Current explanations for private consumption’s diminished role in China focus on the
expansion of exports and investments. Using structural path analysis, we find additional
contributing factors. First, growth patterns during 1997-2007 favoured sectors with low
production multipliers. Secondly, income multipliers fell in most sectors, especially in
fast growing sectors and partly due to urbanization. This means less trickledown from
growth to household incomes. Thirdly, households became less important in sustaining
domestic production processes. Together, these deep structural changes suggest that
enhancing private consumption’s role in China will require new (services-oriented)
growth patterns and a significant realignment of industry-household linkages.