People buy Apple products in the new flagship Apple store on its opening day after an outbreak of coronavirus disease (COVID-19) in Sanlitun, Beijing, China, July 17, 2020.
Thomas Peter | Reuters
BEIJING – Chinese consumer spending is set to more than double in 10 years, with a focus on services rather than goods, Morgan Stanley analysts said in a 200-page report released on Wednesday.
By 2030, China’s private consumption will reach $ 12.7 trillion, about the same amount that American consumers currently spend, the report said. That figure also exceeds Morgan Stanley’s three-year forecast of $ 9.7 trillion and Chinese consumers of $ 5.6 trillion spent in 2019.
Stimulating this expected growth is: a greater focus by the government on policies to support China’s domestic economy, rising household incomes, further urban growth, changes in technology and demographic change, the report said.
Analysts predict that disposable income per capita will likely double from $ 6,000 a year to $ 12,000 by 2030 as more people age and leave the workforce.
Aging population to drive spending
Significantly, Morgan Stanley analysts expect future Chinese spending to fall into new growth categories in the next 10 years as the age groups with the highest purchasing power have families or retire.
“There are likely to be material changes in consumption patterns, from young consumers to household demand, which will require a higher proportion of consumer services,” the report said.
The 35-45 age group is likely to increase by 25.3 million people, or about the current size of Australia, and those over the age of 55 will increase by 123.9 million, or about Japan’s current population, the report shows. Analysts added that the size of other adult categories is likely to decline as a result of China’s ban on having more than one child and a global decline in birth rates.
“We believe that the average Chinese consumer will be a factor of change rather than a beneficiary of Western consumption trends,” the authors added. “Part of this change will be informed by certain cultural values and consumption must uphold these values. These include strong family ties and the prioritization of education.”
Why the Chinese might not spend as much
Morgan Stanley’s forecast of an additional $ 7 trillion in spending over the next few years means that Chinese private consumption is likely to increase by about 7.9% per year over the next decade, “one of the highest levels in the world.” in relation.
But uncertainties remain as the global economy struggles to cope with the coronavirus pandemic.
While China’s economy as a whole has recovered quickly from the initial shock of the pandemic, personal spending has taken longer to recover. Retail sales contracted by 3.9% last year, despite a 2.3% increase in national GDP. Monthly, sales rose again in August and rose 4.6% in December from a year ago.
Morgan Stanley analysts have listed several other developments that could prevent the Chinese from spending as much as they predict.
Authorities could aggressively tighten consumer credit availability, the report said. The Chinese may also be more inclined to save more if increased automation and other technological applications lead to higher-than-expected job losses or if the government is unable to significantly improve social security plans to help cover high personal costs.
Chinese households save mainly on education, retirement and healthcare, the report said.