Chinese consumer spending will have doubled by 2030, Morgan Stanley predicts

BEIJING – Chinese consumer spending will more than double in 10 years, with a focus on services rather than goods, Morgan Stanley analysts predicted in a roughly 200-page report released Wednesday.

By 2030, China’s private consumption will reach $ 12.7 trillion, about the same amount that US consumers currently spend, the report said. That figure is also higher than Morgan Stanley’s forecast of $ 9.7 trillion three years ago, and the $ 5.6 trillion Chinese consumers spent in 2019.

This expected growth is being driven by: increased government emphasis on policies to support the domestic Chinese economy, increases in household income, continued growth of urban areas, changes in technology and demographic shifts, the report said.

The analysts predict that disposable income per capita is likely to double from $ 6,000 a year to $ 12,000 by 2030 as more people age and leave the workforce.

Significantly, Morgan Stanley’s analysts expect future Chinese spending to move into new growth categories over the next 10 years as the age groups with the most purchasing power have families or are retiring.

“Material shifts in consumption patterns are likely to occur, from young consumer-oriented to demand-driven households, which will gradually require a greater share of services in consumption,” the report said.

The age range of 35 to 45 years is likely to increase by 25.3 million people, or approximately the current size of Australia, and the age group 55 and older is expected to increase by 123.9 million, or approximately the current population of Japan. the report said. The analysts added that the size of other adult age brackets is likely to decline as a result of China’s long-standing ban on having more than one child and an overall drop in birth rates.

“We think the average Chinese consumer will be a driver of change rather than just a recipient of Western consumption trends,” the authors added. “Part of that change will be driven by certain cultural values, and consumption must support those values. These include strong family ties and the prioritization of education.”

Morgan Stanley’s forecast of $ 7 trillion more in spending in the coming years means that China’s private consumption is likely to grow at about 7.9% per year over the next decade, “one of the highest levels in the world,” the report said.

But the uncertainties remain as the global economy struggles to cope with the coronavirus pandemic.

While the Chinese economy in general recovered quickly from the initial shock of the pandemic, it took longer for personal spending to recover. Retail sales fell 3.9% last year, despite an increase of 2.3% in national GDP. On a monthly basis, sales returned to growth in August and grew by 4.6% in December from a year ago.

Morgan Stanley’s analysts cited several other developments that could prevent Chinese people from spending as much as they predicted.

Authorities could aggressively tighten the availability of credit to consumers, the report said. Chinese may also be inclined to save more if more automation and other technology applications result in greater than expected job losses, or if the government is unable to significantly improve social security plans to help cover large personal costs.

Chinese households mainly save for education, retirement and health care, the report said.