{
  "title": "Explaining China’s Low Consumption: The Neglected Role of Household Income",
  "publication": "IMF Working Papers, July 1, 2007",
  "sourceUrl": "https://www.imf.org/en/publications/wp/issues/2016/12/31/explaining-chinas-low-consumption-the-neglected-role-of-household-income-21026",
  "canonical": "https://www.imf.org/en/publications/wp/issues/2016/12/31/explaining-chinas-low-consumption-the-neglected-role-of-household-income-21026",
  "overlayPath": "/en/publications/wp/issues/2016/12/31/explaining-chinas-low-consumption-the-neglected-role-of-household-income-21026/index.md",
  "summary": "The Chinese government has recently focused on the need to increase consumption to rebalance the economy. A widely held view is that despite China's remarkably high growth, the share of consumption in total expenditure has been low and declining due to high and rising saving rate of Chinese househol",
  "sections": [
    {
      "heading": "Executive summary",
      "content": "- The paper examines why the share of consumption in total expenditure in China has been low and declining despite high GDP growth.\n- Contrary to a widely held view, the rise in the household saving rate since the mid-1990s is found to have been a minor factor in low consumption.\n- A much larger factor is the declining share of household income in national income, occurring across wages, investment income, and government transfers.\n- Financial sector weaknesses, by restricting firms' access to bank financing for working capital, have played a quantitatively major role in keeping wage and investment income shares low and on a declining trend."
    },
    {
      "heading": "Key findings",
      "content": "- The rise in the household saving rate since the mid-1990s is a minor contributor to the low and declining consumption share.\n- The dominant factor is the declining household income share in national income:\n  - Declines observed across wages.\n  - Declines observed across investment income.\n  - Declines observed across government transfers.\n- Financial sector constraints that limit firms’ access to bank financing for working capital are quantitatively important in depressing wage and investment income shares."
    },
    {
      "heading": "Policy-relevant implications",
      "content": "- Rebalancing China’s economy toward higher consumption likely requires measures that raise the household income share in national income, not only policies aimed at reducing household saving rates.\n- Addressing financial sector weaknesses that constrain firms’ working capital financing could help restore wage and investment income shares and support higher consumption.\n\n---\n\n Content in this bundle\n\n- wp07181\n  - wp07181 (Markdown version){rel=\"alternate\" type=\"text/markdown\"}\n  - wp07181 (PDF){rel=\"external\" type=\"application/pdf\"}\n\n---\n\nSource: https://www.imf.org/en/publications/wp/issues/2016/12/31/explaining-chinas-low-consumption-the-neglected-role-of-household-income-21026"
    }
  ],
  "bullets": [
    "[Markdown version](/en/publications/wp/issues/2016/12/31/explaining-chinas-low-consumption-the-neglected-role-of-household-income-21026/index.md)",
    "[Structured JSON version](/en/publications/wp/issues/2016/12/31/explaining-chinas-low-consumption-the-neglected-role-of-household-income-21026/index.json)",
    "[Bundle manifest](/en/publications/wp/issues/2016/12/31/explaining-chinas-low-consumption-the-neglected-role-of-household-income-21026/bundle-manifest.json)",
    "Authors: Jahangir Aziz, Li Cui",
    "Published: July 1, 2007",
    "Series: IMF Working Papers",
    "DOI: https://doi.org/10.5089/9781451867459.001",
    "The paper examines why the share of consumption in total expenditure in China has been low and declining despite high GDP growth.",
    "Contrary to a widely held view, the rise in the household saving rate since the mid-1990s is found to have been a minor factor in low consumption.",
    "A much larger factor is the declining share of household income in national income, occurring across wages, investment income, and government transfers.",
    "Financial sector weaknesses, by restricting firms' access to bank financing for working capital, have played a quantitatively major role in keeping wage and investment income shares low and on a declining trend.",
    "The rise in the household saving rate since the mid-1990s is a minor contributor to the low and declining consumption share.",
    "The dominant factor is the declining household income share in national income:",
    "Financial sector constraints that limit firms’ access to bank financing for working capital are quantitatively important in depressing wage and investment income shares.",
    "Rebalancing China’s economy toward higher consumption likely requires measures that raise the household income share in national income, not only policies aimed at reducing household saving rates.",
    "Addressing financial sector weaknesses that constrain firms’ working capital financing could help restore wage and investment income shares and support higher consumption.",
    "**_wp07181**"
  ],
  "related": [
    {
      "title": "_wp07181",
      "role": "document",
      "sourceUrl": "https://www.imf.org/-/media/websites/imf/imported-full-text-pdf/external/pubs/ft/wp/2007/_wp07181.pdf",
      "summary": {
        "path": "/-/media/websites/imf/imported-full-text-pdf/external/pubs/ft/wp/2007/_wp07181.pdf.md",
        "mime": "text/markdown"
      },
      "binary": {
        "path": "/-/media/websites/imf/imported-full-text-pdf/external/pubs/ft/wp/2007/_wp07181.pdf",
        "mime": "application/pdf"
      }
    }
  ],
  "alternates": {
    "markdown": "/en/publications/wp/issues/2016/12/31/explaining-chinas-low-consumption-the-neglected-role-of-household-income-21026/index.md",
    "json": "/en/publications/wp/issues/2016/12/31/explaining-chinas-low-consumption-the-neglected-role-of-household-income-21026/index.json",
    "bundleManifest": "/en/publications/wp/issues/2016/12/31/explaining-chinas-low-consumption-the-neglected-role-of-household-income-21026/bundle-manifest.json"
  },
  "generatedAtUtc": "2026-09-17T13:19:53.457Z"
}