3 Megatrends Driving China’s Consumer Economy

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3 Megatrends Driving China’s Consumer Economy



Investors across the globe are watching China’s slowing economy with more than a little concern, but consider this stat from management advisory firm Boston Consulting Group: Even if China’s GDP growth slows to 5.5 percent, which is a full point below the 6.5 percent government target, the country’s consumer economy will expand by more than half to $6.5 trillion in 2020 from $4.2 trillion in 2015.

“Despite a slowing economy, China will remain one of the world’s fastest-growing consumer markets for the foreseeable future,” BCG researchers concluded in a recent report titled The New China Playbook that was developed with AliResearch, Alibaba Group’s research arm. Indeed, the incremental $2.3 trillion in annual consumer spending China is expected to add over the next five years is almost like tacking another Japanese consumer market onto the global economy, as the infographic below shows.

While China’s consumer spending is expected to grow 55 percent from 2015 to 2020, consumer spending in the U.S.—the mother of all consumer cultures—will expand by 21 percent over the same period.

consumption growth thru 2020 -- v2

What will drive that consumption growth? BCG identified three distinct “megatrends.” First, while much attention is focused on China’s emerging middle class, consumers in upper middle class and affluent households will have the most impact over the next four years. Also, Chinese under the age of 35, who are mostly college educated and brand conscious, will lay out more cash on goods and services than the generations that came before. And finally, the shift from bricks-and-mortar retail to e-commerce will continue to play an ever-bigger role in China’s economy.

In this series highlighting the three trends driving China’s consumer economy through 2020, we take a deeper look at each one and how BCG expects it to play out. First up: Rising incomes are fueling greater spending, and in new areas not seen before. Then there’s the growing prominence of China’s “young generation.” And finally, a look at the future of mobile e-commerce.

 

Boston Consulting GroupChinese E-Commerce
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