The Value of China’s Consumer Basket in the U.S., Japan, France, Germany, and Mexico
YU Fei, GUO Kai
YU Fei, GUO Kai
CF40 Institute
Abstract: From the perspective of actual consumption volume, China’s consumption level is far from being as low as commonly perceived. Both per capita expenditure converted at exchange rates and per capita expenditure at PPP are affected by price and exchange rate deviations, leading to an underestimation of China’s consumption. To examine the consumption level of Chinese household, we directly map China’s consumption basket into other countries’ price systems to calculate the value of China’s consumption basket according to the price levels of other countries.
In the portion of consumption we cover, China’s consumption basket is valued at $24,748 in the United States, approximately 80% of the U.S. level; $6,006 in Mexico, 1.17 times that of Mexico’s level; $9,253 in Japan, 93% of Japan’s level; and $9,235 and $10,805 in France and Germany respectively, approximately 75% of the levels in France and Germany.
For the uncovered portion, we assume two scenarios: optimistic and conservative. Under the conservative estimate, China’s entire consumption basket is valued at $26,857 in the United States, representing 50% of U.S. per capita consumption; $8,371 in Mexico, representing 85% of Mexico’s per capita consumption; $11,387 in Japan, representing 65% of Japan’s per capita consumption; and $11,635 and $13,127 in France and Germany respectively, representing approximately 50% of per capita consumption in France and Germany.
This paper only conducts a rough statistical analysis and estimation, without considering quality differences in goods and services. The reexamination of China’s consumption levels cannot resolve the structural challenges in China’s current economy. The underestimation of Chinese household consumption levels implies that China’s real exchange rate is undervalued. Furthermore, a systematic evaluation of actual consumption volumes carries different implications for consumption improvement across various sectors in China.
I. Introduction
In the CF40 Policy Brief “China’s Consumption Is Not Nearly as Low as It Appears,” we compiled statistics on actual consumption volumes in China and other countries across sectors including food, manufactured goods, housing, and services, such as daily calorie supply per capita and the number of clothing items purchased, to directly compare consumption levels between China and other countries.
Our findings show that from the perspective of actual consumption volume, China’s consumption gap with other countries is much smaller than the gap calculated based on the absolute value of per capita consumption expenditure. If we directly examine per capita expenditure converted at exchange rates, China’s per capita household consumption in 2023 was $4,936, which is only about half that of Mexico, less than one-third that of Japan, and less than one-tenth that of the United States. However, from the perspective of actual consumption volume, China’s per capita consumption level is in fact higher than Mexico’s (approximately $10,000), rather than merely 50% as shown by per capita consumption expenditure statistics; it should also reach at least 40%-50% of the level of major developed countries such as Japan, Germany, and France, rather than the 20%-30% indicated by expenditure data.
Therefore, China’s consumption level is systematically underestimated, with underestimation attributable to price and exchange rate factors. From the price perspective, per capita consumption expenditure equals consumption volume multiplied by consumption prices. Since China’s actual consumption volume is not low, this implies that China’s goods and services price levels are systematically undervalued. From the exchange rate perspective, China’s actual consumption volume reflects that the renminbi actually possesses relatively strong real purchasing power, and the current RMB exchange rate may also be undervalued compared to its real purchasing power.
Even when examining per capita expenditure in terms of purchasing power parity, China’s consumption levels may still be underestimated. The essence of purchasing power parity lies in constructing relative price indices, and the reliability of results is highly dependent on the accuracy of price index estimation. In fact, through comparing data from the World Bank’s International Comparison Program (ICP), we found that China’s price indices may be overestimated in multiple sectors including food, clothing and footwear, furniture and education. Therefore, even after purchasing power parity adjustments, China’s actual household consumption levels would still be underestimated.
When comparing China’s consumption levels, both exchange-rate-converted expenditure and PPP-adjusted expenditure first require calculating the absolute value of China’s per capita consumption expenditure denominated in RMB under China’s price system, then conducting exchange rate conversion and certain price adjustments. This procedure makes the results vulnerable to exchange rate and price deviations.
To overcome this problem, we adopt an alternative approach: directly mapping China’s consumption basket into other countries’ price systems. In other words, keeping the composition of China’s consumption basket unchanged while calculating the value of this consumption basket according to other countries’ price levels. This approach can more intuitively reflect how much local currency would be needed in other countries to sustain the same consumption structure as in China, thereby providing a more accurate benchmark for international comparison.
A simple example can illustrate the calculation method: Assume the consumption basket contains only one type of goods—clothing. American households purchase 90 pieces of clothing annually, spending a total of $1,200, while Chinese households purchase 20 pieces of clothing annually. Then China’s consumption basket calculated at American prices would be equivalent to 20÷90×$1200=$267. Similarly, if Japanese residents purchase 40 pieces of clothing annually, spending a total of 75,000 yen, then calculated at Japanese prices, China’s consumption basket would be 20÷40×75000=37500 yen.
Using this method, we can map China’s consumption basket into other countries’ price systems and directly estimate how much China’s consumption basket would be worth in those countries under their respective price systems.
II. The Value of China’s Consumption Basket in the United States
We take the United States as an example to examine how much China’s consumption basket would be worth when calculated at U.S. prices.
First, based on exchange-rate-converted per capita expenditure, China’s per capita consumption expenditure in 2023 was only $4,936, meaning that under China’s price system, China’s consumption basket was valued at $4,936. Under the U.S. price system, the U.S. per capita consumption expenditure was $54,375. If these two figures are directly compared, China represents only 9.08% of the U.S. level, less than one-tenth.
In order to determine how much China’s consumption basket would cost in the United States, we need two sets of data: first, the composition of consumption baskets in China and the United States, namely the actual volume consumed in each category; second, the consumption expenditure value of U.S. household in each category.
We first compiled statistics on the consumption baskets of China and the United States, as shown in Table 1. A broad comparison of the consumption baskets between China and the United States yields some preliminary impressions: China’s food consumption has reached and approaches U.S. levels. For manufactured goods, gaps remain: clothing, footwear, and electronic devices are roughly 20% of U.S. levels; mobile phone and automobile consumption at roughly half of U.S. levels; and household appliance consumption shows a relatively small gap with the United States. In terms of housing, China’s per capita housing units amount to 85% of the U.S. level, and per capita floor space is at 60% of the U.S. level, indicating room for further growth. In the service consumption sector, China matches the United States in per capita life expectancy and expected years of education, suggesting that the fundamental effectiveness of China’s education and healthcare services is relatively comparable to that of the United States, though certain gaps remain in tourism consumption.
The actual consumption volumes across various sectors covered in Table 1 can constitute a consumption basket, but this consumption basket cannot fully cover all consumption areas, with specific coverage shown in Table 2. The Classification of Individual Consumption by Purpose (COICOP) divides all household consumption into 12 categories. Our statistical consumption basket includes food, major manufactured goods, medical and educational services, tourism services, and all housing-related consumption. The portions not included in the consumption basket are tobacco, alcohol and beverages, daily household goods, as well as service consumption in transportation, postal services, culture and entertainment, and restaurants and hotels services.
