Relationship between advertising and consumption in China: Exploring the roles of economic development and mass media

Abstract

The article investigates the dynamic interaction between national advertising spending and consumption in China from 1979 to 2014, including the media production in this process. The results show that the household consumption, economic openness, and economic freedom all positively predict advertising spending. As a peculiar combination of market economy and party-state controlled political system, there exists an asymmetry in the role of the government in terms of media advertising versus media product supply, and newspaper versus television. The ad-consumption elasticity is larger after 1992 than that before 1992, and newspaper ad is more sensitive to economic changes than TV advertising. The imbalance between media dual markets suggests there exists a semi-market in media industrialization in China. Media contents in China serve as both propaganda tool and advertising vehicle, and content production investment is mainly compensated by advertising.