How to think about Chinese consumption

Over at the ChinaFile site, I have a contribution up to a conversation on How Much Consumerism Can China Afford? It’s a short piece, and the gist of it is in the passage below–I call it the “two economies” theory of China.

The big story in the Chinese economy over the past decade was the boom in Industrial China, led by housing, with Consumer China tagging along. The big story over the next decade will be the decline of Industrial China, and the continued growth of Consumer China. Industrial China will falter largely because the demand for new housing and infrastructure in China is getting met, and is very unlikely to grow further from its current enormous size. Consumer China, however, is continuing to grow at a decent pace while this big adjustment is going on. But because the gains in Consumer China are not enough to offset the losses in Industrial China, overall economic growth will slow.

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