Of The Rise of The Asian Consumer

                     Over the last two decades China, India, and parts of Southeast Asia have risen out of poverty becoming a manufacturing power house.  This growth was driven by enormous investments in production by both state and private investors with China being the only country to have the government invest in industry.  China has state owned banks that give loans to private industry and real estate developers.  Also, these banks lend to state owned companies and some of them are infrastructure banks.  Growth in manufacturing in Southeast Asia has mostly been driven by demand in the west for textiles.  While in China the growth has been driven by a much wider variety of products including the IPhone which is designed and marketed by Apple.  Manufacturing of high tech products has been outsourced to China.  However, this growth has come at the cost of increased pollution and a private debt to GDP ratio of 225%.  The public debt to GDP ratio in China is 47.6%.                     The government of China has pointed out the need to move to more serviced based consumer economy.  This is where the Asian consumer comes in.  The middle class in Asia has grown rapidly over the last two decades and this growth is expected to continue into 2035.  China's One Child policy has allowed parents to be able to afford to send their children to school.  Its is common for there to be four grandparents and two parents working with one child in the household.  Eventually, this could lead to an excessive amount of retired people with not enough working people to pay for their social security.  It could also result in a labor shortage and wages are rising as companies compete for a shrinking number of workers.  
                    The demand for luxury goods is increasing in China as the number of wealthy people in China is increasing.  Indeed, a more consumer based economy will require more small business that can cater to the individual wants of the middle class consumer.  The tariffs Trump implemented on China over the summer will not hinder growth in China.  The tariffs was simply a form of negotiating.  I suspect that there will be a new trade deal struck between the U.S and China just as a new version of NAFTA was recently implemented.  China is the U.S's largest trading partner, so as the Chinese consumer becomes wealthier America may export more consumer products to China.  As wages go up in China it will become more expensive to manufacture there.  Although, it could be decades before the cost of manufacturing in China matches that of the U.S.  China has manipulated its currency by keeping the value of its currency down to make its good cheaper than American goods.
                    As I mentioned earlier, China's private debt to GDP ratio is 225% and its public debt is 47.6%.  This could lead to a debt crises.  Much of the debt is concentrated because state owned banks lend to state owned enterprises.  The government could simply inflate its way out of the debt.  In other words, China would print money and keep the debt at the same level.  Then the debt will worth less in future yen.  Also, China could bail out bankrupt institutions.    

"2nd Quarter Wrap Up 2018: The Rise of the Asian Consumer"

https://home.solari.com/2nd-quarter-wrap-up-2018-the-rise-of-the-asian-consumer/

"Debt, Not Trade War, Is China's Biggest Problem"

https://www.forbes.com/sites/panosmourdoukoutas/2018/11/24/debt-not-trade-war-is-chinas-biggest-problem/#e9df0604c4d0

"China's debt crisis: Just how bad is it?"

https://www.bbc.com/news/business-37404838