Re-Estimating China's Underestimated Consumption

Abstract

China’s consumption rate is widely believed to be too low. In this paper, we show that official statistics have significantly underestimated Chinese household consumption. First, housing consumption is grossly underestimated due to the construction cost-based method. Second, a lot of private consumption is paid for by companies but can’t be accounted for in official statistics. Third, and most important, high-income households are significantly underrepresented in the household surveys upon which household consumption statistics are based. Our re-estimation suggests that the rate of China’s consumption is more than 60% of GDP, considerably higher than the official 48-49% of GDP.

Keywords: national accounts, Chinese GDP statistics, consumption, economic growth, Chinese economy

JEL Classification: E01, E21, O47, O53, P24