Why China’s Consumer Market Matters To The World Economy

The International Monetary Fund predicts that both the economies of the United States and China will continue to slow down. Further, some entities expect China to surpass the U.S. as the world’s largest economy by gross domestic product (GDP). While there is a lot of insight in the predictions and expectations, one fact stands clear; consumption in China tops the charts.

China is the workshop of the world

When China embarked on an economic development plan that turned out to be a miracle, it pegged its hopes on investment. The country invested in all industries one could imagine. Within a few decades, China had grown into a significant production destination. Notably, virtually every global company has a production facility somewhere within Chinese borders.

Fast forward, China is seemingly changing its growth strategy. Of late, Chinese consumption as a phrase is more common than Chinese investment in the public discourse. Notably, China’s consumer market is worth more than any other in the world. Interestingly, the country has the world’s largest population that is very productive. As such, many people in the country have a disposable renminbi which they can spend on some luxury.

A global selloff of tech equities

Interestingly, almost every company that aims at global competitiveness has exposure to China. Notably, the country’s consumer market is not only robust but very diverse. Although much of the population that started witnessed China’s economic miracle is aging, there is a substantial replacement.

However, the replacement population might not be as the market would desire. Notably, the one-child policy, since scrapped, limited the country’s population. Nevertheless, the upcoming Chinese are enough to perpetuate the current robust domestic demand.

To demonstrate just how important the consumer market is essential to the world economy, consider the slowing Chinese economy. Notably, firms with high exposure to the market like Apple are already giving profit warnings. As such, spooked investors decided to drop a majority of the stocks of firms highly exposed to the market. What ensued was a global selloff of technology stocks and, subsequently, a substantial dip in global indices. The Chinese consumer market will play a crucial role in shaping future growth trends in the world economy.

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