LONDON - China's private consumption has grown faster than that in any other major economy in the 21st century, according to a recent column in the Financial Times.
In real terms, private consumer spending in China has grown more than 8 percent annually this century, faster than in any other major economy, the paper said.
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The myth that Chinese consumption is weak is largely based on its relatively low share of GDP - about 40 percent, noted columnist Ruchir Sharma, also chair of Rockefeller International. However, this ratio is influenced by the exceptionally high rate of capital investment in the economy, he said.
"The reason for this anomaly is not that consumption has grown slowly," he explained, "it is that the other big component of GDP, investment - in infrastructure, real estate, export industries - has grown even faster, averaging 10 percent a year in this century."
When adjusted for these factors, Sharma argued, the share of consumption in China's GDP would be closer to 55 percent, a level more consistent with international norms.
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He also noted that China's consumer spending has outpaced that of both established and emerging Asian manufacturing powers, from Japan and South Korea to Indonesia and Malaysia.
"When the original miracle economies were reaching the level of development in China today, they too saw sharp slowdowns in consumer spending growth," said Sharma.
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Recent signs of deceleration in consumption, Sharma argued, are concentrated in specific sectors and should not be overinterpreted.
"Drill down into consumer spending, and growth looks to be weakening mainly for services, not goods," he wrote. "But this, too, is partly illusory. If one factors in services provided by China's government at little or no charge, including healthcare and education, consumption rises significantly as a share of GDP."
