As the world faces a second wave of COVID-19 infections, China is one the few countries that has returned to normal social and economic activity, despite being the epicenter of the pandemic.
Social restrictions on movement have been lifted, as the Chinese government’s contact tracing system has so far proven effective in containing new outbreaks of the virus. As a result, movie theatres, shops, restaurants, social events, and other services have all been able to reopen, with consumers also regaining the confidence to spend once again.
Furthermore, the services, export, and investment areas of the Chinese economy have led the economic recovery, but it must be noted that the Chinese consumer is beginning to pick up and contribute more significantly. Even prior to the pandemic, the contribution of consumption to GDP in China was expected to increase, and become a more significant driver of economic growth. Private consumption in China accounts for only 39% of GDP, which has grown over the decades, but is relatively low when compared to other major global economies such as the US (68%), Japan (54%) or the Europe (52%).
Going forward however, we do expect to see this rise in the coming years, as China continues to transition from an export-investment driven economy to a more consumer-based one.