China and Capitalism: Toward a Consumer-Driven Economy The Chinese economic reform is widely regarded as a success. In 1979, communist leader Deng Xiaoping opened China to foreign investment, private competition, and the global market. Since then, China successfully transformed its economy from heavy central planning to a more capitalist system. Less than forty years later, China has become one of the world's largest economic power with significant yearly growth. Many people devoted to study the transformation, hoping to find the answer to China’s economic miracle; yet, by doing so, they failed to recognize the ongoing second Chinese economic reform: from export-dependent to consumer driven. Much of China’s engines of growth hinges on exports
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Alibaba, the leading online commerce provider in China, thrives by offering a wide selection of goods to the Chinese consumers. It had $403 billion of gross merchandise volume last year, which is more than eBay and Amazon combined. With the largest global initial public offering (IPO) of $25 billion and the annual revenue of 76.2 billion Chinese yuan or 12.29 billion American dollars, Alibaba further shows the capacity of Chinese consumers (Statista). The huge consumer demand of 1.3 billion people is China’s biggest advantage, but the purchasing power of the emergent middle class is the key for more domestic consumer-based company like Alibaba to prosper and drive the economy to meet customer’s demands. In order to reshape a society into a consumer-driven economy, most people of that society must be able to spend money on daily consumption. Sociologists predict the Chinese middle class will experience the growth rate of 1 percent annually over the next decade, meaning that approximately 7.7 million Chinese people will join the ranks of the middle class every year (Cheng 16). Therefore, more consumers will emerge at a significant pace, increasing the consumer spending portion of the gross domestic product (GDP). The statistics of consumer population favor the possibility of China successfully transforming into a consumer economy; however, three concerns must be addressed before China could fully become a consumer economy—widened income disparity, high rate of savings, and limited market
Alibaba, the leading online commerce provider in China, thrives by offering a wide selection of goods to the Chinese consumers. It had $403 billion of gross merchandise volume last year, which is more than eBay and Amazon combined. With the largest global initial public offering (IPO) of $25 billion and the annual revenue of 76.2 billion Chinese yuan or 12.29 billion American dollars, Alibaba further shows the capacity of Chinese consumers (Statista). The huge consumer demand of 1.3 billion people is China’s biggest advantage, but the purchasing power of the emergent middle class is the key for more domestic consumer-based company like Alibaba to prosper and drive the economy to meet customer’s demands. In order to reshape a society into a consumer-driven economy, most people of that society must be able to spend money on daily consumption. Sociologists predict the Chinese middle class will experience the growth rate of 1 percent annually over the next decade, meaning that approximately 7.7 million Chinese people will join the ranks of the middle class every year (Cheng 16). Therefore, more consumers will emerge at a significant pace, increasing the consumer spending portion of the gross domestic product (GDP). The statistics of consumer population favor the possibility of China successfully transforming into a consumer economy; however, three concerns must be addressed before China could fully become a consumer economy—widened income disparity, high rate of savings, and limited market