美 Mei - Zhong 中 關 Guan - Xi 系

What is the population of China? 43 million! (中国人口是多少？4300万！)

By Wu Hongsen (吴洪森)

Original Publication:

Window of the South (南风窗)

Link to Original Article

Translated by Anton Lee Wishik II for Mei-Zhong Guanxi

Upon seeing this kind of headline, readers will certainly ask, isn’t China’s population 1.3 billion?  Where did the other 1.2 billion-plus go?

When I say that China’s population is only 43 million, it’s based on converting over to the per capita US consumption in 2006.

In 2006, US per capita income was $36,000 and total consumption was nine trillion dollars.  The US has a population of 300 million so per capita consumption was $30,000.  In 2006, China’s per capita income was $2,000 and its consumption rate was 51%.  Thus, per capita consumption was $1,000 or 1/30th of the US per capita consumption.  If you divide 1.3 billion by 30, the consumption of China’s 1.3 billion people is only equivalent to a population of 43 million Americans.

China’s total consumption is only 1/7th of the US’s, which is to say that the consumption of seven China’s is equal to one America.  Even if China’s total consumption was on par with the US, it would still be the case that seven Chinese people would equal one American.

America’s consumption is equal to that of Europe and Japan combined.  Thus, it’s not hard to understand why it is that as soon as the US economy catches a cold, the global economy catches a cold.  In an age when consumption is king, only a country’s consumption truly represents her economic strength.

We often like to use the economy’s overall GDP figure, become intoxicated with our success, and make China out as already being an extraordinary great power.  However, if one uses per capita consumption as a measure, one immediately realizes that China is a poor country, and moreover, is a very poor country.  China’s per capita income ranks 129th out of the world’s 193 countries.  If you add on the fact that consumption is only 51%, its ranking is not within the top 150.

For countries whose citizens have an average annual income surpassing $1,000, a trend appears in which their consumption rate increases in step with GDP, and even exceeds GDP growth by 1%.  Only China is the exception.  After the Chinese per capita income reached $1,000 for the first time in 2002, not only did the consumption rate not follow the increase in GDP, on the contrary, it fell compared to the previous year  In 2006, it fell to 51%.  The average consumption rate globally is 76%.  Thus, China won the number one ranking globally for its savings rate.

What is the significance of a low consumption rate?

At the very least, it denotes two large issues:  First, after many products are produced they are just placed in a warehouse and are not consumed (for storing things in a warehouse, a storage fee is paid which increases GDP; thus, GDP is easily flooded and merely measuring the economy by increases in GDP is unreliable).  What does it mean that production capacity has not been fully consumed?  The possibility of an economic crisis!

Second, an increase in income accompanied by a decrease in consumption signifies that the methods of economic increase and distribution have not only not increased people’s feeling of security, on the contrary, they have increased feelings of uncertainty regarding the future.  This is clearly due to a severe asymmetry that has been created between increases in income and expected increases in expenses.

To dodge an economic crisis, only a substantial increase in the consumption rate will do. To increase the consumption rate, only strengthening the citizens’ feeling of security will do.  To strengthen the citizens’ feeling of security, only eliminating those factors which cause them panic will do.  Everyone is clear on which factors cause Chinese citizens to panic:  inability to see a doctor, inability to pay tuition, inability to buy a house, and unemployment without safeguards.

The prevalent viewpoint sees solving the masses’ four large difficulties as a material welfare issue.  However, by viewing this in the context of the relationship between GDP and the consumption rate, we should be able to see that this is not a material welfare issue, but is the great issue of whether the entire economy can continue to operate and its relationship to each person’s interests.  If consumption can’t follow in step with increases in production capacity, more and more products will be overstocked, and as soon as an economic crisis breaks out, every person is a victim!

Since per capita consumption is a far more accurate reflection than GDP of the situation concerning our economic growth and the masses’ income, why don’t we use per capita consumption as a standard for measuring our official achievements?

Using per capita consumption as a standard to measure an area’s economic development, at the very least, would bring several clear benefits:  one would be to force officials to be concerned with the masses’ income and think of ways to make it so they would dare to spend money.  The second would be to stimulate all areas into happily admitting a higher population.  Because a large population leads to a large amount of consumption, officials’ achievements would be obvious.  In this manner, the residence permit (hukou,户口) issue would naturally resolve itself.  Within the next 30 years, China’s trend towards urbanization will not change, so there must be a rational policy to sweep away hindrances to urbanization and increase its pace.  By using per capita consumption to examine official achievements, this goal could be attained.

It is estimated that in ten years, China’s population will reach 1.5 billion.  At that time, if China’s per capita consumption reaches $6,000, total domestic consumption would be equal to America’s current consumption.  In another ten years after that, when per capita consumption reaches $12,000, China’s consumption would be equal to two America’s.  Although according to per capita consumption China’s figure would still be only 1/3rd of America’s, at that time, if the Chinese economy coughed, the entire world would shake.  At that time, the disadvantage of having a large population would become an advantage.  Only national strength brought about by the prosperity of the people is true national strength.

Some people will definitely ask, if China becomes a large nation of consumers, how will the earth provide so many natural resources?  One America has already made the earth say enough, if two more America’s appear, how could the earth bear them?

Increases in consumption and what to consume are of course two ideas, and this is a topic for another article.  However, this kind of concern also makes it clear that the path for China’s economic development not only must take the path of people’s prosperity, but also must differ from America in modes of economic increase and consumption, and must go its own way.

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