The world's most populous nation will become the fastest-growing consumer market.
People's Daily Online Business Podcast by Li Zhenyu
Previous: Keys to China's successful transition to a consumer economy
China's current export-led, investment-driven model of growth is no longer sustainable in the long run, and the nation is rebalancing its economy to more of a consumption-based growth model, which is clearly good news for the world, especially in a time of global recession when other major economies, such as the United States and euro zone are seeking new sources of growth.
The hidden potential of the 1.3 billion Chinese consumers, once unleashed, will make China the world's largest consumer market and the top export destination for other major economies, especially for the U.S.
"The U.S. does need a new source of growth, and the emergence of the Chinese consumer could provide a new important source of growth for U.S. exports," Stephen Roach, former chairman of Morgan Stanley Asia and a current senior fellow at Yale University, told me.
"China is America's third-largest and most rapidly growing export market. That's a big toss that China offers."
The former chief economist at Morgan Stanley also believes that the potential of China's consumer market is huge, and the world's most populous nation will outstrip the growth of any consumer market in the world. I recently asked him how he comes to that conclusion.
"Well, I think in many respects that reflects the fact that Chinese share of its GDP is smaller than any major economies in the world that has ever experienced; its only about 35 percent of its GDP, and the normal level needs to be somewhere in the 50 to 55 percent range for an economy that is in the state of development as China is," said Roach.
"So, 35 to 50 percent or 55 percent of GDP, you know, that's a 15 to 20 percentage point increase in the consumption share of the Chinese economy. That will occur in the next 15 years. You know, that alone would increase the consumer sector in China by an estimated $15 trillion, and that's a huge number compared to any other economies that I've ever studied over the modern post World War II period."
Major economies such as the U.S. and the euro zone are in desperate need of new sources of growth and job creation, and China's transition to a consumer-driven economy could well help meet this demand. The long-dormant Chinese consumer power is about to be unleashed, providing new markets for all the world's major exporters.
Next: China's consumer power will be impressive by 2015, says economic guru