China, credit and consumers
- China's Central Economic Work Conference is a few weeks away. The meeting will set out economic policy aims. This matters a lot. China is changing, and the world around China is changing.
- China's debt growth is likely to be a focus at the conference. Stabilizing debt as a share of GDP would imply less borrowing in the future. That will likely cause GDP growth to slow. We should not assume that slowing GDP will slow all parts of the Chinese economy. The recent 40% increase in online sales for "Singles Day" shows the potential of the Chinese consumer. Consumer spending can grow, even with slower economic growth, if the consumer share of GDP rises.
- A stronger Chinese consumer coincides with a possible deal to cut trade barriers with the United States. US President Trump's recent visit improved trade relations. Whether this actually leads to more trade with the US is not certain, but the opportunity exists.
- There is a question about how consumer spending is distributed in China. A recent academic report suggested that income inequality is worse than officially reported. The global results of rich Chinese consumers spending more are very different from a more equal rise if the Chinese consumer.