Home Today's Paper Most Popular Video Gallery Photo Gallery
Subscription Blog Signin Register
Logo
Monday, July 13, 2020 06:41:54 AM
Follow Us On: Facebook Twitter Twitter Twitter Twitter

China turning to a consumer economy

By
31st-Aug-2016       
Share
  • Twitter
  • Google+
  • Save
  • E-mail
  • Print
Comments
Share your thought
Post a comment »
Read all () »

Andrew Sheng :
China's transformation from a manufacturing-driven and export-led economy to one underpinned by services and domestic consumption is firmly underway. And that's good news not just for China, but also for the future of the global economy.
The 2016-17 edition of the Blue Book of China's Commercial Sector by Fung Business Intelligence and the Chinese Academy of Social Sciences maps the change. China's retail markets reached CN¥30 trillion ($4.6 trillion) in 2015, after more than a decade of double-digit growth. Household consumption has begun to climb, even as the pace of investment has fallen, and now exceeds 60% of GDP. Though the consumption growth rate has slowed to 10.7%, the Blue Book projects that China's domestic market may reach CN¥50 trillion by 2020.
A key driver of this transformation has been Internet technology. Building on heavy investments in public infrastructure, such as ports, airports, roads, rail, and telecommunications, the Internet is now expanding rapidly the range of choices available to Chinese consumers, while lowering costs and accelerating delivery.
As a result, China's online retail sales have surged in recent years, from 6.3% of total retail sales in 2012 to 12.9% by 2015. By 2020, 40% of all retail transactions in China may be conducted online. Online sales via mobile phones have jumped from only 1.5% in 2011 to 55.5% in 2015, and may reach 73.8% by 2018.
China has now overtaken the United States to build the world's largest online retail market. With a growth rate of some 33%, it is also the fastest-growing such market. And despite growth in Internet use - the number of connected Chinese has risen from 253 million in 2008 to 688 million last year - there is plenty of room for further expansion.
This progress reflects innovations that enable broad-based consumption without the construction and maintenance of expensive brick-and-mortar outlets. In fact, growth in mobile sales has been driven by lower-income consumers, particularly in rural areas, where more than 81% of Internet use occurs via mobile devices.
One key innovation has been multi-sided platforms like Alibaba, which, by providing access to production, logistics, distribution, and payments, challenge traditional business models - and with considerable success. In the second quarter of 2016, Alibaba announced that its revenue from China's retail market had increased by 49% year on year; another online platform, Tencent, reported a 52% increase.
By connecting small and medium-size enterprises (which account for 80% of employment in China) with the consumer base, such platforms erode some of the competitive advantage of large state-owned enterprises (SOEs). Indeed, while the returns from China's Internet retailing revolution have been highly concentrated, for once this concentration has not been in the state sector.
In online retailing via mobile devices, Alibaba held an 84.2% share of the market last year, with the next largest online retailer, JD.com, capturing just 5.7%. In the business-to-consumer market, Alibaba's Tmall claimed a 58% market share in the third quarter of 2015, with JD.com taking just 22.9%. In third-party online payment services, Alipay held 47.5% of the market, while Tenpay captured 20%, and UnionPay, the only service developed by the banking community, had 10.9%.
As a result, SOEs, which have long specialized in single markets or products, have now begun to recognize that they need to re-tool to compete both in China and in global markets. Given that SOE reform has long been on China's agenda, this extra impetus may prove beneficial. But the challenge of determining how to create a level playing field for healthy competition and improve capital allocation in the Internet age remains.
It is not just China's large companies that need to rethink their business models. As China's e-commerce platforms become increasingly global, they may erode the dominance of giant multinationals in international trade. Already in 2015, China's cross-border e-commerce amounted to an estimated ¥5.2 trillion, or 17.6% of the country's total trade; it may reach ¥8 trillion, or 23% of total trade, by next year.
All of this growth is great news for China; indeed, at a time of slowing performance in many traditional sectors, online retailing could be an economic lifesaver. But it also represents a major challenge for a government that has long relied on top-down decision-making.
China's e-commerce revolution enables the country's consumers to decide where to put their money. They can choose not only what kinds of goods and services they deem worthwhile, but also where to live and receive an education. As a result, they have become a key driver behind the transformation of the housing market, supply chains, finance, and even monetary policy.
The task for China's leaders is to respond more effectively to their citizens' needs and desires, including by accelerating progress on economic reform. Specifically, they must phase out obsolete supply chains saddled with overcapacity, bad debts, and falling employment, while taxing the winners in the e-commerce game. These imperatives are challenging traditional approaches to monetary, fiscal, industrial, environmental, and social policy, while testing the capacity of the bureaucracy and political system.
China's transformation into a consumer society will have profound implications for domestic and global suppliers and distributors of goods and services. At first, it might hurt some of China's trading partners, particularly the emerging economies that have long depended on Chinese demand for their commodity exports. The decline in Chinese imports has already contributed to a decline in commodity prices. Moreover, foreign importers may find that Chinese-manufactured consumer goods now cater more to local tastes and preferences.
Whatever challenges emerge, the fact is that a prosperous China, underpinned by local consumers, will contribute to - and shape - a prosperous global economy. We can thank e-commerce for that.
(Andrew Sheng, Distinguished Fellow of the Asia Global Institute at the University of Hong Kong and a member of the UNEP Advisory Council on Sustainable Finance, is a former chairman of the Hong Kong Securities and Futures Commission.
Xiao Geng, Director of the IFF Institute, is a professor at the University of Hong Kong and a fellow at its Asia Global Institute).
Courtesy: Project Syndicate

Tariff
Add Rate

News Archive

Inside The New Nation

City »

Samajtantrik Chhatra Front forms a human chain in front of the Jatiya Press Club on Sunday demanding waiver of mees and house rent of students, stopping harassment by landlords and reduction of fees in school, college and other educational institutions.


.

Sports »

Mosaddek Hossain marries Umme Tamanna


Sports Reporter :Player of Bangladesh National Cricket team Mosaddek Hossain Saikat married Umme Tamana at Mymensingh on Friday last. Mosaddek, the promising all-rounder completed all the formalities of his marriage with a simple note. It is the promising all-rounder's second marriage. Mosaddek Hossain is an inhabitant of Mymensing, while Umme ...

Entertainment »

Mitali Mukherjee praises for Authi’s rendering style


Entertainment Report :Indian noted Ghazal singer Mitali Mukherjee was born in Mymensingh, Bangladesh. She often comes to Bangladesh to perform in stage shows. She lastly came to Bangladesh in last December to perform in reunion of Sylhet Cadet College. She has popularity among those people who talks in Bengali.  Khudey ...

Business & Economy »

Mahmudur Rahman, SEVP & Head of Noakhali Zone ofIslami Bank Bangladesh Limited, inaugurating its Dudmukha Bazar sub-branch under Boshurhat Branch of Noakhali recently. Mohammad Abdul Awal, Head of Boshurhat Branch of the bank and local elites were also present.


.

International »

Lives will be lost as Syria aid access cut, aid agencies warn


Reuters, Beirut :A U.N. Security Council resolution that leaves only one of two border crossings open for aid deliveries from Turkey into rebel-held northwestern Syria will cost lives and intensify the suffering of 1.3 million people living there, aid agencies said.Western states had pressed for aid access to continue through ...

Editorial »

When the ones highest in government don't regard law, don't blame DCs


A NATIONAL daily on Saturday reported that the Deputy Commissioners of nearly half of the country's 64 districts continue disregarding the government's directive to upload information on allocation and disbursement of relief and financial assistance on their respective websites. The Disaster Management and Relief Ministry has long been asking DCs ...

Health »

Hopeful RNA vaccine strategies in Covid-19 pandemic


Dr. Muhammad Torequl Islam :An injection of nucleic acids (e.g., RNA or DNA) into the experimental animals (e.g., mice) lead to the expression of some proteins encoded by the injected nucleic acid, suggesting a gene encoding a protein of a pathogen is necessary to create a vaccine. Both DNA and ...

International »

Meghan tries to stop her friends from being named in media lawsuit


CNN, London  :The battle between Meghan, Duchess of Sussex, and a top British tabloid is heating up.Meghan's legal team has filed an application seeking to prevent Associated Newspapers, the publisher of the Mail on Sunday, from publicly naming five friends who anonymously defended her against bullying in a US publication ...

International »

China's southern Jiangxi declares highest flood alert


Reuters, Beijing  :Jiangxi province in southern China issued its highest flood warning on Saturday, predicting a big overflow from a lake on the Yangtze River as torrential rain continues to batter much of the country, state media said. The Jiangxi government raised its flood-control response level to I from II, ...

Cricket »

Ben Stokes second fastest to reach 4000 runs and 150 wickets in Test cricket


England all-rounder and stand-in captain for the Southampton Test Ben Stokes became the second-fastest Test Cricketer to reach the milestone of 4000 Test runs and 150 Test wickets under his belt. The New Zealand-born cricketer achieved the historic feat while batting on Day 3 when he scalped Alzarri Joseph's wicket. ...

Entertainment »

Urvashi Rautela is promoting her film Virgin Bhanupriya


The trend of the digital release of films the due to shut down of theatres is no doubt affecting the entertainment business very badly but filmmakers and artists are trying their best to promote their projects on social media with their fans. Urvashi Rautela, a crowned Miss Diva Universe 2015 ...

Entertainment »

Quarantine led me to realise I prefer isolation: Bhumi Pednekar


Bollywood actress Bhumi Pednekar says she has loved being by herself and has focussed on things that make her happy amid the pandemic. “One thing that I have learnt about myself is that I love isolation. I have loved being by myself. I saw a lot of people complaining that ...

City »

Chief Election Commissioner KM Nurul Huda speaks at a meeting on law and order situation in Abu Sharaf Sadeque Auditorium at Keshabpur in Jashore on Saturday on the occasion of election of vacant Jashore-6 constituency.


City »

RAB-10 nabbed three criminals from South Keraniganj in Dhaka district on Friday for their alleged involvement in rape.


.

Cricket »

Five-for box ticked, now time to get a hundred, says Jason Holder


Agency :West Indies captain Jason Holder said "my Test is far from over" after he rocked England with a career-best six-wicket haul on the second day of the series opener at Southampton on Thursday.Holder, the world's top-ranked all-rounder, took 6-42 as England were dismissed for 204 to surpass his previous ...

 
Items that you save may be read at any time on your computer, iPad, iPhone or Android devices.
 
Are you new to our website? Do you have already an account at our website?
Create An Account Log in here
Email this news to a friend or like someone
Email:
Write a comment to this news