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China Shift from a Nation of Producers to a Nation of Consumers

China Shift from a Nation of Producers to a Nation of ConsumersAccording to Stephen Roach a senior fellow from Yale University Institute of Global Affairs, China is fast becoming a nation of consumers from a nation of producers. Roach said that the key understanding of China is on the number of gross domestic product but on the mix of economy. There are two models of economy in China first the old one, which is driven by fixed investment and exports and the new model that is boosted by private consumption.

The old model of economy fueled the economic growth in China in the past three decades is slowing down and the new model is still in the incipient stage. While the gap is continuing in widening, service activity grew by 8.4 percent year on year during the first half of 2015. Thus outstripping the 6.1 percent in manufacturing and construction. In 2014 the service sector has contributed 48 percent to the gross domestic product, which exceeded the combined 42 percent share of manufacturing and construction.

The shift to service based new economic model lifted the downside pressure in the manufacturing based old model. It was predicted that the service sector will account for 65 to 70 percent of the economy in the next 20 years making it a key piece of transformation in China. Services is the infrastructure of a consumer society and is generating more work in China as services require 30 percent more jobs per unit of output than manufacturing and construction. Jobs in China shifted to labor intensive service led growth in which the urban job created a target of ten million per year as of 2013.



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