The China Inventory

China to Become the World’s Largest Importer

by 2014

We have heard a lot about China becoming the world’s largest this and that. In 2009, when the world was in recession, China leapfrogged the U.S. to become the world’s largest auto market. In 2010, China overtook Germany as the world’s largest exporter. This year, China is likely to surpass Japan to become the world’s largest luxury goods market.

So, it shouldn’t be a surprise when The Economist predicts that China will become the world’s largest importer by 2014. Yet, many skeptics still doubt China’s potential to be a stronghold of the world economy.

Eforchina.com

Last month, I was on BBC World News to discuss the eurozone debt crisis and whether Chinese consumers can make a difference in the world economy.  My discussion partner Johathon Holslag from the Brussels Institute of Contemporary China Studies argued that Chinese consumption is still far below its production, and people should not be over optimistic about China rescuing the world economy. See the discussion video below:

Yes, official statistics show that consumption is only 34 percent of China’s GDP (compared to 70 percent in the U.S.). While the West’s economy is imbalanced with over-spending, the Chinese economy is imbalanced with under-consumption. However, this dynamic is changing. When I travel in China, I can clearly see the consumption boom in China’s large and small cities. Retail has been growing like a wildfire in recent years.

While it is not China’s role to save the world economy, it is in China’s best interest to balance its own economy toward domestic consumption. In so doing, China serves as a counter-balance of over-spending Western economies.  China may not want to bail out Italy or Greece, but China can provide opportunities for these troubled economies to get their own house in order. continue »

Eforchina.com


Sourced & published by Henry Sapiecha