China is expected to surpass US as the world’s number one retail market in 2019, according to a report by the consulting firm eMarketer.
With China’s increasing middle-class population, this would be a factor in having a consumer-driven economy.
Based on the report’s worldwide retail and e-commerce forecast, retail sales in China will reach more than $5.6 trillion this year, a 7.5 percent growth. The US, on the other hand, will have an increase of 3.3 percent to $5.5 trillion.
While growth is slowing for both countries, China is expected to overtake the U.S. through 2022, the report noted.
Senior forecasting director of eMarketer Minica Peart said that in recent years, consumers in China have experienced rising incomes, catapulting millions into the new middle class.
E-commerce sales in a global comparison have already been dominated by China, with 35.3 percent of the country’s retail sales set to take place online this year, eMarketer said comparing to 10.9 percent in the US.
In annual retail spending, US still dominates with projected sales of $16,661 this year. China’s projection this year is $4,056.
In 2019, the Asian country’s e-commerce sales are projected to reach $1.9 trillion. By the end of the year, 55.8 percent of the world’s online retail sales will be coming from China, the report claimed.
China has become a market for global brands, though statistically, the country is already the world’s largest market for cars and smartphones.
China’s rise to being the leader in retail sales took years, as Peart said: “It has really picked up in the last three to five years.”
Over the years, the Chinese government exerted effort to change the country’s economy from factory exports and commercial and residential investment to consumption.
Urbanization became the trend when millions of Chinese workers have moved from the rural areas. Workers then received significant wage increases.
The report also stated that the biggest e-commerce companies Alibaba and JD.com played a significant role in retail growth. However, Alibaba, having the 53.3 percent of the e-commerce sales this year, has experienced a decline due to the increasing number of smaller players, such as social commerce platform Pinduoduo.
Significantly, Alibaba’s Singles Day, an annual online spending blitz, brings off bigger sales than Black Friday and Cyber Monday combined.
A year ago, Tencent and three other companies invested $5 billion in China’s biggest mall operator, Wanda Commercial Properties. Tencent is the owner of top messaging app WeChat and a major shareholder in JD.
In 2017, Alibaba invested $2.9 billion for 36 percent share in Sun Art Retail Group, considered to be China’s Walmart.
China’s trade war with the US started to be felt by Chinese consumers. The report predicted that retail sales growth would weaken to 7.5% in 2019, from around 8.5% last year.
Amidst the slow growth prediction, a senior economist at Oxford Economics, Tianjie He said that “we do not expect a significant slowdown in 2019.” For him, China’s consumers remain “a key driver of economic growth.”
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