chinese consumers. Photo by Jeremy Wong on Unsplash.png

Here’s an idea for a mental exercise.
First, try to remember what you thought about the Chinese economy twenty years ago. If you’re too young for that, go back in time as far as you can. What do you see? If you’ve watched TV news reports or, assuming you take your information needs seriously, read economic research analysis, you’d probably imagine something along the lines of a lot of cheap trinkets, toys or garments.
Now think again, but this time focus on the present. What do you see when you conjure up the Chinese economy? High-end electronics purchased on Alibaba, the world’s largest online shopping platform? Long lines of well-to-do tourists queuing outside luxury shops in London, Paris and New York?
There are many signals alerting us to China’s transformation from an export-dependent manufacturer of low-margin products into a consumer-driven economy. But what does this monumental shift mean to the global economy?

Our latest report, titled “Will the Chinese consumer save the world”, examines how far and fast this process might take place.
The US represents the largest final consumer market with nearly 30% of global household consumption. As it contemplates more protectionist policies, the world may have to find itself a substitute.
China is a strong candidate thanks to its economic size (USD11tn+) and growth track record (6 %+). Chinese aggregate final consumption went from representing 1/10 of the US in 2005 to 1/3 in 2016.
Extrapolating this trend and assuming a gradual opening of the Chinese market for consumer goods, China’s private consumption could match the US in 2040. ·
There are three Cs that are key to make China the world’s top consumer:
- Consumerization and income growth from smart industrialization
- Successful currency internationalization
- Strategic cooperation and influence building. Think of the massive One Belt One Road plan, and you get the beginning of the big picture.
So who, who should be the main winners from the rise of the Chinese consumer? First, Producers in the US, Western Europe and industrial Asia (Singapore, Japan) of consumer goods for China’s middle class. Second, commodity exporters in Russia, Central and East Asia, and Oceania as One Belt One Road reduces transaction costs. Last but not least, competitive suppliers in ASEAN and South Asian countries fit for China’s Manufacturing 2025.
There are, however, three risks to this projection: (i) a disorderly credit crisis in China; (ii) a negative demand shock from the US; and (iii) regional political escalation.
Ludovic Subran
Chief Economist
Euler Hermes
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