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Warwick Powell's avatar

This is an excellent study of comparative consumption levels between China and other countries. Rather than do the comparison in financial terms (even adjusted for exchange rate differentials) this study addresses the material measures themselves - calories, square metres, number of units etc. The results suggest that on financial measures China’s household consumption patterns and volumes are chronically underestimated and this further suggests that China’s real GDP has also been significantly under-estimated. It finally says something about relative low prices of goods and services in China. This is a vitally important intervention in a global debate about China’s consumption levels, suggesting strongly that western missives are simply off the mark.

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Mark Schwartz's avatar

I have a few questions / comments if you have time.

1: is the floor space per capita adjusted for vacancy (bc my understanding is that many apartments in China are vacant - perhaps as many as 20%, which is much higher than in the rich OECD world) and if vacant they do not really contribute to consumption now (they may later) and so a straightforward comparison of total living space is deceptive.

2: about 2/3 US homes have whole of house AC - “central air” - as do many apartments, so they are not buying individual units. My impression is that central air is not anywhere near as prevalent in China (or Europe for that matter) but this means using AC units is not an apples to apples comparison for the US.

3: if as you conclude the RMB is very much undervalued and at the same time Chinese households have high levels of physical consumption, then much as “Don” says the level of overcapacity is even higher than the usual calculations (the ones you contest) suggest.olds. Or 2 Which means 1 of 2 things: 1: either an undervalued RMB -> lower consumption than would otherwise be possible (more tourism, etc) so that the main criticism about Chinese consumption still holds and/or 2: if the RMB ever revalues to its ‘true’ level, export firms will have a massive shock to profits akin to the 1980s Japanese “endaka”

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