China To Become the World's Largest Retail Market in 2016

[Dungeness]

China Eclipses the US to Become the World's Largest Retail Market

Mobile now accounts for more than half of all ecommerce sales in China
August 18, 2016 | Retail & Ecommerce


In 2016, China will surpass the US to become the world’s largest retail market with total sales of $4.886 trillion, compared with $4.823 trillion in the US, according to eMarketer’s latest worldwide retail forecast.




China will also remain the world’s largest retail ecommerce market, with sales expected to top $899.09 billion this year, representing almost half (47.0%) of digital retail sales worldwide.

With China having one of the most developed ecommerce markets in the world, eMarketer expects purchases made digitally will represent a globe-topping 18.4% of the country’s total retail sales this year. China will continue to see massive gains in retail ecommerce over the next few years, with sales topping $2.416 trillion in 2020. Spending via mobile is also booming and this year will account for 55.5% of all ecommerce sales and reach 68% by 2020.

China’s booming ecommerce market can be attributed in part to the proliferation of the dominant domestic marketplaces such as Alibaba, Tmall and JD.com, which took advantage of the country’s undeveloped traditional retail infrastructure. eMarketer forecasting director Monica Peart commented, “Alibaba, Tmall and JD.com positioned themselves well to capitalize on growing consumer demand by creating their own payment systems (e.g., Alibaba’s Alipay) and logistical services (e.g., JD.com operates a self-owned logistics network).




“In addition, with rising incomes and increased internet access in rural areas the cultural appetite to shop digitally will continue and we can expect to see further growth in mobile spend,” noted Peart.

Asia-Pacific as a whole remains the world’s largest retail ecommerce market, with sales expected to top $1 trillion in 2016 and more than double to $2.725 trillion by 2020. According to eMarketer’s forecast, the region will also see the fastest rise in retail ecommerce sales, climbing 31.5% this year. Expanding middle classes, greater mobile and internet penetration, growing competition of ecommerce players and improving logistics and infrastructure will all help to fuel ecommerce growth in the region.

Asia-Pacific will continue to lead all regions in total retail sales with $8.997 trillion this year, accounting for 40.8% of the global total. Burgeoning consumer economies in China, India and Indonesia will drive retail sales over the next four years as disposable incomes in those countries continue to rise.

https://www.emarketer.com/Article/China-Eclipses-US-Become-Worlds-Largest-Retail-Market/1014364

 

[Shotgunner51]

China Eclipses the US to Become the World's Largest Retail Market

Mobile now accounts for more than half of all ecommerce sales in China
August 18, 2016 | Retail & Ecommerce


In 2016, China will surpass the US to become the world’s largest retail market with total sales of $4.886 trillion, compared with $4.823 trillion in the US, according to eMarketer’s latest worldwide retail forecast.




China will also remain the world’s largest retail ecommerce market, with sales expected to top $899.09 billion this year, representing almost half (47.0%) of digital retail sales worldwide.

With China having one of the most developed ecommerce markets in the world, eMarketer expects purchases made digitally will represent a globe-topping 18.4% of the country’s total retail sales this year. China will continue to see massive gains in retail ecommerce over the next few years, with sales topping $2.416 trillion in 2020. Spending via mobile is also booming and this year will account for 55.5% of all ecommerce sales and reach 68% by 2020.

China’s booming ecommerce market can be attributed in part to the proliferation of the dominant domestic marketplaces such as Alibaba, Tmall and JD.com, which took advantage of the country’s undeveloped traditional retail infrastructure. eMarketer forecasting director Monica Peart commented, “Alibaba, Tmall and JD.com positioned themselves well to capitalize on growing consumer demand by creating their own payment systems (e.g., Alibaba’s Alipay) and logistical services (e.g., JD.com operates a self-owned logistics network).




“In addition, with rising incomes and increased internet access in rural areas the cultural appetite to shop digitally will continue and we can expect to see further growth in mobile spend,” noted Peart.

Asia-Pacific as a whole remains the world’s largest retail ecommerce market, with sales expected to top $1 trillion in 2016 and more than double to $2.725 trillion by 2020. According to eMarketer’s forecast, the region will also see the fastest rise in retail ecommerce sales, climbing 31.5% this year. Expanding middle classes, greater mobile and internet penetration, growing competition of ecommerce players and improving logistics and infrastructure will all help to fuel ecommerce growth in the region.

Asia-Pacific will continue to lead all regions in total retail sales with $8.997 trillion this year, accounting for 40.8% of the global total. Burgeoning consumer economies in China, India and Indonesia will drive retail sales over the next four years as disposable incomes in those countries continue to rise.

https://www.emarketer.com/Article/China-Eclipses-US-Become-Worlds-Largest-Retail-Market/1014364

It's very good news that China consumption is on the rise! However I don't see it become a major pillar of GDP within the foreseeable future. Why?

• China's currency policy is to suppress exchange rate, this will also prevent consumption from growing too fast. Well this policy does have a time limit, perhaps will expire in a decade.

• Savings. China's savings rate is among world's highest, 2nd highest in the world on par with Singapore, only behind Qatar, note the latter two are small super-wealthy states, such a savings level is absurd for China. Why savings are so high? Culture. Yes, such gigantic savings IF unlocked then for sure it boosts consumption/GDP massively, but no it won't happen, it's cultural that Chinese maintain high savings. Policy can change, millennium old culture can't.

Here is an article about savings which as a matter of fact are increasing, not decreasing. Check this:

The Return of the East Asian Savings Glut
A CFR Discussion Paper
Author: Brad W. Setser, Senior Fellow and Acting Director of the Maurice R. Greenberg Center for Geoeconomic Studies

Abstracts

• The combined savings of China, Japan, Korea, Taiwan, and the two city-states of Hong Kong and Singapore is about 40 percent of their collective GDP, a thirty-five-year high. No other region of the world currently contributes more to the global glut in savings that has brought interest rates around the world down to record lows.
• Asia’s current account surplus — its excess of savings over investment — has increased significantly in the past two years and is now about as large, relative to the GDP of its trading partners, as it was prior to the global financial crisis.
• East Asia’s external surpluses are no longer maintained primarily through intervention in the foreign exchange market, with the result that moving toward floating currencies is no longer a sufficient policy response to the region’s trade surplus. The traditional U.S. economic agenda in East Asia—aimed at liberalizing trade, investment, and exchange rates—needs to be complemented with a push for the policies needed to bring East Asia’s savings down to a level that the region can more easily absorb internally. The adjustment should be centered on China, where exceptionally high levels of savings no longer serve the same purpose as during the country’s catch-up phase of economic development. A national savings rate that still approaches 50 percent of output increasingly implies either bubbles in credit domestically or large capital surpluses that have to be exported. Korea and Taiwan also have scope to reduce high levels of national savings by expanding their social safety nets and reducing government savings, and Japan can take steps to reduce its high level of corporate savings.

Read the full article at http://www.cfr.org/asia-and-pacific/return-east-asian-savings-glut/p38417​

 

[Dungeness]

It's very good news that China consumption is on the rise! However I don't see it become a major pillar of GDP within the foreseeable future. Why?

• China's currency policy is to suppress exchange rate, this will also prevent consumption from growing too fast. Well this policy does have a time limit, perhaps will expire in a decade.

• Savings. China's savings rate is among world's highest, 2nd highest in the world on par with Singapore, only behind Qatar, note the latter two are small super-wealthy states, such a savings level is absurd for China. Why savings are so high? Culture. Yes, such gigantic savings IF unlocked then for sure it boosts consumption/GDP massively, but no it won't happen, it's cultural that Chinese maintain high savings. Policy can change, millennium old culture can't.

Here is an article about savings which as a matter of fact are increasing, not decreasing. Check this:

The Return of the East Asian Savings Glut
A CFR Discussion Paper
Author: Brad W. Setser, Senior Fellow and Acting Director of the Maurice R. Greenberg Center for Geoeconomic Studies

Abstracts

• The combined savings of China, Japan, Korea, Taiwan, and the two city-states of Hong Kong and Singapore is about 40 percent of their collective GDP, a thirty-five-year high. No other region of the world currently contributes more to the global glut in savings that has brought interest rates around the world down to record lows.
• Asia’s current account surplus — its excess of savings over investment — has increased significantly in the past two years and is now about as large, relative to the GDP of its trading partners, as it was prior to the global financial crisis.
• East Asia’s external surpluses are no longer maintained primarily through intervention in the foreign exchange market, with the result that moving toward floating currencies is no longer a sufficient policy response to the region’s trade surplus. The traditional U.S. economic agenda in East Asia—aimed at liberalizing trade, investment, and exchange rates—needs to be complemented with a push for the policies needed to bring East Asia’s savings down to a level that the region can more easily absorb internally. The adjustment should be centered on China, where exceptionally high levels of savings no longer serve the same purpose as during the country’s catch-up phase of economic development. A national savings rate that still approaches 50 percent of output increasingly implies either bubbles in credit domestically or large capital surpluses that have to be exported. Korea and Taiwan also have scope to reduce high levels of national savings by expanding their social safety nets and reducing government savings, and Japan can take steps to reduce its high level of corporate savings.

Read the full article at http://www.cfr.org/asia-and-pacific/return-east-asian-savings-glut/p38417​

I am puzzling with this number as well, as it seems to be too high when compared with that of US with much higher GDP.

Assuming China's GDP will reach $11 trillion for the year of 2016, the total retail number presented by this article would account for more than 40% of that. Could China's consumption really be that high? Or China's GDP is grossly underestimated?

As for the savings, younger generation of Chinese seem to have a different mentality from their parents. If Chinese really save close to 50% as suggested by your link, how in the world they can spend so much on retail? The numbers just don't add up.

 

[AndrewJin]

I am puzzling with this number as well, as it seems to be too high when compared with that of US with much higher GDP.

Assuming China's GDP will reach $11 trillion for the year of 2016, the total retail number presented by this article would account for more than 40% of that. Could China's consumption really be that high? Or China's GDP is grossly underestimated?

As for the savings, younger generation of Chinese seem to have a different mentality from their parents.

I don't think retail number = consumption GDP

 

[Chinese-Dragon]

Assuming China's GDP will reach $11 trillion for the year of 2016, the total retail number presented by this article would account for more than 40% of that. Could China's consumption really be that high? Or China's GDP is grossly underestimated?

Both, I think.

Consumption has been a huge driving engine for the Chinese economy especially in the last few years.

And the $11 trillion figure is based on US dollar exchange rates. So if China is keeping the Yuan artificially low then our actual GDP would be significantly higher than the current nominal figure based on exchange rates.

 

[Dungeness]

I don't think retail number = consumption GDP

Shed some light? Resale?

 

[AndrewJin]

Shed some light? Resale?

This year consumption will be around 60% of the total 11 trillion dollar GDP.

 

[Star Expedition]

That's rational, no surprise at all

 

[Dungeness]

This year consumption will be around 60% of the total 11 trillion dollar GDP.

Even higher? I thought China is not a consumer driven economy, but a export driven economy.

 

[AndrewJin]

Even higher? I thought China is not a consumer driven economy, but a export driven economy.

China's export/GDP ratio is only half of Germany's.

 

[Dungeness]

The eCommerce number is interesting. It is like China vs. the rest of World.

 

[Shotgunner51]

I am puzzling with this number as well, as it seems to be too high when compared with that of US with much higher GDP.

Assuming China's GDP will reach $11 trillion for the year of 2016, the total retail number presented by this article would account for more than 40% of that. Could China's consumption really be that high? Or China's GDP is grossly underestimated?

As for the savings, younger generation of Chinese seem to have a different mentality from their parents. If Chinese really save close to 50% as suggested by your link, how in the world they can spend so much on retail? The numbers just don't add up.

GDP is just (1) a compiled statistics, (2) with an invented formula C+I+G+NX, (3) being used to gauge approximately "how vibrant are economic activities" by adding apple to orange and reach a single number, (4) within confined border, while (5) without taking into account of health or sustainability of these economic activities. So never bother about the accuracy. Purpose? This is supposed to be used by macro-economic planners, but I believe other professions like politicians, diplomats, state leaders, bankers, capitalists, may like to use it for their own agenda. Can it be tailor-made? Well, let's not be too concerned about GDP.

 

[AndrewJin]

China's export/GDP ratio is way lower than Europe (30-40%) and Korea/Germany (>45%). Even india's ratio is higher than China.

China/Japan (around 20%) is way less dependent on export than people assume.
Local consumption is quite height.

 

[GeraltofRivia]

Not too sure what have been included in the retail sales numbers in this article but they are clearly not just ecommerce sales.

based on World Bank' 2014 data, China's household final consumption expenditure was 3.9 tr (37% GDP) while USA was 11.8 tr(68% GDP), both at in current USD. We have a long way to go. let's hand over our credit cards to girlfriends/wives and buy buy buy...

 

[cirr]

I am puzzling with this number as well, as it seems to be too high when compared with that of US with much higher GDP.

Assuming China's GDP will reach $11 trillion for the year of 2016, the total retail number presented by this article would account for more than 40% of that. Could China's consumption really be that high? Or China's GDP is grossly underestimated?

As for the savings, younger generation of Chinese seem to have a different mentality from their parents. If Chinese really save close to 50% as suggested by your link, how in the world they can spend so much on retail? The numbers just don't add up.

I think it has got a lot to do with the composition of US GDP and the way it is calculated.

Just a few cases in point.

The so-called productive service as a percentage of GDP is a lot higher in the US than in China.

American lawyers contribute greatly to US GDP as opposed to their Chinese counterparts who are practically non-existent GDP wise.

Housing expenditure by owner-occupiers takes up a big chunk of the US GDP while it is virtually unaccounted for in the Chinese GDP

China "enjoys" a far larger "underground economy" than the US(both as a share of the total output and by absolute value).

etc etc.