Determinants of China’s Private Consumption: An International Perspective

By Kai Guo and Papa N'Diaye on April 1, 2010

Gauges the key determinants of China's private consumption in relation to GDP using data on the Chinese economy and evidence from other countries' experiences. The results suggest there is nothing "special" about consumption in China. Rather, the challenge is to explain why the conditioning variables—notably a low level of service sector employment, the level of financial sector development, and low real interest rates—are so different in China relative to other countries' historical experience. The results suggest, in particular, that efforts to further raise household income and the share of employment in the services sector, as well as to develop capital markets, including liberalizing interest rates and creating alternative savings instruments, are likely to have the biggest impact on consumption. Other mechanisms to raise household income and mitigate household-specific risk (such as by improving the healthcare and pension systems) also have a role to play.

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Topics: 
Economy
Keywords: 
Consumption
Interest Rates
Organization: 
International Monetary Fund (IMF)

Chinese Politics

By Stanley Rosen on April 1, 2010

Written by a team of leading China scholars, this text interrogates the dynamics of state power and legitimation in 21st-century China. Despite the continuing economic successes and rising international prestige of China there has been increasing social protests over corruption, land seizures, environmental concerns, and homeowner movements. Such political contestation presents an opportunity to explore the changes occurring in China today—what are the goals of political contestation, how are Chinese Communist Party leaders legitimizing their rule, who are the specific actors involved in contesting state legitimacy today and what are the implications of changing state-society relations for the future viability of the People’s Republic?  —Routledge

One Country, Two Societies

By Martin K. Whyte on April 1, 2010

This timely and important collection of original essays analyzes China’s foremost social cleavage: the rural-urban gap. It is now clear that the Chinese communist revolution, though professing dedication to an egalitarian society, in practice created a rural order akin to serfdom, in which 80 percent of the population was effectively bound to the land. China is still struggling with that legacy. The reforms of 1978 changed basic aspects of economic and social life in China’s villages and cities and altered the nature of the rural-urban relationship. But some important institutions and practices have changed only marginally or not at all, and China is still sharply divided into rural and urban castes with different rights and opportunities in life, resulting in growing social tensions. The contributors, many of whom conducted extensive fieldwork, examine the historical background of rural-urban relations; the size and trend in the income gap between rural and urban residents in recent years; aspects of inequality apart from income (access to education and medical care, the digital divide, housing quality and location); experiences of discrimination, particularly among urban migrants; and conceptual and policy debates in China regarding the status and treatment of rural residents and urban migrants.  —Harvard University Press

Socialist Insecurity

By Mark Frazier on April 1, 2010

Over the past two decades, China has rapidly increased its spending on its public pension programs, to the point that pension funding is one of the government's largest expenditures. Despite this, only about fifty million citizens—one-third of the country's population above the age of sixty—receive pensions. Combined with the growing and increasingly violent unrest over inequalities brought about by China's reform model, the escalating costs of an aging society have brought the Chinese political leadership to a critical juncture in its economic and social policies.

In Socialist Insecurity, Mark W. Frazier explores pension policy in the People's Republic of China, arguing that the government's push to expand pension and health insurance coverage to urban residents and rural migrants has not reduced, but rather reproduced, economic inequalities. He explains this apparent paradox by analyzing the decisions of the political actors responsible for pension reform: urban officials and state-owned enterprise managers. Frazier shows that China's highly decentralized pension administration both encourages the "grabbing hand" of local officials to collect large amounts of pension and other social insurance revenue and compels redistribution of these revenues to urban pensioners, a crucial political constituency.

More broadly, Socialist Insecurity shows that the inequalities of welfare policy put China in the same quandary as other large uneven developers—countries that have succeeded in achieving rapid growth but with growing economic inequalities. While most explanations of the formation and expansion of welfare states are derived from experience in today's mature welfare systems, developing countries such as China, Frazier argues, provide new terrain to explore how welfare programs evolve, who drives the process, and who sees the greatest benefit.  —Cornell University Press

Myth of the Social Volcano

By Martin K. Whyte on April 1, 2010

Is popular anger about rising inequality propelling China toward a "social volcano" of protest activity and instability that could challenge Chinese Communist Party rule? Many inside and outside of China have speculated, without evidence, that the answer is yes. In 2004, Harvard sociologist Martin King Whyte has undertaken the first systematic, nationwide survey of ordinary Chinese citizens to ask them directly how they feel about inequalities that have resulted since China's market opening in 1978. His findings are the subject of this book. —Stanford University Press

Book Review: 

Andrew J. Nathan, Foreign Affairs (September/October 2010)
David Pilling, Financial Times (July 3, 2010)