Can China’s Spenders Lift the World?
There’s no rescue coming from squeezed consumers who got used to rising incomes and more credit.
It’s hard to restore consumer confidence.
Photographer: Feature China/Barcroft Media/Getty
The Chinese consumer has been one of the most important drivers of the world economy over the past decade, fueling hopes of prolonged growth and profits. So it’s worth looking at what’s happening to household balance sheets as Covid-19 wreaks havoc on a population now feeling the downside of growing personal leverage from the boom.
In the last major financial crisis, big-spending Americans were hit hard, but the Chinese found new ways to open their wallets and took the rest of the global economy along for the ride. China accounted for 31% of growth in household consumption between 2010 and 2017, World Bank data show, bringing its share now to about 10%. That includes around 30% of spending on cars, luxury retail and mobile phones, and hundreds of billions of dollars on travel and tourism.
Chinese consumers are the “single most important thing in the world economy,” Jim O’Neill, a former Goldman Sachs Group Inc. chief economist, told the Financial Times last year. They could be key to the next 40 years of growth, and it’s unlikely that any other country could replace them.