Chinese consumer spending will double by 2030, predicts Morgan Stanley

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

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

The increase in expected growth is: greater emphasis by the government on policies to support the local Chinese economy, increase in household income, further growth in urban areas, changes in technology and demographic shifts, the report said.

Analysts predict that per capita disposable income 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 analysts expect future Chinese spending to go into new categories of growth over the next ten 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 household demand-driven, which increases a higher percentage of services in consumption,” the report said.

The age category 35 to 45 is likely to increase by 25.3 million people, or about the current size of Australia, and those aged 55 and over will increase by 123.9 million, or about the current population in Japan, the report. According to analysts, the age categories of other adults are likely to decline due to China’s long-standing ban on 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 simply a recipient of Western consumption trends,” the authors added. “Part of the change will be informed by certain cultural values, and consumption must support those values. This includes strong family ties and the prioritization of education.”

Morgan Stanley’s forecast of $ 7 billion more in spending over the next few years means that Chinese consumption is likely to grow by around 7.9% a year in the next decade, ‘one of the highest levels in the world’, the report states .

However, uncertainties remain as the world economy struggles to cope with the coronavirus pandemic.

While the Chinese economy has generally recovered quickly from the initial shock of the pandemic, personal spending has taken longer to bounce back. Retail sales shrank by 3.9% last year despite a 2.3% increase in national GDP. On a monthly basis, sales grew again in August and grew by 4.6% in December from a year ago.

Morgan Stanley analysts have listed several other developments that could prevent Chinese from spending as much as they predict.

Authorities can aggressively tighten the availability of credit to consumers, the report said. Chinese will also tend to save more if increased automation and other technological applications result in greater job losses, or if the government is unable to significantly improve social security plans to cover large personal costs.

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