A recent article on the CNN website details how China is estimated to have the largest retail market in the world by the end of the year, replacing the United States, despite the fact that here has been much in the news in the last few months about how the Chinese economy has been faltering slightly. By the end of the year, retail sales in China will likely by around 5.6 trillion, which will probably be at least 100 billion more than retail sales in the United States. These estimates were made by consulting firm eMarketer.
Reasons for growth
There are essentially two reasons for the growth of China’s retail market. The first is that the middle class is in China is becoming more wealthy because of the economic reforms initiated by the Chinese government in the 1990’s. The second is the growing popularity of eCommerce among Chinese shoppers. Moreover, even as Chinese economic growth slows, the country’s consumer market is becoming increasingly important, especially for cars and smartphones.
Another factor is the spectacular success of Chinese eCommerce platforms, especially the giants Alibaba and JD.com. For example, Alibaba has an annual “Singles Day” shopping event that results in more spending than Black Friday and Cyber Monday together. Alibaba alone enjoys over half of the online spending in China, but smaller firms such as Pinduoduo are scrambling to catch up. Furthermore, following the lead of Amazon in the United States, Internet retailers are opening bricks-and-mortar stores.
It’s still unclear how much the recent slowdown of the Chinese economy will effect the country’s retail market, and the trade war with the United States, which has made many Chinese consumers skittish, is another wild card. Notably, Apple recently reported sales in China that were less than anticipated, and this was a unpleasant surprise for the company and its investors that could be indicative of a larger trend. Apple CEO Tim Cook even sent a letter to investors to explain.
Furthermore, the recently red-hot Chinese real estate market is cooling down, and sales on luxury items like jewelry are slowing as the Chinese grow more cautious in their spending. However, there are many economists who see the slowdown as just a blip rather than a beginning of a long slide. Many agree that Chinese retail spending may continue to decline but not enough to affect larger economic trends.