Welcome back. The notion that China needs to rebalance its economy towards greater consumer spending is now well established. For over a decade, economists have been warning that there are limits to delivering high, sustained growth from Beijing’s investment- and export-led model.
But there is widespread scepticism that the Chinese Communist party can oversee a significant boost to household consumption. So this week, I asked analysts to outline why long-term consumer spending growth in China might surprise on the upside (even if that was not their view). Here’s what they said.
First, the downbeat narrative around China’s consumption underplays how large it already is. Consumer spending accounts for around 40 per cent of the country’s economy. Although the global average is about 20 percentage points higher, in absolute terms China’s consumer market is the world’s second largest (behind the US) and has grown at an unrivalled rate.