Relatively slow growth in fixed capital formation hastens speed of structural reform of Chinese economy

Consumption generated 52 % of Chinese GDP last year, with private consumption contributing about three-quarters of that. Fixed capital formation accounted for 43 % of GDP. National accounts data show real consumption grew 8 % y o y last year, while investment growth slowed to 6 %. Consumption contributed about 60 % of GDP growth last year.

China’s National Bureau of Statistics updated its GDP calculation methodology in July. Although the revised figures slightly increased the share of fixed capital formation in GDP, it did not disturb the overall shift in the structure of the Chinese economy; the ratio of fixed capital formation to GDP still fell gradually and the ratio of consumption to GDP continued to rise. China’s calculation methods for GDP still fail to fully capture activity in China’s service sector, and thus the actual contribution of consumption to GDP is believed to be higher.

Evolving structure of Chinese GDP, 1984–2015

Source: CEIC.