Ikea in China

http://blogs.forbes.com/china/2011/02/06/times-have-changed-no-more-china-produces-and-america-consumes/

Times Have Changed: No More ‘China Produces and America Consumes’

Feb. 6 2011 - 10:20 pm | 1,553 views | 0 recommendations | 3 comments

posted by HELEN H. WANG

When I started to write my book The Chinese Dream three years ago, people in the United States did not even believe there was a middle class in China. Today, China’s middle class is already larger than the entire population of the United States and is expected to reach 800 million in fifteen years.

If this prediction sounds too bullish, chances are it is not. In 2006, McKinsey predicted that the by 2025, the Chinese middle class would reach 612 million and China would become the third largest consumer market in the world after the U.S. and Japan.

These numbers are already outdated.  A recent Credit Suisse reportpredicts China’s consumer market will reach $16 trillion by 2020, overtaking the United States as the world’s largest consumer market in the world.

2020 is less than ten years from now. Whether or not China will become the world’s largest consumer economy remains to be seen. However, this much is clear: the Chinese middle class has already changed the dynamics of the world we live in. The world is no longer “China produces and the United States consumes.” U.S. exports to China are growing almost two times as fast as overall U.S. exports, supporting half a million jobs.

The Credit Suisse report reveals that the average household income of the Chinese middle class increased 98% between 2004 and 2009. While Western economies were struggling with recovery, China’s retail sales rose solidly 18.4% in 2010. The Chinese are also saving less. The household saving rate dropped from 26% to 12% over the last five years.

The $45 billion export deal signed during President Hu Jintao’s state visit is just the beginning of these changing dynamics. The Chinese middle class is creating enormous...