The "name" and "real" of Chinese consumption

Zhang Guodong was born in a small mountain village in Anhui. Despite his low level of education, he left his hometown in 1995 to ride the wind of China's economic reform and began to drift north. At first, he sold belts and lighters in Tiananmen Square. Later, when this kind of selling was banned, he and some friends from his hometown started a small business in Beijing Xiushui Market, selling vegetables and some silk products to the employees of the embassy in the annex.

Silk Street is known for selling counterfeit brand-name products at low prices. After being fined several times for selling fakes, Zhang finally decided to change his tactics. Although the licensor of Hello Kitty was very worried about the fake products circulating in the market, he was finally persuaded by Mr. Zhang that the market would purify itself and obtained the distribution rights of genuine hello kitty products. The white short-tailed cat first appeared on people's wallets in the 1970s, and now kitty has become an Asian representative comparable to Mickey Mouse. Now, Mr. Zhang's business is doing well. In March, Xiushui Market clustered more reputable stalls together, and he owned a new 15-square-meter store on the third floor, five square meters larger than the previous store on the first floor. Mr. Zhang, who is from the countryside like many stall owners at Xiushui Market, said he never imagined that one day he would be able to live the life he is now.

Most people think of China as an industrial power rather than a consumer paradise. The share of household consumption in GDP has continued to decline since 2001. At the end of the decade, household consumption accounted for only 34 percent of GDP, not only 15 percent lower than South Korea's, but 16 percent lower than Japan's postwar lows. Even during World War II, the share of US consumption in GDP was not much lower than 50%. But this decline is actually deceptive. China's consumption growth rate is actually faster than that of any big country, but the rapid GDP growth masks the consumption growth. In any case, consumption always lags income, explain Carr of the University of Hawaii and Wilmore of the University of Southern California. This is partly due to the fact that people choose to use a period of time to neutralize their consumption, and partly due to people's reluctance to give up the lifestyle they have become accustomed to. Therefore, although China's output and income have increased substantially after 2000, people's consumption habits have not caught up with this increase.

Cultural anthropologist Jacqueline Jacqueline found that businessmen from remote areas who made their fortunes on their own often didn't know what to do with their newfound wealth. A couple new to Shenzhen have tiled their bathrooms throughout their apartment, while others complained that the bathroom windows didn't have the blue, translucent glass found in rural toilets. A home buyer who had never lived in a house bigger than a two-bedroom before bought a six-bedroom apartment and renovated four of them into a dining room.

But consumption habits are changing. In Shenzhen, one view is that "what you buy represents what you are," Alfik said, so the newly rich are proving themselves by buying sprees. They like to buy furniture that imitates the opulence and richness of the Baroque. In Sanya, an advertisement for a mansion showed a woman in a low-cut dress leaning against a window, and a painting of Napoleon crossing the Alps hung on the wall.

At the same time, there is also a group of increasingly discerning customers who do not like ostentation and pride themselves on their noble taste for red wine, tea and coffee. Now the in-vehicle TV advertisements in Beijing taxis are all about wine knowledge. "How to consume has itself become a consumer product," Elphick wrote.

In the past decade, consumption growth has not kept pace with income growth. China's GDP growth rate has slowed from 10% to 7% in this decade, so the proportion of consumption to GDP will naturally rise. Some economists believe that this growth has already begun. Since 2008, official statistics have been unable to reflect the surge in consumer spending, said Huang Yiping of Barclays Capital. Some additional expenses, such as housing, are not captured by official data, where tenants pay a large extra rent, but homeowners do not.

Retail sales, a proxy for consumer spending, have grown much faster than GDP in recent years. Unfortunately, these figures also do not take into account housing costs. In China, GDP includes a lot of things other than household consumption, such as government procurement, industrial trade such as basic chemicals. But even with those things out of the way, Mr Huang says consumption is still rising rapidly.

He believes that spending and the level of its growth are likely to be underestimated. Excluding conspicuous consumption, much income and spending escapes the eyes of tax collectors and statisticians. Among the many studies that have made my country's hidden income public, one led by Wang Xialou of the National Economic Research Institute of the China Reform Foundation has done the best. The research team surveyed the income and spending of 4,000 people. While the figures are less representative than official figures, the results are more impartial. After a statistical process to remove bias, Mr Wang calculated that China's household disposable income was 93,000 yuan higher than the official 2008 figure of 14 trillion yuan. Based on this calculation, Mr Wang believes that private consumption accounted for 41% of GDP in 2010, 7 percentage points higher than the official figure.

This calculation is unlikely to convince everyone, even if they are correct. For a number of other factors, the wealthier are more likely to benefit from hidden incomes, which may help explain why China is currently the world's largest luxury consumer market. When hidden incomes are also included, households in the top 10 cities are 26 times richer than those in the bottom 10, not six times as officially stated. These figures make China's economic imbalances seem less serious, but in fact social injustices are increasing. Then there is an important consumer force that is often overlooked: government. Since 2009, government consumption (health care, education, subsidies, etc.) spending as a percentage of GDP has been rising, but it still fails to meet social needs and is unevenly distributed.

The state of patchwork

Although my country has greatly expanded the coverage of rural social endowment insurance, it still only covers 30% of the target population. At the same time, the government has also expanded the coverage of health insurance, with 95% of people already covered, according to the Organization for Economic Cooperation and Development. Compared with the previous 60%, my country's medical insurance now only requires patients to directly pay 35% of the cost. But these developments are still uneven, and our country still implements three different sets of plans for urban workers, urban residents and rural populations, which are managed by separate city and county people's governments. Contributions required and benefits received vary widely among the three. According to the OECD, in rural areas the government only provides 16 yuan per person per year, which only covers 41% of the cost of patient care.

In the formulation of socialized economic policy, the government prefers localized strategies and fragmented expansion. This works well for economic reforms, but it does not allow for effective risk sharing for social policy. Although the financial cost is contained, it has left people facing illness and anxiety about losing their jobs. For example, health benefits are blocked, and patients cannot be protected in severe cases. China's hospital-centric healthcare system has only one general practitioner for every 22,000 people.

The older generation of Chinese live in a society where consumption choices are restricted by the state and work, eating in state-owned canteens and living in state-assigned dormitories or apartments. Although this kind of life is a bit boring, when the "iron rice bowl" is abandoned, the government has not been able to provide effective compensation including medical insurance and minimum pensions. According to the statistics of the World Bank, my country's spending on various social security accounts for only 5.7% of the GDP. But other countries with similar income levels as China spend 12.3% on social security.

Rational social spending and personal consumption are mutually reinforcing. According to the IMF, my country's imperfect social security system is one of the reasons why households save most of their income. They also found that every 1% increase in public spending as a percentage of GDP can stimulate a 1.25% increase in household consumption as a percentage of GDP, and every additional dollar of government spending on health causes two yuan in consumer spending.

However, can such free consumption be possible in China? In a sense, it is impossible. Once investment falters, and personal consumption cannot make up for it, there will be a huge demand hole in China that threatens employment and economic growth. If investment rates fall back to 2007 levels, the demand gap will be more than 6 percent of GDP. To make up for this, the government will have to spend about 3.4 trillion yuan this year or face mass unemployment. This amount of money is so large that only one-sixth of it can provide an extra two yuan a day for all the poor in China. This shows that China has huge production potential, but it will take a lot of money to fully mobilize them.

Another measure with Chinese characteristics that could stimulate consumption is the abolition of the household registration system, which limits rural people's access to public services in the cities where they work and live. Without hukou, new immigrants have no sense of belonging, so they are reluctant to spend money. A survey by several professors from the Central University of Finance and Economics, Fudan University and the Hong Kong University of Science and Technology found that new immigrants without urban hukou spend 30 percent less than the urban population. Mr. Zhang from Silk Market is a typical ghostwriter who is subject to institutional flaws. He came to Beijing 17 years ago, and now he owns a house of his own, gave birth to a son, runs a business, and has a franchise, but he still does not have a Beijing hukou.

Although it is not only shopping that drives consumption, it is a fact that my country's consumption has been sluggish for a long time. As one of the troikas that drive the economy, consumption's contribution to the economy still has a lot of room for development. Stimulating consumption and boosting domestic demand has been mentioned for many years. Various policies and measures have been implemented many times, but stimulating consumption is hard to deserve. The gap between the rich and the poor is large, they live in poverty and have no money to spend; social security is not perfect, they worry frequently, and they dare not spend money when they have money; spiritual construction is based on unbalanced material growth, their consumption awareness and habits are outdated, and they will not spend money; lack of belonging They feel that they cannot fit into the city where they live and are unwilling to spend money. Stimulating consumption is hard to deserve.