Is the Chinese Consumer Ready to Drive Global Economy?

As we approach the end of the year, I’m having numerous discussions with banking executives and other clients about where we see the global and local Asia Pacific economy performing next year. I was asked to opine on this for Singapore’s business daily, Business Times.

In short: Globally, it often seems that we're taking two steps forward followed by one step backwards. Yet we are taking steps forward: In North America, employment and gross domestic product (GDP) are both growing, though at rates far below those typical of a recovery. In Latin America, a robust recovery is underway. And perhaps most encouraging, strong growth continues across most of Asia Pacific (though even here, Japan and Australia still are challenged).

As leaders, we need to focus on what we can do to help our economies prosper.

The key to economic health is the consumer, who is the engine that drives the economy in most countries. It’s a theme you have seen previously on this blog, perhaps most recently as part of FICO CEO Mark Greene’s FICO World 2011 keynote address. As Mark said in New York, it won't be the US consumer - where consumer spending has accounted for 70 percent or so of GDP - to lead us out of the current malaise. Nor the Chinese consumer - whose consumer spending still only accounts for about 30 per cent of GDP - yet.

So who will it be? And, how do we do our part to drive global economic recovery? How do we do this in a way that ensures our own businesses are healthy and profitable?

These are questions you’ve expressed interest in, and questions we will be discussing with nearly 40 APAC senior banking executives next month. Expect to hear more from me on this.

* Many of you have said that you're unable to access the Business Times link, so I'm reposting my submission below. I’m sharing this because we’d like to hear your thoughts on these topics, so I encourage you post a comment.

Excerpt from Business Times, 28 November 2011

How do you see the global and local economy performing in 2012? What do organisations and individuals need to do to ensure that they are ready for whatever next year may bring?

Dan McConaghy
President
FICO Asia-Pacific

IF there was one way to describe 2011, it would be 'volatile'.

Globally, it often seems that we're taking two steps forward followed by one step backwards. These unsettling 'steps backward' are what led one executive to confide that in his 30 years in banking, he has never felt so bad at a time when his firm's numbers appear to be so good.

Yet we are taking steps forward: In North America, employment and gross domestic product (GDP) are both growing, though at rates far below those typical of a recovery. In Latin America, a robust recovery is underway. And perhaps most encouraging, strong growth continues across most of Asia.

 As leaders, we need to focus on what we can do to help our economies prosper.

 The key to economic health is the consumer, who is the engine that drives the economy in most countries. It won't be the US consumer - where consumer spending has accounted for 70 percent or so of GDP - to lead us out of the current malaise. Nor the Chinese consumer - whose consumer spending still only accounts for about 30 per cent of GDP - yet.

The interplay between consumers and lenders is critical, the fulcrum on which most of today's economic problems pivot.

We need to rebuild the relationship. We need to give consumers what they need. Not just buying power but security. Not just the right terms but confidence.

As leaders, it's our responsibility to make sure that the systems and policies and regulations that drive our business support us in rebuilding the relationship with consumers.