Chinese Consumption Kings
What’s Chinese for “Starbucks”? Did you catch the news about how China is now the world’s biggest exporter in absolute terms, having recently eclipsed Germany? Or how the Middle Kingdom is very close – almost there, 9 out of 12 months last year – to passing the US as the world’s largest car market?
Now Isabelle de Foucaud of the French newspaper Le Figaro weighs in with another upcoming China milestone: The Chinese soon [to be] kings of consumption. “Soon,” but not really right away; her lede:
Chinese households are earning more and saving less. In consequence, Credit Suisse estimates that the Chinese could dethrone the United States at the first world-rank of consumption around 2020.
Yes, this pronouncement is based upon a survey that Credit Suisse recently did towards the end of last year among 2,700 respondents in eight major Chinese cities. In particular, this showed that Chinese personal saving rates have fallen from 26% in 2004 to 12% last year.
Where does all that newly-free income go? For now, the report says, it’s going to real estate and to cars, but it’s also starting to go into consumer goods, too. “The big international brands are rubbing their hands” in glee about this, writes De Foucaud, but they need to be careful: Chinese companies are getting ready to challenge foreign firms for these new consumers’ Yuan across-the-board, including in the high-tech and luxury sectors where up to now they have been absent.
From my reading of recent macroeconomic commentary, this increase in consumer spending is a quite healthy development towards “re-balancing” the recession-struck world economy, so it can’t come soon enough (indeed, in this perspective 2020 looks rather too far off). On the other hand, the strong economic growth that is behind these developments is also making China more into a nation of “haves” and “have-nots,” i.e. with top-earners enjoying much more income growth than the rest, and this itself is a dangerous development in traditionally-egalitarian Chinese society.
