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The share of discretionary spending in total consumption is increasing for both urban and rural consumers in China, suggesting a general shift in consumption patterns. Spending amounts across all consumer categories rose from 2013 to 2016, but the share of spending on nondiscretionary categories (i.e., necessities like food and clothing) is declining. Meanwhile, the share of spending has increased for discretionary categories: education and entertainment, transportation and communications, and health care.
Even as discretionary spending is on the rise, Chinese spending on basic necessities remains relatively high compared to richer nations. In 2016, spending on food, clothing, and housing accounted for 59 percent of total expenditure for both urban and rural households in China. In comparison, the same categories in 2014 accounted for 44 percent of total expenditure in the US and 51 percent in Japan. This comparison suggests that China has considerable headroom for discretionary spending growth in the future, assuming incomes continue to rise.