“The more you buy, the more you earn!” Sounds paradoxical, yet Chen Yu, author of the best-selling Consumers Also Can Be Capitalists, has sold this idea to tens of thousands of Chinese readers.

The ABC of orthodox capitalist economic theory states factories produce goods, retailers sell them and consumers buy as end users. Factories make a profit by charging more for their products than the cost of the raw materials and labor that goes into them, while retailers make money by marking up prices when selling to consumers. However, Chen Yu, president of the World New Economics Research Institute, discerns something more intricate in the production-consumption relationship, and has developed his ideas into ‘consumption capitalization theory’.

Professor Chen argues that retail enterprises should regard consumer purchases as an investment in the retailer, and therefore regularly return a portion of profits to consumers through membership and loyalty schemes. Under such schemes, credit points are accumulated each time you make a purchase, with bonuses and special offers made available according to the number of points earned. This means each consumer plays the dual role of buyer and investor when reaching into his or her pocket at the cashier, transforming the money spent into ‘consumer capital’.

This theory profoundly alters the psychology of the market. Consumers are no longer passive buyers, but manufacturing and retailing company shareholders. As such they should expect to have their interests and rights protected. Companies are encouraged to stamp out fake and shoddy products, as consumption capital, like any kind of capital, will flow to businesses whose products are superior in quality. Chen Yu believes the watchful eye of consumer/investors can provide no better incentive for Chinese enterprises to guard their credibility and reputation.

“History has proven that an economy with multiple forms of capital is much better for promoting economic development,” explains Professor Chen. “Hard currency is the oldest and most obvious form of capital, but countries like the U.S. long ago realized the importance of other forms such as intellectual capital, and made them the complement of money capital. The result has been decades of dynamic growth in the American economy. In contrast, nations that were slow in responding to this revolution have been sluggish economic developers. The sooner China embraces consumer capital, the sooner its future prosperity will be assured.”

Some scholars have dubbed Chen Yu’s consumption capitalization theory ‘the economics of wealth for all’, as it puts rich and poor on an equal footing in their acts of buying/investment. But Chen Yu’s ideas are heard beyond the academic community: since its release in March 2006 Consumers Also Can Be Capitalists has sold more than 50,000 copies, a stunning figure for a book on economics. And an English edition was published earlier this year, featuring additional commentary by renowned Chinese economists.