China will overtake the United States as the world’s largest retail market by 2018 as it strives to switch to a consumption-based economy, a PwC report on retail and consumer products in Asia said.
“China is switching toward a consumer model [from an export-oriented and investment-led one] …and wage levels are going to be higher. That’s going to be driving much of the volumes there,” said Jon Copestake, chief retail & consumer goods analyst at the Economist Intelligence Unit, the research group that collaborated with the Big Four auditing firm on the report.
The country will account for half of Asia Pacific retail sales volume, estimated at US$10.3 trillion, twice the size of that of North America, by 2018, the report said.
Copestake said China’s retail sales volume will still maintain a growth rate of about 8 percent in the several years until 2018 despite its ongoing anti-corruption campaign, which has dented sales of luxury products.
However, the picture is not that rosy for Hong Kong.
The study shows the city may record a fall of 1 percent in retail sales volume next year, the first decline since the launch in 2003 of the scheme allowing individual visits by mainlanders, after an estimated increase of 2 percent this year.
Michael Cheng, PwC’s China retail & consumer leader, said this will mainly be a result of the US Federal Reserve’s interest rate hike, which is expected to take place later this year.
“The effect will be stronger in 2016, as there will be a gradual increase in the interest rate. There may be impacts on the broader economy … Hong Kong will be affected, and so we think there will be a slight decline in 2016,” he said.
A slowdown of spending by mainland visitors and a strong Hong Kong dollar, which will reduce the luster of Hong Kong as a tourism destination, are also among the challenges faced by the local retail sector, Cheng said.
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