Is China really going through 'Consumption Downgrade'?

Some economists with a pessimistic attitude toward China's consumer confidence believe the trade war panic and China's economic slowdown are factors behind the success of e-commerce site Pinduoduo and the popularity of low-price products.

Pinduoduo is a popular, fast-growing e-commerce platform for low-price products in China.

Every day, millions of Chinese shoppers order daily necessities on the site, with rising sales of instant noodles, pickled vegetables, and cheap clothing.

Some economist interpreted this as a signal of a 'consumption downgrade.'

However, Zong Qinghou, chairman and general manager of Wahaha Group, largest beverage producer in China, offered a different opinion at a high-level seminar in Beijing.

Zong Qinghou, chairman and general manager of Wahaha Group, largest beverage producer in China, speaking at a high-level seminar on Monday, September 17, 2018 in Beijing’s Diaoyutai State Guesthouse. [Photo provided to China Plus]

"So currently there is a popular belief that there's been a consumption downgrade because of a dip in people's income, causing an overall downgrade in expenditures. But I see just the opposite. Our market consumption is upgrading. China now has a 3-4 million strong middle-class among the 1.4 billion population, and they are living a well-off life.”

According to Nielson's China Consumer Confidence Index, consumption remained strong through the Q2 of 2018.

Official stats also show that the country's consumption in the first half of this year has taken up 78% of the overall economic growth.

Golden Eagle International Group Chairman Roger Wang says consumption has a great impact on the Chinese economy.

Roger Wang, Chairman of Golden Eagle International Group, speaking at a high-level seminar on Monday, September 17, 2018 in Beijing’s Diaoyutai State Guesthouse. [Photo provided to China Plus]

“By 2018, the Per capita GDP in China has exceeded 9000 U.S. dollars. Indicating that we are a middle-income leveled society. Consumption per capita is also on a rise, including poverty areas. Consumption has a great boost to the economy, which is of great potential and driving force."

Nicholas Lardy, Anthony M. Solomon Senior Fellow at the Peterson Institute for International Economics explains the reason behind the consumption rise.

Roger Wang, Chairman of Golden Eagle International Group, speaking at a high-level seminar on Monday, September 17, 2018 in Beijing’s Diaoyutai State Guesthouse. [Photo provided to China Plus]

"China is the only major economy in the world where the wage share of GDP is going up. If you look at the OECD countries, the wage share of GDP is basically on average flat. In the US is been gradually going down in recent years."

In recent decades, China has played a major role in global growth. Chinese consumers have helped global companies like Apple, Volkswagen and many others to expand.