China has become the undisputed global leader in the digital economy and the gap is widening
Less than 10 years ago, China e-commerce as a share of total retail value was less than 5% which was comparable to the share of e-commerce in USA and Germany at the time. Since then, the growth in e-commerce in China has been much faster and as of 2019, e-commerce as a share of retail value increased to 24% compared to 11% in USA and 9% in Germany. Furthermore, China currently accounts for 45% of global e-commerce transactions while mobile payments penetration is three times higher than that of the USA.
China has been reducing its dependence to the outside world, at the same time, the outside world is becoming more and more dependent on China
According to MGI China-World Exposure Index which measures the exposure in terms of trade, technology and capital, the outside world’s exposure to China has tripled over the past 20 years. During the same period, China’s exposure to the outside world has decreased by 25% (or 33% in the past 15 years). The main reason to why China’s relative exposure to the outside world has declined is that China’s economic expansion is no longer driven by trade and investment, but domestic consumption, which currently accounts for 60 to 70% of China’s GDP growth.
Chinese consumers is becoming the growth engine of the World
China’s consumption power has grown significantly over the past 20 years. In the period 2000-2005, Chinese consumers only accounted for 9% of the global household consumption growth. As a contrast, in the period 2013-2018, Chinese consumers accounted for 23% of the global household consumption growth just slightly behind US at 27%. Going forward, Chinese consumers are expected to overtake the US consumers to truly become the growth engine of the World. This is supported by China’s superior recovery from the COVID-19 pandemic with an expected GDP growth of 2.1% for 2020 compared to an expected GDP decline of 4.4% in the US.
Please click here to view the full McKinsey China Consumer Report 2021.