Correlations between Consumption and Saving in the Context of the Chinese Economic Rebalancing

Iulia Oehler-Şincai

Revista de Economie Mondiala / The Journal of Global Economics, 2015, vol. 7, issue 4

Abstract: In the present paper, the main objective is to analyze to what extent the Chinese economy has been rebalancing towards a higher contribution of domestic consumption to the GDP, by taking into account both temporary and structural determinants and public policies. Our research includes two case studies, considered relevant from the standpoint of this topic: (1) urbanization, increasing the living standards and changing consumption patterns and the correlations between these changes and savings and consumption; (2) measures adopted or announced by the Chinese government in order to stimulate the internal consumption (“reform dividend†) taking into account the Chinese economic slowdown and a global gross product recording growth rates lower than 4% until 2020. Our investigations underline that beyond the direct objective assumed by the Chinese government, to spur the domestic consumption, it targets a more inclusive and sustainable economic growth, oriented towards innovation, high-tech industries and services. As the Chinese GDP structure is changing, and the main role is played by labour intensive services, not by the capital intensive manufacturing, the GDP becomes more and more labour intensive itself, which sustains the labour market and implicitly domestic consumption. Moreover, the universal access to the social security system represents a priority of the government, which determines the diminishing of the precautionary saving and automatically stimulates the domestic consumption.

Keywords: China; internal consumption; savings; precautionary savings; Chinese economic rebalancing; urbanization; consumption patterns; social security system (search for similar items in EconPapers)
JEL-codes: D24 D31 E20 E21 H50 H53 I38 (search for similar items in EconPapers)
Date: 2015
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