China Cultivating Consumers

Robert Lenzner, a Forbes columnist, writes for the Huffington Post, “China Hopes to Double the Value of Yuan-to-Dollars Within Ten years.”

Although Lenzner spends most of his words on the value of the yuan-to-dollars, the real story is China’s goal to become a consumer driven economy that does not depend on exports to survive.

I’ve read this before.

To achieve this goal, in recent years, China has spent more money in Brazil and South Africa then it has received back in trade. In fact, everything China has done since 1980 points in this direction.

It appears that the plan was to use cheap exports to prime the consumer engine that, if successful, will power China for decades avoiding the mistake Japan made.

In 1980, only 20% of the Chinese people could read. Today that number is more than 90%. In 1980, most of China lived in poverty—at least 80 or more percent. Today, according to the World Bank, only 10% of Chinese live in poverty. Recently, many factory workers won large raises and China’s government, for the first time, supported this move toward higher earnings.

Tom Doctoroff, also writing for The Huffington Post, says, “The Chinese will never spend freely. Savings rates will always be higher than in the West. There is no question China’s consumer economy will expand as incomes rise. So will purchasing power.”

However, Alan Wheatley, Global Economics Correspondent for the News Daily writes, “Chinese consumption is, in fact, strong. It has grown by more than 9 percent a year, after adjustment for inflation, over the past decade. China overtook the United States in 2009 as the world’s leading automobile market. The real-estate market is on fire, swelling demand for appliances and furniture. China is No. 2 in sales of luxury goods.”

Even though many Chinese will still save and spend less than most Americans, spending spread across China’s huge population may help China to achieve a different kind of consumer economy from the US where the consumer pays cash and doesn’t run up credit card debt. The key is to raise the standard of living of about 800 million rural Chinese, which China’s most recent economic plan is focused on.

In the next thirty years, if China succeeds in rural as it has in urban China, this means its economy will eventually outperform the US by huge margins in all economic sectors. It’s all in the numbers and China’s population is about five times that of the US.

Wheatley says, “The task for China’s policymakers is to lift that proportion by boosting wages, speeding up urbanization and building a social safety net so people do not need to save so much for a rainy day.

“Consumption will be the story of the next five to 10 years, and because we’re talking about a fifth of humanity, it will have a huge impact on global business,” said David Gosset, director of the Euro-China Center for International and Business Relations at the China Europe International Business School in Shanghai.

Learn more of China’s Middle Class Expanding

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Lloyd Lofthouse is the award-winning author of the concubine saga, My Splendid Concubine & Our Hart. When you love a Chinese woman, you marry her family and culture too.

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2 Responses to China Cultivating Consumers

  1. It will indeed be an interesting and phenomenal development if China does cultivate rural consumers.

    A lot of China’s development in the past 30 years has been in the cities, like Beijing and Shanghai.

    Will keep an eye on Gosset’s words.

    And if/when you should take Americans out of the equation: the place as a hyperpower is an outlier!

    • That is if China succeeds in converting its economy from one that depends on exporting “inexpensive” products to one that depends on a consuming middle class to power its economy.

      I used the word “inexpensive” instead of “cheap” because “cheap” indicates there is no quality to what is manufactured in China yet most of Apple’s high quality, very expensive computers, iPods and iPads, etc. are either manufactured or assembled in China.

      In fact, I read somewhere that most of our mobile phones and almost all of our laptops and desktops are either assembled or manufactured in China.

      While it is a fact, that a lot of junk also comes from China, much of the high-end consumer merchandise we buy also comes from China since US workers demand pay that is often higher than their skills warrant and the benefit package just inflates that cost.

      I’m going to step outside the topic for my final paragraph in this reply to Dupont’s comment:

      The fact is that not everyone in the US will achieve the middle class American dream. There will always be poor people living in poverty surviving on the edge, and why should other people who were willing to work harder to gain a better education and/or better skills support those people through government entitlement programs that go mostly to people that were not willing to work as hard in school or in the workplace to achieve skills that are in demand?

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