The Demand Institute Identifies Potential For Business And Government To Drive An Additional $15 Trillion In Consumer Spending In China Over The Next Decade

New report, "Sold in China: transitioning to a consumer-led economy," concludes that success will vary by degree to which businesses successfully spearhead strategies that promote consumer spending

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The Conference Board

Jul 22, 2015, 10:00 ET

NEW YORK, July 22, 2015 /PRNewswire/ -- According to "Sold in China: Transitioning to a consumer-led economy," a new report released today by The Demand Institute, a non-advocacy think tank jointly operated by The Conference Board and Nielsen, China could generate an incremental $15 trillion in consumer spending over the next decade through a combination of business strategies that include increased communication to the Chinese public about products and services, better access to those products and services, and innovations that expand the range of financial services that typically enable higher levels of domestic consumption.

History will demonstrate, and most economists would agree, that a successful transition to a consumption-led economy is essential for continued robust economic growth in China. The report concludes that for the transition to be maximally successful and enduring, not only must the government provide the requisite policies and incentives, but the business community must make parallel investments to facilitate consumption. Consumer credit services—such as credit cards, mortgages, and auto loans—and life, health and property insurance are just a few product and service categories poised for growth should the right innovations, communications, access and payments infrastructure be employed.

China's economic success story has been largely driven by investment- and export-led growth ("Made in China"), including massive infrastructure investments. As a result, while Chinese consumer spending has grown in absolute terms, consumption as a share of GDP has steadily declined for six decades. That share now stands at about 28 percent (down from 76 percent in 1952) and is one of the lowest ratios globally. The Demand Institute projects that share is unlikely to rise significantly over the next decade unless there are substantial interventions from government and business leaders.

"The growth and prosperity of China over the last 25 years has been a remarkable story, but to sustain that trajectory for another 25 years will require a shift in the forces generating GDP growth. The time has come to provide a path towards a more consumer-led economy, where 'Sold in China' at least equals 'Made in China' as the foundation for future economic development," said Louise Keely, president of The Demand Institute.

The Demand Institute evaluated several future scenarios, of which the most optimistic would lead to a total of 420 trillion yuan in consumer spending over the next decade, a full 90 trillion yuan (about $15 trillion) more than if consumption's share of GDP were to remain flat.

The report benchmarks China's economic history and potential future path against the experience of 167 countries between 1950 and 2011. The report also describes 12 key indicators that business executives should monitor going forward to understand how the transition is evolving over time.

The Demand Institute has launched a research program on the future of Chinese consumer demand, of which this is the inaugural report. The report can be downloaded at The Demand Institute website: demandinstitute.org/sold-in-china.

About The Demand Institute

The Demand Institute illuminates how consumer demand is evolving around the world. We help government and business leaders align investments with where consumer demand is headed across industries, countries and markets. A non-advocacy, nonprofit organization and a division of The Conference Board, The Demand Institute holds 501(c)(3) tax-exempt status in the United States and is jointly operated by The Conference Board and Nielsen. For more information, please visit demandinstitute.org.

About The Conference Board

The Conference Board is a global, independent business membership and research association working in the public interest. Our mission is unique: to provide the world's leading organizations with the practical knowledge they need to improve their performance and better serve society. The Conference Board is a non-advocacy, not-for-profit entity holding 501 (c)(3) tax-exempt status in the United States. For more information, visit conference-board.org.

About Nielsen

Nielsen N.V. (NYSE: NLSN) is a global performance management company that provides a comprehensive understanding of what consumers Watch and Buy. Nielsen's Watch segment provides media and advertising clients with Total Audience measurement services across all devices where content—video, audio and text—is consumed. The Buy segment offers consumer packaged goods manufacturers and retailers the industry's only global view of retail performance measurement. By integrating information from its Watch and Buy segments and other data sources, Nielsen provides its clients with both world-class measurement as well as analytics that help improve performance. Nielsen, an S&P 500 company, has operations in over 100 countries that cover more than 90 percent of the world's population. For more information, visit www.nielsen.com.

SOURCE The Conference Board