SHANGHAI – For 15 years, China has been a key engine of global growth. But now that China’s investment-led boom has run its course, continued economic growth – in China and globally – will depend on urban Chinese consumers. By 2030, people living in cities will drive 91% of global growth in consumption, and China is emphasizing both urbanization and a consumer-led growth model.
The McKinsey Global Institute’s latest research is optimistic that China’s strategy will succeed. MGI (where one of us is a partner) foresees continued growth in the number and income of urban consumers, and predicts that 700 Chinese cities will generate $7 trillion, or 30%, of global urban consumption growth between now and 2030.
Today, China’s urban working-age consumers number 521 million; in just 15 years, their ranks will have swollen to 628 million. Beijing, Guangzhou, Shanghai, and Shenzhen will each add more than one million households with annual income above $70,000 – the number of Hong Kong households in that income bracket today. Per capita spending is set to jump from $4,800 to $10,700 by 2030, at which point this group will spend 12 cents of every $1 of urban consumption worldwide.
Urban incomes in China are now reaching a threshold where spending on both goods and services accelerates rapidly. Annual household spending on personal products and on dining out will more than double, to $770 and $720, respectively. Chinese consumers are also traveling more, with the China Outbound Tourism Research Institute predicting that more than 100 million Chinese will travel abroad by 2020.