A resurgent China enters next phase of vast transformation

Michael P. Toothman

The 19th National Congress of the Communist Party of China concluded on a triumphant note in October as President Xi Jinping welcomed “an era that sees China moving closer to center stage and making greater contributions to mankind.” The event marked a significant milestone on the road towards the “great rejuvenation of the Chinese nation” promised by President Xi at the outset of his first term. 

Once considered no more than an ambitious dream, this rejuvenation is transforming every facet of Chinese society and sets the stage for a new era of Chinese socialism – a socialism tailored to the unique aspects of Chinese culture. The roadmap established by President Xi will position China as one of the most advanced and economically formidable countries in the world, ushering in a reshaping of the global distribution of power. 

In addition to political stability and a pragmatic approach to economic growth, the Chinese rejuvenation is also benefiting from two remarkable societal trends.

This aerial photo taken on May 24, 2016 shows the night city view of Hangzhou, capital of east China's Zhejiang Province.[Photo: Xinhua]

Urbanization

China is experiencing the largest migration in recorded history as hundreds of millions of people move from villages and small towns to the larger cities. This urbanization trend, driven by the transformation of China from a mostly agrarian society to an industrial one, is adding an average of 18.5 million people to China’s cities each year. 

That is the equivalent of adding the entire population of France every four years.

An extraordinary side effect of this population surge is the evolution of the Chinese megacity. China currently has at least 15 megacities (cities with greater than 10 million residents), and this number is expected to grow. Even smaller urban centers are experiencing rapid growth. China now has over 100 cities with more than 1 million residents, and the McKinsey Global Institute is predicting this number to double by 2025.

Urbanization is the fuel that is stoking the Chinese economic engine. Explosive population growth in the major cities has driven massive investment in infrastructure, housing, and transportation and revolutionized how Chinese shop, communicate, work, and travel. 

As a significant catalyst for economic growth, urbanization is responsible for over 350 million Chinese escaping from poverty since 1990 with over 250 Chinese cities tripling their GDP per capita over that same timeframe. In comparison, China’s economic output was only 7 percent of the American economy in 1980. Today, it approaches 50 percent with some sources predicting it to surpass the U.S. GDP by 2025.

It is conceivable that by 2045 the Chinese economy will be double that of the United States.

Rise of the Chinese Consumer

The emerging middle class is experiencing greater prosperity than ever before. Over the past 30 years, 300 million people have joined the Chinese middle class with 200 million more forecasted by 2026. In 2009, the Asia Pacific region represented only 18% of the world’s middle class. This number, however, is predicted to rise to 66% by 2030. In other words, Asia Pacific, with China at its forefront, will increase its percentage of the world’s middle class from 18% to 66% in only 13 years.

This substantial shift in the financial fortunes of its citizens is the realization of the Chinese centennial goal of developing a “moderately prosperous society” by 2021, as well as the driver behind a significant consumer transformation.

Before this great rejuvenation, Chinese consumers participated in a subsistence economy, focusing on food and shelter and the purchase of essential products, such as simple clothing and appliances that provided sufficient value for their money. However, growing economic success and the continuing migration from the countryside to the city has sparked a substantial change in spending patterns.  

Chinese GDP per capita has grown from $200 in 1982 to nearly $5,500 in 2015. In response, Chinese consumers are increasingly wearing luxury brands, taking overseas vacations, and shopping for products that provide intrinsic value, as opposed to merely seeking essential commodities. 

To better comprehend the rise of the Chinese consumer, the recent Singles’ Day celebration provides a compelling example. Observed on November 11th of each year, Singles’ Day is an entertaining festival celebrated by Chinese millennials who take pride in their single status.

It is also the largest online and offline shopping day in the world. 

Alibaba, the Chinese e-commerce conglomerate, reported sales of $1.5 billion worth of merchandise in the first three minutes of the 2017 Singles’ Day celebration and a record 1.48 billion transactions processed for the complete 24-hour period. This staggering figure only includes sales through Alibaba and its subsidiaries T-Mall and Taobao and does not include sales figures from competitors such as JD, Suning, and Yihoudian.

An essential element of the Chinese transformation is the shift from a subsistence economy to a consumption-driven economy. Even if the Chinese investment and export markets begin to flatten, domestic consumption should remain a significant growth vector.

It is clear, the future of the global economy lies firmly with China.

The Future

The rejuvenation championed by President Xi will see China taking a leading role on the global stage, while simultaneously driving unprecedented prosperity, increased security, and greater contributions to mankind. Considerable challenges still exist, of course, and the Chinese government must continue to manage competing goals and balance the needs of numerous stakeholders while staying committed to its centennial goals. However, the once ambitious dream is now coming to fruition, and a new era of Chinese socialism has begun.  

(Michael P. Toothman, PMP is a Los Angeles-based speaker, educator, Sinophile, and expert on Leadership, Communication, and Project Management. He teaches for the University of California, Riverside and has mentored and trained over 3,500 leaders from over 1,000 companies in 25 countries.)