China to be leading consumer economy, says survey

By Neil Merrett

- Last updated on GMT

Related tags: China, Economics

A new survey of Asian business leaders has tipped China to rival
America as the world's largest consumer economy, as it continues to
witness dynamic growth in its food and industrial markets.

The findings are likely to come as further encouragement for foreign and domestic investors looking to enter the country's food and beverage markets, which are undergoing huge growth. A majority of the 1,200 small- and mid-sized Asian businesses consulted by UPS supported the trend with 57 per cent expecting the country to be on a par with the US in terms of consumer spending within a decade. Furthermore, 20 per cent of this group expected China to have bridged the gap within just five years. Only five per cent of the total 1,200 respondents doubted China, would ever be on a par with the US in terms of consumer spending. Opinion was a lot more divided on the effects this growth is likely to have on the wider Asian market, with 34 per cent believing China to be a positive factor in the regions spending. Another 34 per cent of those surveyed however, saw China's growing presence as a threat to their operations, particularly in terms of its low labour and production costs. Alan Gershenhorn, president of UPS International praised the findings as a significant reflection of the dynamic growth of China's industrial powers. "American businesses must understand that their future customers are just as likely to hail from Beijing as from Boston,"​ he said. This has certainly rang true for many of the world's leading food company's, which are increasingly focusing their operations within China and the wider Asia Pacific region. Just this year food giant Nestle announced that is was seeing massive double digit sales growth in the country. Global rival Unilever has also reiterated the country's importance to its global growth strategy. Zeng Xiwen, vice president of the company in China told reporters in February this year, that the country could well outstrip India as the regions most dynamic market within a decade. Not all are as convinced by the findings as Gershenhorn, however. Manoranjan Dutta, professor of Economics at Rutger University told that he believes China's ascension as a leader of the global consumer economy was unlikely within the next twenty years, never mind ten. He did not rule out the prospect entirely however, suggesting that the country was certainly going under monumental economic changes. "In the long run, anything can happen,"​ he said. "China[economically] will continue to grow at an accelerated level of nine per cent for many years yet." ​ Dutta suggested that this continued growth was being helped in part by an industrial shift towards the less developed western provinces in the country that would further encourage spending. He was also optimistic about the effect the country's growth will have on the wider Asian market as a positive movement, pointing out that China's economic development was already seeing business and social reforms. Though he stressed that china was still far from a pluralistic democracy like other western and even Asian markets, the country was beginning to see monumental societal changes, in which business was already beginning to benefit. Of these changes he highlighted last month's passing of the private ownership bill as an important factor in driving economic growth, by giving investor greater rights over their operations. Dutta added that the passing of the law reflects a wider sense of liberalisation in China's business dealings, with financial regulation also changing beyond recognition. "China has also allowed appreciation of its currency, albeit at its own pace,"​ he said. "This has seen them giving greater access to foreign banks, investment banking and hedge funds to further drive business." ​ The increasing favourability of the country's business climate is expected to have a significant boost on the country's food industry in particular. According to Lyndsey Anderson, a senior analyst with Business Monitor International, China's food industry is one of the country's most dynamic sectors for both foreign and domestic investors. "Multinational food and drink firms are investing so heavily inChinabecause there is simply no other opportunity like it at present,"​ she said. "Strong economic growth is rapidly expanding the size of the country's middle class, which can now afford to spend its improved disposable incomes on non-essential food and drink items."

Related topics: Markets, East Asia, China, Industry growth

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