Reestimating China’s Underestimated Consumption

China’s consumption rate is widely believed to be too low. In this paper, we show that official statistics have significantly underestimated Chinese household consumption. First, a lot of private consumption is paid for by companies but cannot be accounted for in official statistics. Second, housing consumption is underestimated because of the construction cost-based method. Third, and most important, high-income households are significantly underrepresented in the household surveys upon which household consumption statistics are based. We reestimate China’s household consumption by correcting for the latter two sources of underestimation. Our reestimation suggests that China’s final consumption expenditure is at least close to 60% of GDP, about 10 percentage points higher than the official figure.