China's Consumer Market: Opportunities and Risks

Deloitte --- The period 2005-07 could be an important turning point for China's consumer market. Several things will happen or may happen that would hasten the further development of a modern consumer sector. These include the following: 1. the end of restrictions on foreign investment in China's distribution sector; 2. Increased interest on the part of foreign retailers in China's retail sector; 3. A possible revaluation of the Chinese currency; 4. Efforts by the Chinese government to shift the sources of economic growth away from investment and exports and toward consumer spending; 5. Accelerated reform of China's banking system resulting in a bigger and more efficient market for consumer credit; 6. Tightening of the consumer credit market following a high default rate on automotive loans; 7. A possible collapse of residential property prices; 8. Forced consolidation of Chinese retailing companies.

Most of these events would have the effect of accelerating the growth of consumer spending, accelerating the modernization of retail distribution, increasing the importance of consumer finance, and increasing the importance of China's consumer market to global retail and consumer product companies. Some, however, would have a deleterious effect on modernization of the sector.

In this report, Deloitte Research considers the changing consumer business environment in China. We offer our predictions about the evolution of the Chinese consumer market as well as the likely strategic implications for global consumer oriented companies.

Main Contents:

·The consumer economy

·The distribution sector

·Changing landscape for distribution

·Strategic requirements for success