Summary of Key Points
This article discusses the complexity of China's consumption data, its international perspective, and the approaches to boosting consumption:
1. Challenges in consumer data statistics: The various methods of calculating consumption data (such as retail sales, per capita spending, and household consumption rates) lead to inconsistent figures. The statistics on service consumption are lagging, and key data are missing.
2. Contrast with international levels: China's household consumption rate (around 40%) is much lower than that of the United States (68%). However, the actual amount of physical consumption (such as food and housing) and the quality of services (education and healthcare) are not as different as the figures suggest, mainly due to differences in prices and exchange rates.
3. High savings rates constrain consumption: China's household savings rate (about 35%) is significantly higher than that of OECD countries (5%-6%), reflecting residents' concerns about future social security and healthcare.
4. Deep-seated reforms are needed to boost consumption: Short-term policies (such as trade-in programs) have limited effects. Long-term solutions are required, including adjusting the fiscal structure to focus more on investment in people, improving income distribution (e.g., increasing pensions and childcare subsidies), and enhancing the social security system.
Why Are Consumption Data So Confusing?
Trying to understand the actual level of consumption in China is like trying to describe an elephant to the blind—different methods yield different conclusions:
- Total retail sales (50 trillion yuan in 2025): This figure includes both physical goods (44.3 trillion yuan) and services (5.8 trillion yuan), but it also includes purchases by businesses (such as office supplies), and it does not account for non-residential services (such as haircuts and travel).
- Per capita spending (29,000 yuan per person in 2025): This figure is based on a sample of 160,000 households, with a total expenditure of 41.4 trillion yuan. However, residents may underreport their income and spending (especially higher-income individuals).
- Household consumption rate (40% in 2025): Calculated as a percentage of GDP, this figure of 56.76 trillion yuan is closer to the actual level, as it includes benefits provided by employers and the rental value of self-owned housing.
- Service retail sales: These data have only been collected since 2023, and the data for small and micro-service providers (such as street vendors and small hair salons) are difficult to gather.
In short, the lack of unified statistical methods and the difficulty in tracking service consumption make the data confusing and difficult for the general public to understand.
Is China's Consumption Really Worse Than Other Countries'?
On paper, China's household consumption rate is half that of the United States, but the actual experience is different:
- Physical consumption: China's consumption of meat and vegetables per person exceeds that of developed countries, and the penetration of smartphones and household appliances is high, indicating that people do not lack access to these goods.
- Service consumption: The quality of basic education and healthcare is similar to that of developed countries, and tourism consumption is improving.
- Price advantages: Chinese goods and services are cheaper, which lower the overall consumption figures when converted to dollars (e.g., food and haircuts in the Pearl River Delta are half the price in Hong Kong).
However, it is true that China's low consumption rate indicates that economic growth has relied heavily on investment and exports, making the economy vulnerable to external shocks.
High Savings Rates: The Fear That Hinders Consumption
Why do Chinese residents save so much? It's not out of frugality, but fear:
- How savings rates are calculated: According to the balance of payments, China's household savings rate was 34.9% in 2023, compared to 5%-6% in OECD countries.
- Reasons for saving: Residents save to prepare for uncertainties such as old age, medical expenses, and high education costs. For example, rural elderly people receive only a small pension, so saving is essential for survival.
- Comparison with other countries: Savings rates in East Asian countries (e.g., 20%-22% in Taiwan) are also high, indicating that Chinese residents have less confidence in the social security system.
Boosting Consumption: Short-term Policies for Immediate Effects, Deep Reforms for Long-term Solutions
Short-term policies like trade-in programs can provide temporary boosts, but to encourage sustained consumption, fundamental issues need to be addressed:
- Fiscal structure adjustment: Professor Lu Feng from Peking University suggests shifting fiscal spending from large-scale infrastructure projects to investments in people, such as increasing social welfare programs.
- Income distribution improvement: Luo Zhiheng from Yuekai Securities recommends:
- Raising the proportion of state-owned assets contributed to the treasury to fund pensions for urban and rural residents.
- Providing subsidies for unemployed graduates and offering mortgage discounts for two-child families.
- Making kindergarten education free for all children.
- Reducing corporate social security burdens: The current high contribution rates should be lowered to allow companies to raise employee salaries.
Changing Consumption Habits and Reforming the System
The article mentions that changing attitudes (e.g., from valuing frugality to valuing reasonable consumption) can encourage spending, but this is contingent on having enough money and the confidence to spend it. More importantly, systemic reforms are necessary, such as improving the social security system and ensuring fairer income distribution. These changes, although slow to implement, can address the underlying concerns that prevent residents from spending.
In conclusion, boosting consumption is not as simple as distributing consumption vouchers; it requires substantial and meaningful reforms. Only when residents have more money and fewer worries can consumption truly become a driving force for economic growth.