The Land of Consumer Spending

consumer spendingChina is on the right path towards developing into a rising world economic power, as well as a basin for incredible and sustained growth across many sectors, including industrial, mining, energy, services and technology. The reality is that, if it is saleable and in demand, then you know that China will likely have the consumer market for it. China knows that and so do many of the world’s top multinational companies, including many in the United States.

All you have to do is to just think about the sheer size of the country’s middle class, which is mind-boggling and clearly reflects the amazing potential in China. The World Bank estimates that, within five years, there will be 542 million middle-class consumers in China. Yet, this may be conservative, as I have seen top-line estimates of around 700 million.

For 2010 and 2011, China’s gross domestic product (GDP) is estimated to grow by over 10%, according to The Organization for Economic Co-operation and Development (OECD). In fact, economic growth in the Asia Pacific region is promising, including seven-percent projected growth in the developing Asian economies and a stellar 8.3% for China’s neighbor, India. China is working hard on increasing its trade and alliance with India.

And, while retailers in the United States are currently struggling to lure shoppers to their stores, it is a vastly different story in China, where consumers are spending on just about everything. Domestic sales in China are predicted to reach $2.1 trillion in 2010, versus $1.8 trillion in 2009, according to the Chinese Academy of Social Sciences.

Advertisement

The current per capita income in China is just below $4,000 a year; yet it has more than doubled over the past few years and wages are heading higher. We are seeing more strikes in China, which is new to the country and reflects the demand for higher wages and prosperity.

With this comes more spending. Consider this: at the present time, only a small fraction of China’s GDP is driven by consumer spending compared to about 70% in the U.S. China wants to drive consumer spending long-term and this will drive organic domestic GDP growth.

“If you build it, they will come,” appears to be the motto in China these days. Just take a look at Beijing and Shanghai and you will notice the commercialism that has sprung up in that country. It was only a few decades ago, when China was still somewhat closed to outside firms and domestic entrepreneurship. That has changed and the associated growth has been stellar. Wait another 10 years and I’m sure the country will continue to grow into a mega-market for goods and services.