China Has the World’s Fastest Growth in Living Standards


ONE of the strangest claims about China that sometimes appear in the media is that it has a slow growth of consumption and living standards. In reality China has the fastest growth of consumption of any country in the world – whether this is measured only by household consumption or includes government consumption in areas vital for quality of life, such as education and health. Furthermore, indicators show that compared to other countries, China’s quality of life is better than would be expected from its present stage of economic development.

First the facts regarding these issues are established and then they will be analyzed.

Table 1 shows the growth rates of consumption, both total and household, for the G7 and BRIC economies. These economies are selected for comparison as, given China’s size, the appropriate comparison is with major economies – not Caribbean islands or African states. Nevertheless including small economies would make no difference – China would still be seen to have the world’s fastest consumption growth rate.

The fundamental period of comparison used is from 1978, the beginning of China’s economic reform, to 2011 – the latest date for which figures are available for all countries. However, as data for Russia before 1990 is not available, a comparison for 1990-2011 is also given.

The pattern is clear. China’s average annual increase in total consumption was 7.9 percent in 1978-2011 and 8.5 percent in 1990-2011. The increase in household consumption in the same periods was 7.7 percent and 8.1 percent. China’s are easily the world’s highest rates of growth of both household and total consumption.

By comparison, India, ranking second after China, registered an annual rate of total consumption increase of 5.4 percent from 1978 to 2011 and 5.9 percent 1990-2011. And its rates of increase of household consumption are 5.2 percent and 5.9 percent respectively in the two periods.

The U.S., by comparison, had an annual growth rate of total consumption of 2.7 percent in 1978-2011 and 2.5 percent in 1990-2011. The U.S. growth rates of household consumption are 2.9 percent and 2.8 percent in the same periods. China’s consumption growth was therefore almost three times as fast as the U.S.

It is obvious that such a rise in consumption – an increase in quantity and quality of food, housing, holidays, phones, cars, furniture, health care etc. – is a decisive factor in determining any country’s living standards. China’s rapidly growing numbers of smartphones, cars, Internet users, those taking foreign holidays etc. reflect its rising living standards. However some people attempt to claim, entirely falsely, that China’s dramatic increases in consumption may be offset by other factors – for example weaknesses in health care, deterioration in the environment, etc.

Fortunately, this can be tested objectively. Life expectancy, as is well known, is a very sensitive indicator of overall living conditions. As well as most people having a direct goal of living longer, longevity also summarizes the combined impact of health, environment, consumption and other factors on human well-being.

There is a strong correlation between a country’s level of development, measured by GDP per capita, and its life expectancy – life expectancy tends to lengthen as GDP per capita rises. However other factors (health care, education, environment etc.) can raise or lower a country’s life expectancy compared to what would be expected from its per capita GDP. By comparing a country’s rank in world GDP with its rank in life expectancy, it is possible to know whether these other factors are leading to a country’s people living longer or shorter compared to what would be expected solely from its economic development level.

For example, Zambia ranks 98th in the world in GDP per capita, but 110th in life expectancy – lower than would be expected given its level of economic development. In contrast, Spain ranks 27th in GDP per capita but 5th in life expectancy. Such differences indicate that the consequences of health care, environment etc. are better in Spain, and worse in Zambia, than would be expected from their overall level of economic development.

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