COMMENTARY

Where the potholes are (literally) on the road to a booming Chinese consumer economy

Obsession
China Slowdown
Obsession
China Slowdown

China’s economic planners want the country to shake off its dependence on exports and develop a consumer economy. Fund managers consistently get excited about the country’s notorious savers spending more in shops too. In the UK, investment manager Fidelity has even launched what it calls the China Consumer Fund.

But according to research house Gavekal, China’s internal infrastructure covering provinces away from the rich and well-developed eastern seaboard needs much improvement before retailers can do well in the country.

China is spending hundreds of billions of dollars on shiny new high-speed trains for its cities, particularly wealthier eastern ones such as Beijing and Shanghai. The trains evoke the space age modernity East Asian governments tend to equate with progress.

But while richer Chinese can now zip up and down the country on bullet trains, 40% of Chinese villages lack paved roads to the nearest town. The absence of decent transport infrastructure across much of China is as much a problem for domestic retailers as it has been for exporters.

“Moving goods around the country is still costly and slow,” Gavekal’s Joyce Poon writes.

This is why manufacturers who are struggling with rising minimum wages in factory hubs such as Guangzhou on the eastern seaboard do not automatically move inland, where land and labor are cheaper.

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