China’s economy, already the world’s second-largest and one of its most dynamic, is forecast to continue growing at a solid pace through 2021. But behind that headline projection are widely diverging opinions on what that means for Chinese consumers and how it will affect the rest of the world.

In this article:

· Forecast for 2021

· Views on consumer spending

· International implications

Forecast for 2021

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The OECD, the club of 35 mostly rich countries, expects China’s gross domestic product to expand at a 6.3% annual rate from 2020 through 2021—not far from this year’s 7%. That would bring average Chinese growth to 6.5% a year for the 2020s, compared with an average of 10% a year from 1990 to 2010.

The World Bank sees things a little differently—and darker. It projects China’s growth rate will drop below 4% in 2019 and 2020 before recovering only slightly in 2021 to 5%.

Views on consumer spending

For sure, China’s economic growth will slow. But scholars at both institutions believe consumers and businesses will keep spending—at least to a point.

The OECD sees consumer spending rising 5% in 2021, the World Bank only 1%. Still, average Chinese household incomes should rise by $3,500 during that period, so there is money to burn.

International implications

The tepid outlook for Chinese growth has led some economists to downgrade projections for the entire global economy—most notably, U.S. gross domestic product. The OECD now expects America’s GDP to expand 2% in 2021, down from its April forecast of 3%. Others point out that China is less important to the world economy than it used to be, accounting for only 14% of global GDP growth in 2016.

Just as China’s economic rise has transformed the fortunes of many emerging markets, its slowdown is likely to have a broad impact. Other large developing countries should fare better because their reliance on exports remains modest—about 20%, compared with China’s 60%.

Two-thirds of the world’s population lives in developing countries, but shares in global GDP are expected to be split evenly between advanced and emerging nations by 2050. And while international trade has grown rapidly since 1990, the World Bank projects that trend will flatline over the next few years.

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