Consumption Recovery and Economic Rebalancing in China

Boosting consumption has been a policy strategy for rebalancing the Chinese economy. The official statistics, however, show persistently declining consumption as a share of GDP during the past decade. In this paper, we provide a more complete picture of Chinese consumption by piecing together data from official and unofficial sources. Our estimations suggest that the consumption share rebounded from 2008, after a period of decline. This may provide the first piece of evidence that the rebalancing of the Chinese economy is already under way as a result of changes in factor markets, especially rapid increase in labor income, that have resulted in increases in household income as a share of GDP and improvement in income distribution across households. © 2013 The Earth Institute at Columbia University and the Massachusetts Institute of Technology.