Why is it so hard for China to boost domestic consumption?
Special points to highlight in this report:
* The consumption share of GDP is so low in China that for it to comprise a more normal level, equivalent to that of other very low-consuming economies, requires that in the future, the consumption share of GDP growth be extraordinarily high. For example, if consumption accounted for 85 percent of future GDP growth (something China has only achieved once, in 2023, and that in extraordinary circumstances), it would take between 7 and 12 years for consumption to rise to 60 percent of GDP—still well below the global average of around 75 percent of GDP.
* In spite of this pressure, Beijing seems to have strongly resisted implementing policies that raise the role of consumption in the domestic economy. While some economists have described this as a “bizarre” choice, in fact there are very good reasons why this is such a difficult set of policies to implement.
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