The shirt tail myth

Various blogs point to an excellent piece in the FT (only partly visible outside the subscriber area I think) by Arthur Kroeber, managing editor of China Economic Quarterly and one of the more sensible commentators on China's economic growth. In it, he takes to task the over-excited young investment bankers who are predicing all manner of things for the Chinese consumer markets.

Key takes:

• "stories of a Chinese consumption boom are largely fantasy, the latest version of the nineteenth century Manchester mill-owner’s dream of every Chinaman adding an inch to his shirt-tail".
• "the retail market in China is only about half as big as commonly reported and that the so-called “Chinese middle class” is smaller, more scattered, and has far lower purchasing power than many hopeful sales managers imagine".
• "For the most part, China remains what it has long been: a large country, inhabited by many people, most of whom do not have any money".

Kroeber defines a "Surviving China" (most of it) and a "Consuming China" which he pegs at 100 - 300 million depending on where you draw the lines. In 15 years, at 10% annual growth, the Consuming China market, he suggests, will be roughly as big as Germany is today. Not something to sniff at, but not necessarily the key driver of world economic growth.