{
  "title": "China: Fastest Growing Consumer Market in the World",
  "publication": "IMF Blog, December 2, 2013",
  "sourceUrl": "https://www.imf.org/en/blogs/articles/2013/12/02/china-fastest-growing-consumer-market-in-the-world",
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  "summary": "Author: Steven Barnett",
  "sections": [
    {
      "heading": "Context and timing",
      "content": "- Author: Steven Barnett  \n- Date: December 2, 2013  \n- Seasonal references: Cyber Monday (United States), Singles Day in China (November 11 or 11/11)"
    },
    {
      "heading": "Consumption levels and growth",
      "content": "- China had the largest consumption increase in the world in 2011 and 2012, and likely to be true again in the year of publication.\n- The chart (referenced) shows:\n  - US$ increase of consumption (bars) and real consumption growth (dots).\n  - China has been “tops for the past few years” on the US$ increase metric and has “had the fastest real growth in consumption.”\n  - Exchange rate appreciation contributes to the large measured increase in US$ for China, and contributes to the negative bar for Japan that year.\n- In real terms, consumption has grown about 9 percent a year for the past decade.\n- GDP has grown about 10 percent on average over the same period; thus consumption growth, while strong, has been slightly below GDP growth.\n- Consumption as a share of GDP has fallen by some 10 percent of GDP over the past 10 years or so."
    },
    {
      "heading": "Reasons for declining consumption share",
      "content": "- Household saving has been rising; precautionary motives are a popular explanation.\n  - Households are uncertain about how much health, education, and pension the government will provide, so they self-insure by increasing saving.\n- Household income has been growing slower than GDP; household income has been growing fast, but “just not as fast as GDP.”\n- Both factors (higher saving and slower household income growth relative to GDP) contribute to the declining consumption-to-GDP ratio.\n- These factors are discussed further in “Sino-Spending” (referenced)."
    },
    {
      "heading": "Moving to consumer-based growth — supply-side framing",
      "content": "- Rebalancing toward more consumer-based growth means boosting the consumption to GDP ratio.\n- Consumer-based growth can be told from the supply-side: expanding the service sector is critical.\n  - The service sector, while growing, is smaller in China in terms of output and employment than comparator economies.\n  - As the service sector takes a larger share of the economy, household income (and thus consumption) will naturally rise as a share of GDP.\n  - Advances in the service sector could lower prices for many consumer services and thereby increase sales (consumption) — see IMF Working Paper (referenced)."
    },
    {
      "heading": "Policy reforms to boost consumption",
      "content": "- Strengthen the financial sector:\n  - Would help finance expansion of the service sector, which currently has difficulty accessing credit.\n  - Would boost household income directly as new financial products boost investment income.\n- Social security reform:\n  - Could help reduce precautionary saving.\n- Reduce payroll tax burden:\n  - Payroll taxes are described as “very high and regressive” — employee plus employer social contributions often exceed 40 percent of wages.\n  - Reducing contribution rates would boost labor income directly through lower taxes and indirectly by boosting employment.\n- Other reforms from the recent Third Plenum that will help lift the consumption ratio:\n  - Higher resource taxation.\n  - Labor market reforms.\n  - Land reform.\n  - These can boost household income and lower household saving—either directly or indirectly by shifting the economy more toward services."
    },
    {
      "heading": "Expected outcomes and implications",
      "content": "- As reforms take hold, the consumption to GDP ratio should rise.\n- This shift is a by-product of moving to a more balanced and sustainable growth path, producing:\n  - A larger service sector.\n  - Lower household saving rates.\n  - A higher labor share of income.\n  - More inclusive outcomes (improved labor market).\n  - A more environment-friendly growth path (services are less polluting than industry).\n- If consumption grows faster than GDP, the result will be more consumer-based growth.\n\nSource: China: Fastest Growing Consumer Market in the World — Steven Barnett (December 2, 2013)\n\n---\n\n Content in this bundle\n\n- 中国：世界上增长最快的消费市场\n  - 中国：世界上增长最快的消费市场 (Markdown version){rel=\"alternate\" type=\"text/markdown\"}\n  - 中国：世界上增长最快的消费市场 (PDF){rel=\"external\" type=\"application/pdf\"}\n\n---\n\n References\n\n- https://www.imf.org/wp-content/uploads/2013/12/china-fastest-growing-consumer-market-in-the-world.jpg\n- Sino-Spending\n- IMF Working Paper\n\nSource: https://www.imf.org/en/blogs/articles/2013/12/02/china-fastest-growing-consumer-market-in-the-world"
    }
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    "Authors: Steven Barnett",
    "Published: December 2, 2013",
    "Author: Steven Barnett",
    "Date: December 2, 2013",
    "Seasonal references: Cyber Monday (United States), Singles Day in China (November 11 or 11/11)",
    "China had the largest consumption increase in the world in 2011 and 2012, and likely to be true again in the year of publication.",
    "The chart (referenced) shows:",
    "In real terms, consumption has grown about 9 percent a year for the past decade.",
    "GDP has grown about 10 percent on average over the same period; thus consumption growth, while strong, has been slightly below GDP growth.",
    "Consumption as a share of GDP has fallen by some 10 percent of GDP over the past 10 years or so.",
    "Household saving has been rising; precautionary motives are a popular explanation.",
    "Household income has been growing slower than GDP; household income has been growing fast, but “just not as fast as GDP.”",
    "Both factors (higher saving and slower household income growth relative to GDP) contribute to the declining consumption-to-GDP ratio.",
    "These factors are discussed further in “Sino-Spending” (referenced).",
    "Rebalancing toward more consumer-based growth means boosting the consumption to GDP ratio.",
    "Consumer-based growth can be told from the supply-side: expanding the service sector is critical.",
    "Strengthen the financial sector:",
    "Social security reform:",
    "Reduce payroll tax burden:",
    "Other reforms from the recent Third Plenum that will help lift the consumption ratio:",
    "As reforms take hold, the consumption to GDP ratio should rise.",
    "This shift is a by-product of moving to a more balanced and sustainable growth path, producing:",
    "If consumption grows faster than GDP, the result will be more consumer-based growth.",
    "**中国：世界上增长最快的消费市场**",
    "[https://www.imf.org/wp-content/uploads/2013/12/china-fastest-growing-consumer-market-in-the-world.jpg](https://www.imf.org/wp-content/uploads/2013/12/china-fastest-growing-consumer-market-in-the-world.jpg)",
    "[Sino-Spending](http://www.imf.org/external/pubs/ft/fandd/2012/09/barnett.htm)",
    "[IMF Working Paper](http://www.imf.org/external/pubs/cat/longres.aspx?sk=41073.0)"
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      "title": "中国：世界上增长最快的消费市场",
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