Most people agree that China's consumption may be the next "big play" as the
country gets richer and the economy transitions from an investment-led growth pattern
to a more consumption-oriented one. The government has vowed to foster more
balanced growth through reforms and pro-consumption policies. Yet in the past year,
consumption has been hurt by anti-corruption measures and a slowing economy. In
addition, recent mini-stimulus measures have focused again on infrastructure
investment. Is the rebalancing still taking place? What has the government done to
promote consumption?

To an extent, this gradual transition has already started, albeit at a very incremental
pace. In the past few years, consumption has contributed more to GDP growth
than investment, thanks in part to slower credit growth and cooler investment in
both infrastructure and property. The official (under-estimated) consumption share
of GDP has risen since 2011 to almost 50% last year, recovering to its pre-global
financial crisis level and putting a stop to almost a full decade of decline. Of
course, given that overall economic growth has slowed from the pre-GFC doubledigit
pace to the current 7-8%, consumption growth has also slowed.