Commentary
The great economist Michael Pettis at Tsinghua University has noted for years the importance for the Chinese economy to shift its growth dependency away from investment and toward greater consumption. As China faces its weakest sustained economic period in modern history, it bears worth asking, can China shift toward a more consumer-focused economy?
The Chinese economy is unique among major economies due to its low share of the household sector within the macroeconomy. Most economies typically have a household sector that accounts for 60-75 percent of activity. The United States, for example, hovers around 70 percent. In China, however, households account for only about 45 percent. This difference creates a wide variety of problems, from misunderstanding basic economic data to how to solve policy problems like shifting activity….