The myth of the suppressed Chinese consumer

THE great half-truth about China is that its economy consumes too little and invests too much. Over-investment is a real problem, but underconsumption is not. So the mounting calls on the country to “rebalance” by encouraging more consumer spending are misguided.

In the standard telling, China set out to become a manufacturing power in the 1980s and has since suppressed spending by consumers, so it could pour their savings into building ports and factories. But the suppressed consumer is a myth.

So far this century, in real terms, private consumer spending in China has grown more than 8 per cent a year, faster than in any other economy – by far.