China May Trigger An Extra $15-T In Consumption Over Next 10 Yrs

China May Trigger An Extra $15-T In Consumption Over Next 10 Yrs

China may generate US$15-T in consumer spending over the next 10 yrs through a combination of business strategies, according to a report released by the Demand Institute Wednesday.

Those strategies should include increased communication and better access to the Chinese public about products and services, and innovations that expand the range of financial services that typically enable higher levels of domestic consumption.

The report:  Sold in China: Transforming to a consumer-led economy, said China’s economic success story has been largely driven by investment-led and export-led growth, including massive infrastructure investments.

As a result, while Chinese consumer spending has grown in absolute terms, consumption as a share of GDP (gross domestic product) has steadily declined for the past 60 yrs

The Demand Institute projects that share is not likely to rise significantly over the next 10 yrs unless there are substantial interventions from government and business leaders.

“Shifting the forces generating GDP growth is required to maintain the growth and prosperity of China. The time has come to provide a path towards a more consumer-led economy, where ‘Sold in China’ at least equals ‘Made in China’ as the foundation for future economic development,” said Louise Keely, president of The Demand Institute.

The report concludes that for the transition to be maximally successful and enduring, not only must the government provide the requisite policies and incentives, but the business community must make parallel investments to facilitate consumption.

Consumer credit services and life, health and property insurance are just a few product and service categories poised for growth should the right innovations, communications, access and payments infrastructure be employed.

The Demand Institute evaluated several future scenarios, of which the most optimistic would lead to a total of CNY 420-T (US$68-T) in consumer spending over the next 10 yr frame, a full CNY 90-T (US$15-T) more than if consumption’s share of GDP remains flat.

The Demand Institute has launched a research program on the future of Chinese consumer demand, this is the inaugural report.

Stay tuned…

HeffX-LTN

Paul Ebeling

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