Fears about China’s slowing economy are overblown, according to Jeffrey Towson, Managing partner of the investment firm Towson Capital, and Jonathan Woetzel, director in McKinsey’s Shanghai office in a May 2015 excerpt from their The One Hour China Book.
They argue that China's household income is massive and growing, dwarfing the rest of the BRICS countries. Moreover, there is a sharp rise in discretionary expenditure towards such categories as travel, communications, recreation, education, culture, and personal items. This has grown from 25% of household income in 2005 to 34% by 2013, expected to rise further to 40% by 2020 and 44% by 2030, with recreation, education and culture registering the highest gain.
They point out that the common worry about consumption still remaining a lower percentage of GDP compared with advanced countries is misplaced in the context of a growing China still driven by investment.
"First, from 2000 to 2010, the size of the Chinese economy more than doubled. So consumption grew from around $650 billion to almost $1.4 trillion. Regardless of its relative percentage of GDP, China’s consumption has been growing faster than just about any other country’s in absolute terms. Second, just getting consumer spending back to 43 percent of GDP, the level in 1995, would have a huge impact on “rebalancing.” It would also create the largest consumer market in the world."
While China is likely to retain a high savings rate for various cultural and socioeconomic reasons, the authors argue, the sheer scale and dynamics of China's surging consumer market is not to be under-estimated.
These authors' findings tend to support the conclusion that China is making a robust "consumption transition" from over-reliance on manufacturing and investment as the country continues to re-structure steadily towards a more balanced economy.