China could generate an incremental 15 trillion U.S. dollars in consumer spending over the next decade through a combination of business strategies, according to a report released by the Demand Institute Wednesday.
Those strategies should include increased communication and better access to the Chinese public about products and services, and innovations that expand the range of financial services that typically enable higher levels of domestic consumption.
The report, titled Sold in China: Transforming to a consumer-led economy, said China's economic success story has been largely driven by investment-led and export-led growth, including massive infrastructure investments.
As a result, while Chinese consumer spending has grown in absolute terms, consumption as a share of Gross Domestic Product (GDP) has steadily declined for six decades.
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.
"Shifting the forces generating GDP growth is required to maintain the growth and prosperity of China. 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 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 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.
The Demand Institute evaluated several future scenarios, of which the most optimistic would lead to a total of 420 trillion yuan (about 68 trillion dollars) in consumer spending over the next decade, a full 90 trillion yuan (about 15 trillion dollar) more than if consumption's share of GDP was to remain flat.
The Demand Institute has launched a research program on the future of Chinese consumer demand, of which this is the inaugural report.