Standard Chartered’s report, authored by Carol Liao, Senior Economist and Moriarty Lam, Research Analyst, highlights that China’s household consumption is likely underestimated due to unaccounted government transfers and strong RMB purchasing power. While boosting domestic demand is essential, it may not provide a quick fix for external imbalances and deflation. The report emphasizes the need for supportive measures and a shift in resources to expand the services sector to drive consumption growth.
Underestimating China’s household consumption strength
“Official data likely underestimates strength of China’s household consumption. Understatement likely due to unaccounted-for government transfers and strong RMB purchasing power.”
“However, we think this gap is overstated. The following factors suggest China’s consumption base is larger than conventional statistics imply.”
“Boosting household demand is still important as China consumption’s share of GDP may be behind the global average even after adjusting for possible understatement effects; moreover, consumption growth has been softening.”
“Supportive measures such as the goods trade-in programme are likely not sufficient to boost overall consumption, nor help resolve the external trade imbalance and deflation issues.”
“In the foreseeable future, we expect China to maintain its export competitiveness – and therefore a sizeable C/A surplus – and domestic inflation to remain soft.”
(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)
Source: https://www.fxstreet.com/news/china-consumption-growth-outlook-standard-chartered-202602041758
