Over the last 25+ years, American consumption has been a major driver of the world economy.
But the current economic crisis is threatening America’s role as the consumer of last resort. With
its emergent middle class set to expand exponentially in the coming decades, China’s new
consumers hold the potential to become a new long term source of global aggregate demand.
Using a model of global economic trends, this paper explores how China’s middle class could
evolve over the next thirty years and the implications this may have for both China and the global
economy. While China’s middle class could consume more than America’s within a decade,
realizing this potential may depend on the country’s ability to boost consumption through
increasing the share of household income in GDP.