Opinion | Why Chinese consumption cannot completely be blamed for global imbalances

China’s headline household consumption relative to its gross domestic product has been under 40 per cent in the past few years, much lower than the global average. But China’s consumption and living standards do not seem that low relative to other countries with similar incomes when measured in terms such as calorie intake, child stunting rate (4.6 per cent), urban living space (41 square metres or 441 sq ft per person), home ownership (at least 74 per cent), average years of schooling (about 10 years) and luxury goods sales.

China enjoys world-class transport infrastructure and mobile and internet coverage. The remarkably low headline consumption rate is simply at odds with observations. China’s actual household consumption is much higher when properly adjusted for social transfers, purchasing power and housing expenditure.

Chinese households receive benefits such as subsidised education and healthcare provided by the state. Such social transfers in kind (STIK) were about 6.2 per cent of China’s GDP in 2019 and 6.4 per cent in 2021, up from 3 per cent two decades ago.

As richer countries with generous welfare programmes tend to show higher STIK, comparing China’s STIK-boosted consumption rate won’t narrow its gap with the advanced economies. But it could bring it closer to the rates in developing countries.