This Great Graphic is from Branko Milanovic. It shows the share of private household consumption in GDP for the US and China since 1970. The share of consumption has risen in the US and fallen in China.
Many observers talk about a transition in China. Often what is meant is an evolution away from the export-oriented model and toward domestic demand.
Despite the vagaries of trade flows, the general reduction of the current account surplus in recent years, and the higher real wages, this graph indicates that the transition toward great household consumption has yet to take place.
The re-balancing of the Chinese economy requires greater household consumption. The repression of consumption helps facilitate the excesses elsewhere, such as redundant investment and inventory accumulation. If there was one Chinese data point for observers, investors and policy makers to monitor, this is it.
Great Graphic: Awaiting China's Transition
Reviewed by Marc Chandler
on
August 25, 2013
Rating:
Reviewed by Marc Chandler
on
August 25, 2013
Rating:
