By Jim Trippon

Did anybody outside of Switzerland pay attention to the last World Economic Forum meeting in Davos? Not very many, except for CNBC’s fast-talking Maria Bartiromo. But don’t ignore China’s rising role in world economic leadership.

Discounting U.S. policies is becoming routine. As one Davos speaker ventured, “the U.S. is quickly becoming ungovernable.” A Chinese delegate commented, “the lobbyists give the orders in Washington but nothing gets done.”

Things couldn’t be more different in China. Whatever one feels about one-party, centrally-commanded systems, they do get things done. China’s stimulus package in 2008, followed by a huge wave of bank lending propelled the Chinese economy to double-digit growth in the fourth quarter of 2009.

Now China is declaring a new growth model. In this centrally planned economy, it makes sense for investors to pay heed.

China’s feisty new-generation leader (and premier-in-waiting), Vice-Premier Li Keqiang, declared, “we must change the old way of inefficient growth and transform the current development model that is excessively reliant on investment and exports.”  Beijing is getting serious about boosting internal consumption.

Li announced, “We will focus on boosting domestic demand.” Coming from Washington such words would inspire a yawn. Coming from the future leader of China, the word “transform” demands attention.

Beijing has the resources and power to transform its economy. We’ve seen proof of that in the past year.

Li listed a number of initiatives including a stronger health care safety net and to subsidizing rural poor to buy household appliances. As Li sees it, “The growth in domestic consumption in China will not only drive growth in China but also provide greater markets for the world.” That’s encouraging news for global companies who wish to sell to an increasingly wealthy Chinese consumer, and for Chinese firms looking to expand internally.

A new report on China’s consumer confidence suggests the trend is gaining momentum. China's consumer confidence index, or CCI, has reached a record high over the past 30 months.

A survey of more than 3,500 consumers in urban and rural areas across the country says the nation's CCI rose 16 points over the past nine months to reach 104. (The report was jointly released by, Nielsen, and China and the National Bureau of Statistics.)

Around 63 percent of consumers surveyed said they were confident about their personal income in the coming 12 months. The report also indicated that Chinese consumers were strongly interested in buying new and high-tech products. Those in first-tier cities are more willing to invest in stock markets and spend on travelling.

That’s encouraging for countries worried about their balance of payments with China. It’s also positive for the Chinese economy which has found it can no longer rely on exports to “developed countries.”

In our next note on this topic we’ll look at some further actions that Beijing make take to spur consumerism.

Jim Trippon,
China Stock Digest Editor-in-chief

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