Morgan Stanley chief economist Stephen Roach discusses some surprising data emerging out of a recent Gallup poll in China. He sees amazing potential - once some key constraints are overcome. Mainly the urban-rural gap and building a new safety net.
Only by reducing the excesses of precautionary saving can China’s consumer culture truly flourish. Once that occurs, there is nothing but upside. Chinese consumption currently makes up just 50% of its GDP, well below the 65% norm of most major economies. Putting it another way, 20% of the world’s population accounts for only about 3% of total global consumption. The potential for the Chinese consumer could well be one of the greatest opportunities for the global economy in the 21st century.
Another interesting fact:
Analyses reckon that China, which leapt into second place in the global marketplace for technology, media and telecom in 2004, should take the lead by 2010, supplanting the United States by a wide margin. This could well be a key differentiating factor of the world’s newest consumer.