Our Last, Best Hope: Emerging Market Consumers

For any pessimists out there who can’t imagine what will drive global growth in the new, post-crisis environment, check out the below graph, from the IMF’s recently released WEO update :

We just had the worst global downturn since the Great Depression, and retail sales in emerging economies barely slowed at all.  They’re now nearly 60 percent higher than they were in January 2007.  Yes, this was starting from a small base, and consumption as a share of GDP is still too low in many emerging economies, but still, that’s pretty remarkable.

It also reminds me of one of my favorite survey data points: according to a 2007 McKinsey analysis, the average Chinese shopper spends 9.8 hours a week shopping, nearly three times as much as his/her American counterpart, and a full 41 percent of Chinese list shopping as a favorite leisure activity.

Just further evidence that the reason Chinese households don’t consume a lot isn’t because they’re afraid to spend, but because they’re poor.  But lucky for the global economy, they’re getting richer every day…


3 Responses to “Our Last, Best Hope: Emerging Market Consumers”

  1. 1 JKS July 11, 2010 at 11:21 pm

    You mean urban Chinese households, and at the expense of the rural poor.

    • 2 geoffgertz July 12, 2010 at 8:46 pm

      Well, depends what you mean by “at the expense of”… It’s true that urban households are getting richer more quickly than rural ones, but rural households are undoubtedly benefiting from growing prosperity on the coast. And though it’s less flashy than what’s going on in Beijing and Shanghai, don’t discount the economic success of rural China: between 1995 and 2005, poverty in rural areas dropped from 75 percent to 26 percent, a remarkable achievement by any standards.

      • 3 JKS July 13, 2010 at 10:15 am

        Maybe this is more of what you had in mind:

        Beijing is well aware that further accumulation of foreign reserves is counterproductive, since it would increase the risk associated with the assets China already holds or else induce a shift to ever riskier ones. The government is also very aware of the need to reduce the country’s export dependence and stimulate the growth of domestic demand by increasing the working classes’ disposable income. Such a redirection of priorities has to involve moving resources and policy preferences away from the coastal cities to the rural hinterland, where protracted social marginalization and underconsumption have left ample room for improvement. But the vested interests that have taken root over several decades of export-led development make this a daunting task. Officials and entrepreneurs from the coastal provinces, who have become a powerful group capable of shaping the formation and implementation of central government policies, are so far adamant in their resistance to any such reorientation. This dominant faction of China’s elite, as exporters and creditors to the world economy, has established a symbiotic relation with the American ruling class, which has striven to maintain its domestic hegemony by securing the living standards of US citizens, as consumers and debtors to the world. Despite occasional squabbles, the two elite groups on either side of the Pacific share an interest in perpetuating their respective domestic status quos, as well as the current imbalance in the global economy.

        Unless there is a fundamental political realignment that shifts the balance of power from the coastal urban elite to forces that represent rural grassroots interests, China is likely to continue leading other Asian exporters in diligently serving—and being held hostage by—the US. The Anglo-Saxon establishment has recently become more respectful towards its Asian partners, inviting China to become a ‘stakeholder’ in a ‘ChiAmerican’ global order, or ‘G2’. What they mean is that China should not rock the boat, but should continue to help maintain American economic dominance (in return, perhaps, for more consideration of Beijing’s concerns over Tibet and Taiwan). This would enable Washington to buy precious time to secure its command over emergent sectors of the world economy through debt-financed government investment in green technology and other innovations, and hence remake its ailing supremacy into a green hegemony. This seems to be exactly what the Obama administration is betting on as its long-term response to the global crisis and declining American power.

        –Hung Ho-Fung, New Left Review

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