The economy of China has been in the doldrum for the past few years since the pandemic. A recent article in the journal discussed the reasons China is unable to revive its stagnant economy and drive expansion. Unlike the US economy, the Chinese economy is manufacturing and export-based. Since the consumption is further down the economy is stuck in low growth mode. While western experts suggest the country increase its consumption of goods and services and become a consumption-based economy it is unlikely to happen.

For starters, the Chinese are big savers and not spenders. The lack of major social safety nets like social security and others force people to save more for the future. This scenario will not change anytime soon. The following chart shows the household savings rate as a percentage of disposable income:

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Source: Communist Party Priorities Complicate Plans to Revive China’s Economy

For comparison, the household savings rate in the US was 3.50% in July this year. No wonder consumption is a major part of the US economy.

The chart below shows the Chinese household expenditure as a percent of the GDP relative to a select few countries:

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Source: Communist Party Priorities Complicate Plans to Revive China’s Economy

The difference is indeed massive between the Chinese and US rates. The idea that China’s over 1.4 billion population can consume like there is no tomorrow on consumer goods and services is far from reality anytime soon.