Bolstered by a $586 billion government stimulus program and a surge in lending by state-owned banks, China may be the first major economy to bounce back from the global recession. But the composition of China’s growth remains unbalanced. Aggressive increases in government spending and investment by state-owned enterprises has cushioned the impact of weak exports. But those gains have not been matched by comparable increases in private consumption. Spending by Chinese households as a percentage of GDP is roughly half the US consumption ratio and remains significantly below private spending levels in Europe and Japan. And despite rising sales of items such as automobiles and household appliances, the ratio of private spending to GDP in China today has actually fallen relative to Chinese spending levels of a decade ago.

Why do Chinese consumers spend so little relative to counterparts in other nations? What can be done to change that? Is boosting private consumption in China’s national interest? How would that contribute to global growth? In this interview, conducted by McKinsey director Jonathan Woetzel in June 2009 in Shanghai, four distinguished members of the McKinsey China Council of Business Economists¹ explore these questions. Watch the video, or read the transcript below.