China’s Growth Relies on Consumers Still Too Cautious to Spend
- Investment and government spending supported 3% GDP growth
- Data show a slowdown in urbanization and rise in inequality
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China will need its cautious consumers to start spending again in order to achieve stronger economic growth, but recent data shows just how difficult that goal may be this year.
The biggest driver of the economy’s 3% growth last year was investment — or gross capital formation — which includes spending on durable assets such as buildings and also business inventory. That reverses the trend seen over most of the last decade, where consumption spending was the fastest growing component of demand for goods and services each year.