China’s consumption is a disappearing act

FT ^ | 04/08/09

[TigerLikesRooster]

China’s consumption is a disappearing act

Published: April 8 2009 19:46 | Last updated: April 8 2009 19:46

/snip.........

There are several factors holding back the Chinese consumer. First, people have for years witnessed the destruction of the “iron rice bowl”, as once-free health and education systems have been dismantled. Now the government is committed rhetorically – and, increasingly, in practice – to rebuilding the social safety net. But it will be years before people trust the state to look after them, and run down their precautionary savings.

Second, most Chinese are what Dragonomics, a research firm, calls “survivors”, whose purchases of basic food and clothing are meaningless for multinationals or global demand. Only about 150m are part of “consuming China”, although this may double to 300m by 2015. Consuming China’s median household income is about $6,000, against $45,000 in the US. The owner of a Beijing car does not spend like the owner of a Boston car.

Finally, China’s recent consumption boom has been predicated on rising income, itself a function of strong external demand. Growth should continue at 7-8 per cent, but the days of double-digit expansion may be over. So, rather than accelerate, Chinese household purchases may in fact slow. It turns out that Americans have been paying for everything with credit – even Chinese consumption.

[TigerLikesRooster]

Ping!

[Vet_6780]

There are several factors holding back the Chinese consumer

Yeah the American consumer !