China as the world’s second biggest consumer?

Published on Author gjeong


As most of us are aware, China surpassed Japan to become the world’s second biggest economy back in 2010. Interestingly, however, China did not exceed Japan in consumption. This trend is beginning to change.

On Feb. 17th, 2014, Japan reported that its private consumption amounted to 3 trillion dollars (or 61.2% of GDP). Its government spending added another 98.5 trillion dollars (or 20.6% of GDP). Although China has not reported 2013 consumption rates yet, we can use last year’s report to compare.  It was 9.25 trillion dollars last year. As The Economist points out, this number refers to how much was produced within China not how much was spent on this output. However, we can still use this number to make comparison.

Japan’s private consumption was equivalent to 32.4% of China’s 2013 GDP (the total consumption was 43.3%) whereas China’s private consumer spending was roughly 36% of its GDP in 2012 (and the total consumption is 49.5%). Although China has not released its consumption rates for 2013 yet, none of economists thinks that it collapsed below 32.4% of China’s 2013 GDP. Thus, The Economist claims that it is safe to say that “China was the world’s second biggest consumer economy last year”.

As Paul pointed out, one of the reasons that China is slowing down is that China is becoming a consumer, rather than a producer. More and more countries will eventually depend on China’s economy. As many economists are concerned, if something goes wrong 20140222_woc370with China’s economy (mainly due to debt problems), it may have bigger impact than the U.S. 2008-2009 financial crisis.

Interesting note: It is true that China’s consumption level is still far below that of the U.S. However, it is growing much faster in percentage terms. It is possible that China’s consumption will surpass that of the U.S. in a few years.


The Economist

5 Responses to China as the world’s second biggest consumer?

  1. A major curiosity of most of the world is where this consumption will go. There is a major battle right now to capture market share of these new consumers to ingrain buying habits early. Right now domestic producers are winning this battle, but it is also unclear where Chinese consumers will be spending more. I’ll look to do a future post on expected growth industries in China if I can find some good sources.

  2. This observation reinforces and further justifies the continued attempts to break into the Chinese markets by foreign firms. There is so much potential consumption within the nation to which foreign companies can cater to, but at this point it seems immensely difficult to gain any advantage over local firms.

  3. What is more interesting is that China’s consumption will surpass that of the U.S. in a few years. This indicates that China will be the biggest economy in the world and the power that the U.S. economy has may shift to China.