Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/212793 
Year of Publication: 
2014
Series/Report no.: 
BOFIT Discussion Papers No. 7/2014
Publisher: 
Bank of Finland, Institute for Economies in Transition (BOFIT), Helsinki
Abstract: 
Capital investment and exports have driven China's remarkable economic growth for decades, but recent trends have put pressure on the government to move to a more consumption- driven model of growth. Unfortunately, China's institutional framework does little at the moment to spur household consumption. While the country's weak social security setup and highly regulated financial markets are routinely cited as disincentives to private consumption, the role of the hukou household registration system in depressing consumption gets less attention. Controlling for income levels on datasets from 2002 and 2007, we show the average propensity to consume is significantly lower for internal migrants to cities. Official figures suggest that China in 2013 had about 260 million internal migrants. These individuals are often separated from their families for long periods and denied access to public services in the cities where they work. The government's current urbanization strategy calls for increasing migrant populations in cities, which, in the absence of hukou reform, is likely to further dampen consumption.
Subjects: 
Chinese private consumption
urbanization strategy
hukou system
JEL: 
E21
O15
R23
Persistent Identifier of the first edition: 
ISBN: 
978-952-6699-73-8
Document Type: 
Working Paper

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