People buy Apple products at the new Apple flagship store on opening day, following an outbreak of coronavirus disease (COVID-19) in Sanlitun, Beijing, China, on July 17, 2020.
Thomas Peter | Reuters
BEIJING – Chinese consumer spending is expected to more than double in 10 years, with an emphasis on services instead of goods, analysts at Morgan Stanley forecast in a report of approximately 200 pages released on Wednesday.
In 2030, China’s private consumption is expected to reach $ 12.7 trillion, almost the same amount that American consumers currently spend, the report said. That figure is also higher than Morgan Stanley’s forecast three years ago of $ 9.7 trillion, and the $ 5.6 trillion that Chinese consumers spent in 2019.
Stimulating this expected growth are: greater government emphasis on policies to support the Chinese domestic economy, increases in household income, greater growth in urban areas, changes in technology and demographic changes, the report said.
Analysts predict that per capita disposable income is likely to double from $ 6,000 to $ 12,000 in 2030, as more people age and leave the workforce.
Aged population to drive spending
Significantly, Morgan Stanley analysts expect China’s future spending to enter new categories of growth in the next 10 years, as the wealthier age groups have families or retire.
“Material changes in consumption patterns are likely to occur, from the focus on young consumers to those driven by household demand, which will require an increasing proportion of services in consumption,” said the report.
The 35-45 age group is likely to increase by 25.3 million people, or roughly the current size of Australia, and those aged 55 and over are expected to increase by 123.9 million, or roughly Japan’s current population, said the report. Analysts added that the size of other adulthood categories is likely to decrease as a result of China’s years of banning having more than one child and a general drop in birth rates.
“We believe that the average Chinese consumer will be a driver of change, not just a recipient of Western consumer trends,” added the authors. “Part of this change will be informed by certain cultural values and consumption needs to support those values. This includes strong family ties and the prioritization of education.”
Why the Chinese may not spend so much
Morgan Stanley’s forecast of $ 7 trillion more in spending over the next few years means that Chinese private consumption is likely to grow by around 7.9% per year over the next decade, “one of the highest levels in the world,” the report said. .
But the uncertainties remain as the global economy struggles to deal with the coronavirus pandemic.
Although China’s economy in general recovered quickly from the initial shock of the pandemic, personal spending took longer to recover. Retail sales contracted 3.9% last year, despite a 2.3% increase in national GDP. On a monthly basis, sales resumed growth in August and grew 4.6% in December compared to the previous year.
Morgan Stanley analysts have listed several other developments that could prevent the Chinese from spending as much as they predict.
Authorities can aggressively restrict the availability of credit to consumers, the report said. The Chinese may also be inclined to save more if increased automation and other technological applications result in greater than expected job losses, or if the government is unable to significantly improve social security plans to help cover large costs. personal.
Chinese families save mainly for education, retirement and health, the report said.