Misunderstood Chinese consumption

There are some misleading arguments about the jonathananderson/of Chinese consumption.　　In the case of housing purchases, China's total household spending is not weak, and real estate investment is also a key factor in boosting total investment. With China's domestic demand falling, import growth is also weakening, and the trade surplus has risen sharply, and "China's imbalances" have once again attracted investors ' attention.　　The usual view is that China's imbalances come from the inadequacy of Chinese consumption. The story most investors hear is that over the past 10 years, China's consumer spending has fallen in proportion to GDP, and China's economy is increasingly reliant on investment and exports.　　Unless consumption quickly becomes the main driver of domestic demand, this imbalance will inevitably lead to instability in economic growth. Is this actually the case?　　By drawing, we may be able to know the truth more intuitively. The blue and red lines in the shift map of consumption structure show that residents ' income and household consumption are the share of GDP based on official data. As you can see, these two lines are gradually falling.　　The share of household consumption as a percentage of GDP fell from more than 50% in 1990 to 36% in 2009, at a lower level in the world's economies. But these two figures are very misleading, and we recommend that investors better ignore them.　　When we talk about the contribution of Chinese residents to domestic demand and the economy as a whole, the traditional sense of household consumption is not a good metric, it is better measured by total consumer spending. Household consumption includes not only the consumption of goods and services, but the purchase of houses, which are counted into investment accounts.　　But anyone familiar with China knows that the boom in the housing market over the past 10 years has led to an unprecedented surge in China's economy. The standard household consumption combined with home purchase constitutes the total consumer spending in China. As the black line shows, consumer spending as a share of GDP has not fallen significantly, at 50% or so, as it was almost 10 years ago.　　In fact, China's consumption is not weak, and the main change is that consumers spend less on durables and more on durable goods such as homes and cars.　　Thanks to this change in consumer structure, UBS's China Economic Research group still maintains a positive judgment on China's stock market in the medium term. Since the beginning of the century, U.S. consumers have been making a big increase in housing purchases with loose loan conditions, which has led to a negative savings rate for the U.S. population. America's economy faces a painful balance-sheet repair process as the nation's debt is exploding. In China, although the real estate market has undergone a big expansion, Chinese residents are buying more money from thrift of other spending.　　In the past 10 years of housing sales, only 30% of the total value is financed by housing mortgage loans. The real estate pushes up the investment again to look at China's investment. China's total investment as a share of GDP has risen from 35% in 1990 to more than 47% in 2009 years, it is generally assumed. But when we put the investment in the house part of the buckleIn addition, its share of GDP has only edged up in the past 20 years. Of course, this does not mean there is no excess capacity in China, but the profit figures from industrial companies show that the efficiency and profitability of the industry as a whole is good. So the growth in China's investment share is largely a result of real estate investment. Although we expect real estate investment to fall from 2009 highs, the Chinese real estate market still has better support due to the high savings rate and relatively low balance sheet leverage of the residents.　　In other words, this is thanks to China's "weak" consumption. The writer is Asia Pacific chief economist of UBS Group (Liao Zongkui)