Morgan Stanley: China's nominal GDP to triple by 2010

By 2020, China will have completed its transformation from the "world's factory" to the world's biggest market of both consumer and industrial products, with its nominal GDP three times as it is now, Morgan Stanley predicted in its blue book for the Asian economy recently.

According to the report, Morgan Stanley believes that driven by the urbanization process, China will see its fixed asset investment double and its consumption triple by 2020, making 14 percent of the world’s GDP.

Morgan Stanley estimates China's urbanization shows no signs of slowdown but will accelerate. As a result, China's urbanization will rise from 47 percent to 63 percent, nearly equal to developed economies.

Lou Gang, a strategist with Morgan Stanley China said there is still room for further improvement of infrastructure, such as high-speed railway, ultrahigh voltage(UHV)) grid and pollutant drainage equipment, in addition to China’s massive investment on infrastructure in recent years. Meanwhile, with the progress and reform of the pension, health care and education systems along with the further construction of a social safety net, China's enormous deposits held by residents will be released and give an unprecedented push to consumption.

Morgan Stanley pointed out that consumer financing in China, only accounting for 10 percent of the total consumption, still lags behind developed economies, which is 50 percent of the total consumption. Online shopping can help promote the use of credit cards. It estimates that by 2020 some 40 percent of consumption will be financed by credit, which will lift the purchasing power by 30 percent.

Lou also agrees that China’s economy will be driven more by consumption than production in 10 years due to the support of the six factors: demographics, urbanization, infrastructure, social security, education and consumer finance. As a result of that, many sectors will enjoy very good growth prospects, including auto and auto parts, food, home appliances and entertainment.

However, Morgan Stanley also said that enterprises in those sectors would have to adjust their own strategies to benefit from China's transformation. For example, they should regard China as another local market, rather than one part of their overseas market.

Morgan Stanley believes that China is ready for a major transformation and has grown from the world's factory into a global economic power. The country's transformation is irreversible, it concluded.

By Li Jia, People's Daily Online