Not exact matches
Far from an economic powerhouse, China's economy remains a middleweight when its vast number of poor people is taken into account — the country's per capita
GDP is only around US$ 4,500, 1 / 10th that of the U.S. And
as a share of the economy,
household incomes have actually declined over the past decade.
First, there are several categories of spending by
households that are lumped into the personal consumption expenditures category in our official
GDP statistics that can fairly be counted
as investment.
First, because they represented a transfer from net savers to net borrowers, they helped to exacerbate the split between the growth in
household income (
households are net savers) and the growth in
GDP (which is generated by net borrowers), and so led directly to the extraordinary imbalance in the Chinese economy in which consumption,
as a share of
GDP, has declined to perhaps the lowest level ever recorded in history.
I calculate that for most of this century
as much
as 5 - 8 % of
GDP was transferred from
households to borrowers.
If the global economy were to recover much more quickly than most of us expect, and, much more importantly, if Beijing were to initiate a far more aggressive program of privatization and wealth transfer than I think politically possible, perhaps transferring in the first few years the equivalent of
as much
as 2 - 5 % of
GDP, the surge in
household income could unleash much stronger consumption growth than we have seen in the past.
Remember that by definition rebalancing means that
household income must grow faster than
GDP (
as happened in Japan during the 1990 - 2010 period).
This, combined with widespread moral hazard, had inevitably to result in both tremendous misuse of capital and a sharp decline in the consumption share of
GDP (
as the
household income share declined)-- both of which of course happened to a remarkable degree in China.
But if
households retain a low share of everything they produce, with governments and businesses getting the rest, then again, whether they are
as thrifty
as ants or
as spendthrift
as grasshoppers, their total consumption will be a low share of total
GDP, and the country's total savings, which is equal to
GDP minus consumption, will be a high share.
Not surprisingly,
household consumption is consequently an extremely low share of
GDP,
as is total consumption, which consists mostly of
household consumption.
As savings were force up structurally, whether because of rising income inequality or a declining
household share of
GDP, the system responded in ways that were sustainable (increases in productive investment) and in ways that were unsustainable (rising inventory in China, increases in speculative investment in the US, China, and Europe, and increases in credit - financed consumption in the US and southern Europe).
If we assume that disposable
household income is currently half of
GDP, eight years of real
GDP growth of 6.9 % and real disposable
household income growth of 7.7 % will only raise the
household income share of
GDP to 53.1 % in 2023, a little more than 3 percentage points higher and still below its 21st Century average and leaving China
as dependent
as ever on investment and the current account surplus.
For roughly three decades, Karen,
as GDP expanded by roughly 9 - 10 %, the
household share contracted while the government share expanded, and this expansion occurred mostly at the local government level.
As I have argued before, except under implausible scenarios (at least 2 - 4 % of
GDP transferred every year from the state to
households) I can not work out arithmetically any meaningful rebalancing process that is consistent with average
GDP growth much above 3 - 4 % during President Xi's 2013 - 23 term in office.
Looking at the economy
as a whole, the 2.5 % real
GDP growth observed in 2017 featured 1.2 - 1.4 % growth in employment (depending on whether one uses the
household or establishment survey).
According to this model, a small amount of deceleration in credit growth can occur
as additional credit efficiency is squeezed out of the system, but without a sharp decline in
GDP growth, substantial and sustainable credit growth deceleration can not occur except after a major transformation of China's growth model, one condition of which is net wealth transfers from local governments to median
households of at least one to two percentage points of
GDP annually.
I have not seen addressed in Dr. Pettis» writing but given several statistics I have seen, I believe the business share of
GDP is high at the expense of
household's
as a results of decades of policies.
As Adair Turner shows in his new book, Between Debt and the Devil, private sector debt soared as a share of GDP in most advanced economies after the 1980s, fuelling unproductive, debt financed household consumption, housing bubbles and wasteful financial speculatio
As Adair Turner shows in his new book, Between Debt and the Devil, private sector debt soared
as a share of GDP in most advanced economies after the 1980s, fuelling unproductive, debt financed household consumption, housing bubbles and wasteful financial speculatio
as a share of
GDP in most advanced economies after the 1980s, fuelling unproductive, debt financed
household consumption, housing bubbles and wasteful financial speculation.
Chart 4 compares
household debt
as a percentage of
GDP for Canada and the US from 1990 onwards.
As a basis for comparison, between 1980 and 1995,
household credit grew, on average, by around 3 3/4 percentage points faster than nominal
GDP.
However, starting in the early 1980s (
as the stock market started this amazing bull market run discussed earlier)
household debt rose to 100 % of
GDP and 130 % of PDI by 2008.
According to data from Standard & Poor's, lending from financial institutions to the corporate and
household sector
as a percentage of
GDP in Hong Kong jumped from 143 % in 2005 to an estimated 202 % in 2012.
The change in
household and government savings
as a share of
GDP is strongly and inversely correlated with the change in corporate profits
as a share of
GDP (particularly after 2 - 4 quarters).
The level of
household and government savings
as a share of
GDP is strongly and inversely correlated with the level of corporate profits
as a share of
GDP (particularly after 2 - 4 quarters).
Over the next two years Chinese
household consumption will continue declining
as a share of
GDP.
As a result, Canadian
households are more indebted than their American counterparts relative to each country's
GDP.
If reliance upon coal - fired generation were to diminish by a third
as a result of EPA regulatory programs,
GDP would be reduced by about $ 166 billion,
household incomes by $ 64 billion, and employment by 1.2 million jobs.
Reducing the UK's carbon emissions by around 60 % by 2030 (
as recommended by the CCC) would: * increase UK
GDP by 1.1 % in net terms * result in at least 190,000 additional jobs being created across the UK economy * mean
households are financially better off compared to a scenario where little is done to reduce emissions.
It starts with the same data used to calculate
GDP, but then adjusts for factors such
as income distribution, adds in factors like unpaid
household and volunteer work, and subtracts the costs of crime, pollution, resource depletion and other negative factors.
The measurements that will be discussed include the overall strength of the economy
as measured by inflation - adjusted gross domestic product (
GDP), the job market, the housing sector, consumer confidence,
household net worth, the stock market, wage growth and inflation, Fed policy, and interest rates.
Negative or virtually flat
GDP growth would obviously be harmful for housing,
as it would cause more job loss, set back
household balance sheet repair, and depress the already weakened housing market.