China is shifting its growth model to one relying more on consumption and less on investment. It is also urbanising, ageing and experiencing dynamic technological change. It should therefore offer the world’s businesses a gigantic, rapidly growing, but challenging, consumer market as it evolves from being the “workshop of the world”.
Assume, instead, less optimistically, that China’s consumption share remained at a mere 40 per cent of GDP. Assume, too, that, after 2023, the growth of China’s nominal GDP (in dollars) falls to a mere 6 per cent, while that of the US remains at 4 pe cent. Then China’s aggregate consumption will still reach 55 per cent of US levels by 2027. Even under these considerably less favourable assumptions, this will be a hugely important market.
By 2027, 22 per cent of the Chinese population (324 million people) will be over 60. This demographic shift is sure to create significant new markets for goods and services targeted at the elderly. Meanwhile, the young adults of 2027 will virtually all be from one-child families and familiar with the digitally-enabled and relatively prosperous China of today. They are likely to be considerably more demanding than their elders.
China’s astonishingly dynamic “sharing economy” — already visible in the booming market for shared bicycles and cars for hire — will expand further, reducing demand for outright ownership.
As elsewhere in the world, Chinese consumers will also increasingly demand and obtain personalised goods and services. In addition, argues the report, the pattern of consumption is likely to be split between those seeking a more traditionally Chinese lifestyle and those with a preference for a more westernised way of life.
The dramatic development of China’s digital economy will increasingly weave together online and offline worlds. Hema, for example, is a start-up, backed by the Alibaba Group. As I witnessed during a recent visit to Alibaba’s headquarters in Hangzhou, a Hema store is a mixture of supermarket, restaurant, distribution centre and online store. I saw a possible future — and it worked.
The plausible assumption, however, is that over the next decade a mass consumer society will emerge in China. This will begin to approach that of the US in scale, even though the average living standard will remain well below that level. Moreover, Chinese companies are emerging as world leaders in this technology-enabled economy.
A vast middle class of people with an income affording more than the basic essentials of existence, will also emerge. These consumers will be not only be more demanding, but will seek goods and services that enrich their lives.
