Essay on Consumption in China

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Consumption in China
The article “Bottoms up” in the Economist of March 30th-April 5th 2013 illustrates that, through Morgan Stanley’s “bottom-up” calculations, the consumption in China is much higher than official statistics published by China’s National Bureau of Statistics (NBS).
According to the estimates by Morgan Stanley, official statistics in China undercount many parts of consumption, such as the spending on domestic tourism, financial services, health care, and housing, etc. As a result, official data shows that private consumption only counts about 35% of GDP in 2012. However, “bottom-up” calculations conducted by Morgan Stanley suggests that the consumption is almost 46% of GDP. The bank also claims that the undercounted consumption in 2012 ($1.6 trillion) is more than Australia’s entire GDP.
The calculations shows that the undercount in consumption remains a big problem in the official data, mainly because of missing stuff bought offshore and spending online. E-spending becomes more and more popular in China, but the official statistics neglects the entire category. It also cannot keep pace with the spending on online gaming.
China’s statistics have long been considered as skeptic. Some economics believe that the statistics does not reflect reality or even reflect political imperatives. Even some government officials thinks the province’s output figures are “man-made” and “for reference only”. Although NBS has stopped relying on provincial statistics to calculate GDP for a long time, it is still very hard for independent outsiders to check its work.
As the author said in the article, not every statistical distortion can make the figures more plausible. For instance, the understatement of consumptions makes people worry that Chinese economy relies too much on investment, which is considered as unstable. The government is blamed for the failure to rebalance the economy. If the calculation by Morgan Stanley is true, the
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