China may overtake the US as biggest consumer market by 2020, say economists
Reuters 24 September 2009
(BEIJING) For all the talk about Chinese spending too little, business is booming for the country’s online retailers, heralding the emergence of young, affluent consumers who will reshape the global economy over the next decade.
Xue Yong is the sort of Chinese shopper long dreamt of by international stores and brands. The 30- year-old software engineer has money to burn and a desire to stay on top of the latest fashions.
‘My wife and I spend at least two hours a week surfing online for stuff to buy, and we hardly ever log off empty-handed,’ Mr. Xue said. ‘It’s a way for us to relax at home after a busy day at work.’
China’s sky-high savings rate, the flip-side of debt-fuelled spending in the United States, is one of the main economic imbalances that underlay the global financial crisis.
American consumers, facing job insecurity and tighter credit, have effectively been forced to ramp up savings to 5 per cent of their incomes from nearly zero before the crisis.
But, despite a well-flagged US call at this week’s G-20 summit for exporting nations to spend more, there is no easy way to get Chinese consumers to cut their 30 per cent savings rate. Slowly, though, change is afoot.
‘The structural rise of the Chinese consumer will create a shift in China’s growth model as well as the global consumption landscape,’ Dong Tao, a Credit Suisse economist in Hong Kong, said in a recent report. ‘We project that China will overtake the United States as the largest consumer market by 2020.’
The fundamental drivers of consumption growth will be urbanisation, as rural citizens benefit from rising incomes, and demographic trends, with younger Chinese both wealthier and inclined to spend much more money than their parents, Mr. Tao said.
Contours of the new global consumption order are clearly visible in a surge of Internet shopping in China.
Chinese e-commerce sales in the second quarter rose 91.9 per cent from a year earlier to 56.36 billion yuan (S$11.65 billion), according to iResearch, an online marketing research firm. That dramatically outpaced the 15 per cent increase in China’s retail sales over the same period.
Taobao, China’s biggest online auction site, has 145 million registered members, or about 43 per cent of the country’s total Internet users.
Known as China’s eBay, Taobao expects its 2009 revenues, derived largely from advertising, to more than double from 300 million-400 million yuan last year.
Online commerce not only exemplifies China’s rising consumption prowess, but also provides a springboard for shoppers to vault over hurdles that have held them back.
Despite vast investment in infrastructure, China remains woefully short of roads and railways away from the coast. Retailers struggle to set up distribution networks deep in the country’s interior, putting hundreds of millions of potential shoppers beyond their reach.
E-commerce helps to bridge the divide. Twenty-seven per cent more people in poorer cities say they might buy online than those in wealthier cities, even though Internet penetration in the former is lower, according to a survey by consultants McKinsey & Company.
For retailers, the message is clear: Get online. Japanese casual-clothing chain Uniqlo launched a Chinese portal on Taobao in April and sold 4.1 million yuan of merchandise in its first 11 days.
‘We expect online sales to further expand in the coming years. It is really a vast market with great growth potential and we cannot ignore it,’ said Han Bing, a marketing executive at Uniqlo China. ‘It is the quickest way to spread our brand.’
The rise of e-commerce also snugly fits the Chinese government’s economic strategy of promoting domestic consumption and reducing reliance on exports\. \-- Reuters
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‘Buy online’ craze grips affluent Chinese
China may overtake the US as biggest consumer market by 2020, say economists
Reuters
24 September 2009
(BEIJING) For all the talk about Chinese spending too little, business is booming for the country’s online retailers, heralding the emergence of young, affluent consumers who will reshape the global economy over the next decade.
Xue Yong is the sort of Chinese shopper long dreamt of by international stores and brands. The 30- year-old software engineer has money to burn and a desire to stay on top of the latest fashions.
‘My wife and I spend at least two hours a week surfing online for stuff to buy, and we hardly ever log off empty-handed,’ Mr. Xue said. ‘It’s a way for us to relax at home after a busy day at work.’
China’s sky-high savings rate, the flip-side of debt-fuelled spending in the United States, is one of the main economic imbalances that underlay the global financial crisis.
American consumers, facing job insecurity and tighter credit, have effectively been forced to ramp up savings to 5 per cent of their incomes from nearly zero before the crisis.
But, despite a well-flagged US call at this week’s G-20 summit for exporting nations to spend more, there is no easy way to get Chinese consumers to cut their 30 per cent savings rate. Slowly, though, change is afoot.
‘The structural rise of the Chinese consumer will create a shift in China’s growth model as well as the global consumption landscape,’ Dong Tao, a Credit Suisse economist in Hong Kong, said in a recent report. ‘We project that China will overtake the United States as the largest consumer market by 2020.’
The fundamental drivers of consumption growth will be urbanisation, as rural citizens benefit from rising incomes, and demographic trends, with younger Chinese both wealthier and inclined to spend much more money than their parents, Mr. Tao said.
Contours of the new global consumption order are clearly visible in a surge of Internet shopping in China.
Chinese e-commerce sales in the second quarter rose 91.9 per cent from a year earlier to 56.36 billion yuan (S$11.65 billion), according to iResearch, an online marketing research firm. That dramatically outpaced the 15 per cent increase in China’s retail sales over the same period.
Taobao, China’s biggest online auction site, has 145 million registered members, or about 43 per cent of the country’s total Internet users.
Known as China’s eBay, Taobao expects its 2009 revenues, derived largely from advertising, to more than double from 300 million-400 million yuan last year.
Online commerce not only exemplifies China’s rising consumption prowess, but also provides a springboard for shoppers to vault over hurdles that have held them back.
Despite vast investment in infrastructure, China remains woefully short of roads and railways away from the coast. Retailers struggle to set up distribution networks deep in the country’s interior, putting hundreds of millions of potential shoppers beyond their reach.
E-commerce helps to bridge the divide. Twenty-seven per cent more people in poorer cities say they might buy online than those in wealthier cities, even though Internet penetration in the former is lower, according to a survey by consultants McKinsey & Company.
For retailers, the message is clear: Get online. Japanese casual-clothing chain Uniqlo launched a Chinese portal on Taobao in April and sold 4.1 million yuan of merchandise in its first 11 days.
‘We expect online sales to further expand in the coming years. It is really a vast market with great growth potential and we cannot ignore it,’ said Han Bing, a marketing executive at Uniqlo China. ‘It is the quickest way to spread our brand.’
The rise of e-commerce also snugly fits the Chinese government’s economic strategy of promoting domestic consumption and reducing reliance on exports\. \-- Reuters
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