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Reestimating China’s Underestimated Consumption

Author

Listed:
  • Jun Zhang

    (School of Economics, Fudan University, Shanghai, China.)

  • Tian Zhu

    (China Europe International Business School, 699 Hongfeng Road, Shanghai 201206, China.)

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, a lot of private consumption is paid for by companies but cannot be accounted for in official statistics. Second, housing consumption is underestimated because of the construction cost-based method. Third, and most important, high-income households are significantly underrepresented in the household surveys upon which household consumption statistics are based. We reestimate China’s household consumption by correcting for the latter two sources of underestimation. Our reestimation suggests that China’s final consumption expenditure is at least close to 60% of GDP, about 10 percentage points higher than the official figure.

Suggested Citation

  • Jun Zhang & Tian Zhu, 2015. "Reestimating China’s Underestimated Consumption," Comparative Economic Studies, Palgrave Macmillan;Association for Comparative Economic Studies, vol. 57(1), pages 55-74, March.
    • Handle: RePEc:pal:compes:v:57:y:2015:i:1:p:55-74
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    Cited by:

    1. Yang, Chengyu & Wang, Xupeng, 2023. "Income and cultural consumption in China: A theoretical analysis and a regional empirical evidence," Journal of Economic Behavior & Organization, Elsevier, vol. 216(C), pages 102-123.
    2. Gradín, Carlos & Wu, Binbin, 2020. "Income and consumption inequality in China: A comparative approach with India," China Economic Review, Elsevier, vol. 62(C).
    3. Kevin Luo & Tomoko Kinugasa & Kai Kajitani, 2018. "Dynamic efficiency in world economy," Discussion Papers 1801, Graduate School of Economics, Kobe University.
    4. Zhao, Da & Wu, Tianhao & He, Qiwei, 2017. "Consumption inequality and its evolution in urban China," China Economic Review, Elsevier, vol. 46(C), pages 208-228.

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