Consumption part of China GDP 'underestimated' amid gift giving

The mainland's famously frugal households may be living larger than they are letting on.

Data released this week showed that the mainland economy grew 7.7 per cent last year, suggesting that the imbalance is worsening, with consumption unchanged at just under 50 per cent of gross domestic product but investment growing.

Some economists, though, say official statistics have it wrong. To avoid taxes, consumers routinely get employers to buy stuff for them. That means the country has underestimated how much consumers spend and has exaggerated the lopsided nature of China's US$9.4 trillion economy.

The implications of their research are far-reaching, at least statistically. If two economists are right, not only do consumers represent a larger part of the mainland's economy than thought, but estimates of its household savings rates may be inflated, investment's dominance may be overstated and China's economy may be larger than current estimates.

"China's consumption is not low," says Zhu Tian, an economist at the China Europe International Business School in Shanghai who co-authored a recent report on the subject. "It's actually desirable."