The US represents the largest final consumer market with nearly 30% of global household consumption. As it contemplates more protectionist policies, the world may have to find itself a substitute. China is a strong candidate thanks to its economic size (USD11tn+) and growth track record (6 %+). Chinese aggregate final consumption went from representing 1/10 of the US in 2005 to 1/3 in 2016. Extrapolating this trend and assuming a gradual opening of the Chinese market for consumer goods, China’s private consumption could match the US in 2040. 

Three Cs to make China the #1 Consumer: Consumerization and in-come growth from smart industrialization, successful currency internationalization, and strategic cooperation and influence building. 

The main winners from the rise of the Chinese consumer are: (i) producers in the US, Western Europe and industrial Asia (Singapore, Japan) of consumer goods for China’s middle class; (ii) commodity exporters in Russia, Central and East Asia, and Oceania as One Belt One Road reduces transaction costs; and (iii) competitive suppliers in ASEAN and South Asian countries fit for China’s Manufacturing 2025. 

There are three risks to this projection: (i) a disorderly credit crisis in China; (ii) a negative demand shock from the US; and (iii) regional political escalation.

 
Chief Economist
Ludovic joined Euler Hermes as Chief Economist in 2011. He also heads macroeconomic and thematic research for Allianz SE globally since 2017. Ludovic sits on the Board of Directors of Solunion, Euler Hermes’ joint venture company for Spain and Latin America.