idiosyncratic to China explain the difference.

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