China, India lead consumer
confidence survey By Shehla
Raza Hasan
KOLKATA - Fired by buoyant
markets and high economic growth rates, China and
India topped ACNielsen's latest Consumer
Confidence Study. While China ranked as the most
optimistic among all markets surveyed, with 78% of
consumers looking forward to further economic
improvement over the coming year, following
closely behind were India (77%) and Indonesia
(76%). Completing the top 10 spots were the United
States, ranking ninth
(43%), followed by Norway at
10th (42%). Among the top 10 countries in the
world that are most optimistic about the next 12
months, eight are from the Asia-Pacific region.
Conducted over the Internet last November,
ACNielsen's Consumer Confidence Study was expanded
this time to cover 28 markets across Asia-Pacific,
Europe and the US, interviewing 14,134 consumers.
This robust degree of consumer confidence
among Asian markets such as India, China and
Indonesia has contributed to the Asia-Pacific
region's overwhelming optimism compared with
Europe and the US. This bodes well for the outlook
of global investors, who have pinned their hopes
on the Asian economies. Looking at the countries
where consumers have the highest penchant to save
money, the top nine were from the Asia-Pacific
region - led by Indonesia (59%), Malaysia (58%)
and Thailand (57%), with the Netherlands the only
market outside the Asia-Pacific making it into the
top 10.
For the Asia-Pacific region as a
whole, 40% of consumers surveyed thought their
country's economy had improved over the previous
six months, and 53% expected it to improve further
over the next year. However, 43% of Americans
remained positive about the year ahead, and
optimistic their economy would improve, and while
31% of Europeans were of a like mind, a further
35% expected the situation to deteriorate over the
coming year.
A sizable 48% of Americans
and 40% of Europeans thought their economies had
deteriorated over the previous six months.
Consumers surveyed in the US perceived that their
economy had not improved in the last six months,
but were more optimistic of a turnaround in the
year ahead, with 43% expecting an improvement. The
Europeans, however, were split in their opinion:
about a third each felt the outlook would improve,
remain the same or deteriorate over the next 12
months.
In the portion of the survey
on "How We Spend Our Spare Cash", in India and
across the world, during good times and bad,
consumers appear to respond differently when it
comes to how they spend their spare cash. For
Indians, buying new clothes, short, local
vacations, home improvements and investing in
shares and mutual funds seems to be a greater
priority than consumers in other parts of the
Asia-Pacific region. For 50% of Indians, saving
money is also a priority, like most other
countries in Asia.
In the Asia-Pacific
region, when asked how they use spare cash once
they have covered their living expenses, nearly
half said they put it in savings or deposit
accounts. The second-most-mentioned was
out-of-home entertainment (32%), followed by
paying off credit-card debts or loans (29%).
In the US, however, the top three
priorities were reversed, with 33% claiming they
were paying off credit-card debts or loans,
followed by out-of-home entertainment (29%) and
savings and deposits (23%). This compared with 37%
of Europeans spending on out-of-home
entertainment, followed by savings or deposits
(34%) and new clothes and home improvements, each
coming in at 33%.
It has been predicted
that the Asian economies of China and India will
be the main vehicles of growth for the world
economy, making up the engines of a new world
economic order. This point was highlighted
recently at the World Economic Forum at Davos,
Switzerland, where "India Everywhere" was the
theme. This was reflected in the words of the
Confederation of Indian Industry chairman Y C
Deveshwar, who said he detected a certain sense of
insecurity among Western governments and
corporations as they were getting increasingly
uneasy over the prospect of being bought out by
Indian or Chinese multinationals.
Professor Jagdish Bhagwati also pointed
out that the West was imposing its own labor
standards and other social-justice norms on
emerging economies. In fact, the key to the fresh
and vibrant business optimism in "Chindia" (as the
Asian growth phenomenon is being called) is the
rise of the middle classes.
The rising
middle class in China and India Propelling
China's growth is a steady stream of foreign
investment attracted by the country's seemingly
inexhaustible pool of workers and its growing body
of consumers. Economists note that even if only 8%
of Chinese make a middle-income salary, that would
still amount to 100 million people - a base of
consumers almost as big as the entire US middle
class. In 2003, foreigners invested US$60 billion
in the Chinese mainland and more than $30 billion
in Hong Kong. It was the
second year in a row that mainland China displaced
the US as the world's most popular investment
locale.
The impact of that investment was
magnified by the artificially low value of China's
currency. Economists estimate that one Chinese
yuan can buy as much in China as $4.60 can buy in
the US, so $60 billion worth of investments there
has the same impact as $276 billion in the US.
Since China opened its economy to international
trade in 1978, foreign investments have totaled
more than a half-trillion dollars, helping fuel
one of the greatest industrial expansions the
world has ever seen.
Similarly, in India,
the middle class forms 20-25% of the total
population (200 million to 250 million people),
and is driving demand in the economy. Increased
spending by India's middle class is estimated to
be more than $300 million. The lifestyle
orientation of people is changing: the super-rich
class of 17 million will increase to 35 million in
five years. More than 40 million in India already
have the same purchasing power as Americans.
Overall consumer spending grew at a pace of 6% per
year in past 10 years. In addition, about 75% of
population in India is under 40 years of age.
India is marketing itself as the world's
fastest-growing free-market democracy. This time,
it is hitting the right chords with foreign
investors who are otherwise wary of the two Asian
giants teaming up.
(Copyright 2006 Asia
Times Online Ltd. All rights reserved. Please
contact us for information on sales, syndication and republishing
.)
