Consumption and Living Standards in China

Abstract

The future of the reforms in China ultimately depends on whether, and if so to what extent, reforms introduced in the recent past have improved the consumption and the standard of living of the Chinese people. It also depends on whether any such gains in the standard of living have been widely spread among the whole population. Since 1978 real per capita consumption in China has risen at an average annual rate of 7 per cent which is more than three and a half times that of the preceding 21 years. As a result, the standard of living of the average Chinese citizen in 1990 was more than double that of 1978. However, the growth of consumption and the living standard was rather uneven during the reform period. During the first phase of the reforms (1978–85) the consumption standard increased rapidly without widening existing income disparity. During the second phase (1985–90), however, improvements in consumption standards slowed significantly amidst rising inflation and growing income inequality. The question is whether the recent trend of a relatively slow rise in the standard of living and greater income disparity will continue in the 1990s. The purpose of this article is to examine the recent trends and changes in the level, structure and differentials of Chinese consumption and living standards, and to assess their prospects for the 1990s