China narrowing gap with US as consumption market grows

Source:Global Times Published: 2020/1/19 22:16:36

A consumer buys wine imported from Italy in a supermarket in Shanghai in June 2018. Photo: VCG

As the world has transformed from being a seller's market to being a buyer's one, which values consumption, China has become one of the major consumer markets for propelling global economic growth, with a narrowing gap with the world's biggest consumer market - the US.

According to data for 2019 released by both countries last week, China's retail sales rose 8 percent year-on-year to 41.16 trillion yuan ($6 trillion), while total sales for retail and food services in the US gained 3.6 percent to $6.24 trillion. Based on the average yuan exchange rate against the US dollar in 2019, China's retail sales in dollar-denominated terms were about $5.97 trillion. Thus, the gap between US and Chinese consumption markets narrowed to about $270 billion last year, from $340 billion in 2017 and $280 billion in 2018.

More importantly, China's consumer market is still in a rising stage, and it's bound to get bigger. The country's per capita GDP just passed the threshold of $10,000 last year and its population exceeded 1.4 billion for the first time - figures that bode well for the consumption potential of the Chinese market. The US remains the world's largest consumer market, but with a slowing growth rate.

In recent decades, Americans impressed the world with their huge consumption, while the Chinese were known for their mass production, which is unlikely to see a change in the years to come. Even the US-China trade war, which just reached a delicate truce, cannot change the trend any sooner.

Nevertheless, one important change the trade war will bring to the two major economies is that there will be a significant increase in China's consumption of US goods. According to the text of the phase one deal the two countries signed last week, China promises to buy at least $77.7 billion of manufactured goods and at least $32 billion of agricultural goods from the US by the end of 2021. 

While there is skepticism about whether China can consume such a great amount of US products, there is no denying that China's trade will become more and more relevant to the US in the near future. Moreover, the joint development of the US and Chinese markets will benefit each other and boost the global economy as a whole.

Besides, if there is a greater degree of integration between the two markets, it may show that a decoupling in other aspects will be hard to achieve. While conflicts over certain trade issues may still exist, a complete cutoff will be out of question. Judging from the current situation, the trade war is actually accelerating market interaction rather than decoupling the two economies.

Posted in: GT VOICE

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