That is true, if "consumption" is defined in terms of how much one eats, how much one spends on clothes, vacation travel, cars, etc. But I did not even speak of "consumption" I spoke of "internal demand." That is rapidly growing part of GDP. Things like new electric generation facilities,(solar, wind and 400 new nuclear plants) new clinics and hospitals, new airports, new and better railroads, smart grids, etc.and of course more and better consumption: Things like cell phones, computers and cameras, new kitchen appliances, electric battery bikes, plus much more fish and meat is being eaten, etc. The price of pork is up 60% in the last year, despite the fact that China now has nearly as many pigs as the rest of the world's total! China is now using 47 times more corn, mainly feeding pigs, than it did a decade ago. But lets focus on housing, a major part of China's GDP and certainly "Internal Demand": Critics of China claim it is bubble and point to government built "ghost towns" - "a foolish inefficient waste of capital." It is true that China is building in one decade 100 new cities, each for a population of more than one million, with subways, hospitals, schools, energy efficient high rises (instead of urban sprawl) water and sewer plants, etc. - lot of "internal demand." China, about three years ago, made a little noticed in the West, but hugely important change: - The government still owns all the farmland but now the peasant can lease "their" tiny plots to business corporations for efficient, vast-acreage industrialized agricultural production. This happened in the US ~100 years ago and transformed the US into an urban nation. It is happening now in China. Now China has the highest wheat yield per acre in the world! (I'm not sure, but think natural fertilizer from all those pigs may be part of the reason.) With their assured farm rent money, millions of former pig farmers are moving to the new cities, some getting jobs to build them (or the world's fastest railroads, etc) and learning how to live in high-rises, buy their food in grocery stores etc. (Unfortunately, some of the older men, still spit and piss in the street, etc.) Here, from today's email to me is a very balanced discussion of this major component of "internal demand" : “… There are currently about 643 million urban inhabitants in China out of a population of more than 1.3 billion. And that number is forecast to rise to 925 million urbanites by 2025. So, over the next 15 years or so, China will need to add 282 million people to city life—nearly the entire U.S. population. Family sizes, too, are getting smaller, further raising the need for housing. In addition, current construction is not just about adding capacity but also about replacing old capacity. Thus, when we hear of “ghost cities” like Ordos (population 1.5 million+), we must bear in mind that it is already a fairly decent-sized city, sitting on huge raw material reserves and expected to grow its urban population aggressively. What people often mean when they talk of “ghost cities” is as yet unpopulated, or under-populated, new developments on the outskirts of large existing urban centers. In other parts of the country, city centers are being redeveloped, too, to create retail and office space for the growing consumer and service sectors. China needs redevelopment because a large portion of its housing is of poor quality. Much discussion of investment in China focuses merely on the gross amount of new housing built, without considering the net addition to the number of houses after older poor quality housing is bulldozed to make room. As of 2005 (the latest available data), one-third of city households were living in former, low quality, state-owned enterprise housing units. These socialist era factory worker units have few amenities for modern living. Old housing is being destroyed—about 1 billion square meters worth of public housing (or about 14 million, 70-square-meter units) have been torn down, but that still leaves about 9 billion square meters of this type of living space nationwide. China’s Vice Minister of the Ministry of Housing and Urban Rural Development, Qiu Baoxing, was quoted in the People’s Daily, as saying that Chinese buildings can stand for only between 25 to 30 years. And the country’s director of the ministry’s policy research center has said that homes built before 1999 will be dismantled to make way for new development during the next two decades. He expects two thirds of Chinese families to be living in new homes over the next decade. That could mean half of China’s urban housing is demolished in the next 20 years. Some analysts posit that urban redevelopment is responsible for more than two-thirds of China’s housing construction. This lessens our concerns; if construction in China is improving the quality of housing, does that not surely that add value? Estimates of the total housing stock to GDP, at about 75%, look reasonable (the U.S. is twice that level), particularly in the face of so much redevelopment and upgrading. …” From: http://matthewsasia.com/perspectives-on-asia/asia-insight/default.fs BTW, China's exports to the US are dropping, at least in relative importance, despite the US's worsening trade balance: While "... China's exports surged 20.4 percent from a year earlier to $175.13 billion in July, a record high, exports to the US slowed slightly to 9.5 percent from 9.8 percent. ..." From: http://usa.chinadaily.com.cn/china/2011-08/11/content_13090197.htm I and China have long recognized that China can sell to the US only if it lends the US the funds (buys Treasury Bonds) with which to buy. China is growing tired of this, developing trade with other Asian nations (plus Brazil and Australia) that it needs to import from. The recent fiasco in Congress has hastened the day when China will tell the US: Go to Hell. Your green paper is worthless to us. We don't need to sell to you and we will no longer finance your debts.