Decreasing Engel’s coefficient reflects nation’s economic leap

Behind China’s slumping Engel’s coefficient is the nation’s rising income level, which reflects the rapid economic growth of recent decades, an economic expert said on Wednesday.

But he warned that the figure alone can’t fully reflect China’s economic conditions on a shortterm basis.

China’s Engel’s coefficient, which measures the proportion of income spent on food, fell 0.9 percentage point to 28.4 percent in 2018, Ning Jizhe, head of the National Bureau of Statistics (NBS), revealed at a press conference in January.

China’s coefficient dropped below 30 percent, which marks the line between a “well-to-do” standard of living and a “wealthy” living standard, for the first time in 2017. The figure stood at about 60 percent in the early years of the reform and opening-up policy.

“The coefficient is an indicator that can reflect a country’s economic status in the long term. The fact that China’s Engel’s coefficient has fallen by about half in the past 40 years shows a leap in the country’s economy,” Liu Xuezhi, an economist at Bank of Communications, told the Global Times on Wednesday.

A report by the People’s Daily on Wednesday called the decline a “big accomplishment.”

Rising income levels led to the dramatic decline.

A 29-year-old male white-collar worker surnamed Dai who’s currently working in Hangzhou, capital of East China’s Zhejiang Province, told the Global Times on Wednesday that his monthly income has risen from just about 5,000 yuan ($740) when he graduated from college in 2011 to nearly 30,000 yuan now, but his spending on food has not changed much over the years.

“My spending on food has not grown along with my salary. I spend more on other items like tourism and pets,” he told the Global Times.

But Liu said that Engel’s coefficient can’t fully reflect a country’s economic status in the shortterm sense.

“We can’t jump to the conclusion that China’s economy is better in 2018 than in 2017 just because the country’s food/income ratio has dropped slightly. Of course it is a reference, but we have to take other economic indicators into consideration as well,” Liu said.