Determinants of China’s Private Consumption: An International Perspective

April 1, 2010

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Format: Chicago

Kai Guo, and Papa M N'Diaye. Determinants of China’s Private Consumption: An International Perspective, (USA: International Monetary Fund, 2010) accessed December 22, 2024

Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary

This paper gauges the key determinants of China's private consumption in relation to GDP using data on the Chinese economy and evidence from other countries' experiences. The results suggest there is nothing "special" about consumption in China. Rather, the challenge is to explain why the conditioning variables-notably a low level of service sector employment, the level of financial sector development, and low real interest rates-are so different in China relative to other countries' historical experience. The results suggest, in particular, that efforts to further raise household income and the share of employment in the services sector, as well as to develop capital markets, including liberalizing interest rates and creating alternative savings instruments are likely to have the biggest impact on consumption. Other mechanisms to raise household income and mitigate household-specific risk (such as by improving the healthcare and pension systems) also have a role to play.

Subject: Consumption, Disposable income, Income, Private consumption, Services sector

Keywords: GDP, Saving, Share, WP

Publication Details

Pages:

16
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2010/093
Stock No:

WPIEA2010093
ISBN:

9781451982701
ISSN:

1018-5941

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