China’s actual consumption power may have already surpassed that of Mexico and reached 40 to 50 per cent of the levels seen in developed nations such as Japan and Germany, a Beijing-based think tank contends.
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That conclusion, put forth by China Finance 40 Forum, which comprises senior Chinese regulators and financial executives, runs contrary to the market consensus that China’s consumption is underdeveloped, while providing a new perspective from which to assess the consumer potential of the world’s second-largest economy.
The research report came as Beijing has been rallying efforts to rev up China’s domestic market as an economic growth engine amid a trade war with Washington. But market analysts have raised concerns that consumption could run out of steam, pointing to the waning impact of a trade-in programme, and to the weakened purchasing power of residents troubled by job insecurity.
“Mainstream metrics have systematically underestimated China’s consumption level,” two of the think tank’s research fellows, Guo Kai and Yu Fei, wrote in the report, posted online on Friday.
Despite being the world’s second-largest consumer market, after the US, China’s per capita spending before adjustment is only 8.8 per cent of what Americans spend, about half of what Mexicans spend, about a quarter of what Japanese spend, and 18 per cent of what Germans spend, the report said, citing World Bank data.
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It looks a bit better when adjusted for purchasing power parity – an international metric that compares the relative economic strength of countries by equalising the purchasing power of their currencies. By this measurement, China’s level is 17.1 per cent of US consumption, 35.3 per cent of Japan’s, 59.6 per cent of Mexico’s, and 28.5 per cent of Germany’s.