Consumer Industry Boosts the BRI Economy

The consumer industry is an important part of the Belt and Road Initiative (BRI). The BRI focuses on policy coordination and the connectivity of infrastructure. It aims to foster unimpeded trade, financial integration, and people-to-people exchanges. Household consumption and savings are key variables in macroeconomic growth and economic policy formulation, in our view. We think that connectivity of infrastructure will help reduce the transaction costs of consumer services, and unimpeded trade is key to meeting consumer demand through international trade. We expect financial integration to facilitate the conversion of savings into investments, and we think that people-to-people exchanges are essential to fostering cultural consumption and consumer culture. In addition, we expect consumer industry cooperation between China and BRI countries to facilitate the integration of national economic development strategies, accelerate household consumption and income growth, and enhance people-to-people and cultural communication and exchanges. Consumer industry cooperation between China and BRI countries covers the full range of business processes, including production, sales, and procurement. Accordingly, we look at such cooperation from the perspective of optimizing global industry chains, facilitating brands’ global expansion, and capitalizing on demand from large economies (including global procurement and tourism). First, rising unit labor cost is prompting China’s consumer industry to optimize global industry chain distribution in BRI countries. This helps export China’s expertise to BRI countries, improve local labor production efficiency, and foster local economic growth. Second, we think engineering expertise has become the main driver for the growth of China’s consumer industry. The global influence of Chinese brands is improving rapidly on the back of incremental innovations in products and innovations in distribution channels (such as cross-border e-commerce). Third, as a large economy, China enjoys economies of scale and has the potential to become a major market for BRI countries. Fourth, consumption and culture are closely intertwined, in our view. We expect consumption to facilitate cultural exchanges between China and BRI countries, and familiarize people with each other’s culture.