Sign in Subscribe
Economic conditions

China's Growth Story: Domestic Spending Takes Center Stage

Strategic Insights

— 2 min read

A new report by MasterCard International suggests that China's growth story is not just driven by exports, but by a strong domestic consumption market. The report, which surveyed residents in eight cities, found that domestic private consumption has contributed an average of 46.5% to the nation's GDP over the past five years, and is expected to reach 50% in 2014. The report highlights the role of domestic consumption as a key driver of China's economic growth, and attributes this growth to factors such as higher incomes, returns on savings, and the wealth effect of the real-estate market.

Key Takeaways:

  • Domestic private consumption has contributed an average of 46.5% to China's GDP over the past five years, and is expected to reach 50% in 2014.
  • Real growth in private consumption has been at an annual 12% in the past five years.
  • The real growth rate in private consumption of those younger than 40 who are the driving force will reach 18% annually in the next 10 years.
  • Those earning $5,000 per year or above will see a 24% increase in private consumption per year.
  • MasterCard estimates that a 12% increase in private consumption could boost GDP by 6% in 10 years' time.
  • Dining out in Western-style restaurants is a growing trend, especially among younger consumers.
  • The survey found that people in different cities have varying preferences, with Guangzhou residents being keen on traveling abroad and Shenzhen residents having the most appetite for real estate.
  • A big chunk of disposable income is deposited in banks, with more than 80% of respondents having savings in banks and only 17% having dabbled in the stock market.

Statistics:

  • Domestic private consumption has contributed an average of 46.5% to China's GDP in the past five years (Source: MasterCard Report).
  • Real growth in private consumption has been at an annual 12% in the past five years (Source: MasterCard Report).
  • The real growth rate in private consumption of those younger than 40 who are the driving force will reach 18% annually in the next 10 years (Source: MasterCard Report).
  • Those earning $5,000 per year or above will see a 24% increase in private consumption per year (Source: MasterCard Report).
  • MasterCard estimates that a 12% increase in private consumption could boost GDP by 6% in 10 years' time (Source: MasterCard Report).
  • 80% of respondents have savings in banks (Source: MasterCard Report).
  • 17% of respondents have dabbled in the stock market (Source: MasterCard Report).
  • 2.4 times per month is the average frequency of dining out in Western-style restaurants among those aged 20-29 (Source: MasterCard Report).

Sources:

  • "China's growth is driven by domestic consumption," says Yuwa Hedrick-Wong, MasterCard International's economic adviser for the Asia-Pacific Region (Source: Asia Pulse).
  • MasterCard Report (Source: MasterCard International).
  • Survey conducted in eight cities in China (Source: MasterCard International).

Read more