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Can Consumption Growth in China Keep Up as Investment Slows?

Mali Chivakul and Bernhard Kassner
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Mali Chivakul: IMF

Comparative Economic Studies, 2019, vol. 61, issue 3, No 3, 412 pages

Abstract: Abstract China’s exceptionally large share of investment in GDP has been widely noted. Rebalancing away from investment to consumption has been on China’s agenda to realize more sustainable growth. As investment growth slows, the question is whether consumption could replace investment as a growth engine. This paper empirically explores the drivers of Chinese household consumption and specifically tests whether investment has affected household consumption beyond the standard income channel. Our empirical results using both national- and provincial-level data suggest that investment has had a significant impact on household consumption beyond the household income channel. The effects are particularly strong in the post-Global Financial Crisis period, suggesting that the Chinese government’s stimulus measures, which aimed mostly at investment spending, have significantly affected households’ decision to consume both through households’ current and expected future income channel.

Keywords: Reforms; Investment; Consumption; China (search for similar items in EconPapers)
JEL-codes: E21 E22 E27 E44 E47 E52 C12 C32 C33 O53 (search for similar items in EconPapers)
Date: 2019
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DOI: 10.1057/s41294-019-00097-w

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