Online Consumption and Income Efficiency: Evidence from China

Abstract

Online shopping has becomes more and more popular in China largely due to the convenience and competitive prices of online products and services. This paper discusses fours issues related to online shopping. Using data from the Chinese Household Financial Survey 2013 and 2015, we find that online shopping is a more common practice for higher income earners, youngsters, women, married couples, better educated citizens, urban residents, and smartphone users. Online consumption is affected by similar factors. We observe the concavity of income on household total consumption and money savings due to online shopping. We conclude that online shopping improves the income efficiency on household total consumption. Using smartphones does not promote total consumption, although it increases online consumption.

Keywords:

• Online shopping
• online consumption
• income propensity
• income efficiency

Notes

1 https://download.mouse0232.cn/pdf/1012/2018(%E4%B8%8A)%E4%B8%AD%E5%9B%BD%E7%BD%91%E7%BB%9C%E9%9B%B6%E5%94%AE%E5%B8%82%E5%9C%BA%E6%95%B0%E6%8D%AE%E7%9B%91%E6%B5%8B%E6%8A%A5%E5%91%8A.pdf.

2 2020 Statistical Report on Internet Development in China, China Internet Network of Information Center.

3 2019 China Mobile Payment Development Report.

4 2019 China Mobile Payment Development Report.

Today, China's two dominant mobile payment platforms, Alipay and WeChat payment, have covered all consumer categories of ordinary residents, including physical goods consumption, entertainment service consumption, and other online consumption. The combined market share of Alipay and Tencent Tenpay (includes WeChat Pay) reached 94% in 2019. In 2016, China's mobile payment market exceeded $9 trillion, far exceeding the $112 billion in the US mobile payment market.

5 The data for CHFS 2017 is still not available; the 2011 data is not used in this article because the survey does not involve mobile payment or internet finance.

6 Based on panel data created by respondents who participated in both 2013 and 2015 surveys, the number of valid observations was less than 400.

7 All these expenditures and incomes are collected on a monthly basis, which are used to calculate the annual values. The after-tax salary excludes all insurance fees and housing provident fund contribution.

8 The link between mobile payments and online shopping in 2012 was not close before 2015 because most of mobile payment activities developed in recent years. Hence, the issue of overestimation may not be prominent in our data analysis. Nevertheless, further tests are necessary, such as by using proxy variables.

9 https://home.kpmg/cn/zh/home/insights/2015/10/china-connected-consumers-201510.html.

10 https://us.alibabacloud.com/?spm=a2c4e.11153940.minheadermenu.1.4a6d14aaQfbPtT.