According to figures quoted by the Carnegie Endowment for International Peace China lags way behind the global average when it comes to the proportion of its GDP which is accounted for by domestic consumption.

The Washington-based thinktank notes that, globally, based on World Bank figures, consumption accounts for 75% of GDP with the remainder largely accounted for by investment.

In China consumption accounts for 53–54% of GDP, investment accounts for 42–43% of GDP with the rest accounted for by the companies trade surplus.

Yet are there are signs domestic consumption is starting to play an increasing role as Beijing looks to boost consumer spending among its citizens. China’s electric vehicle industry has been a notable success story with sales reaching 11 million in 2024 according to UK research outfit Rho Motion – a nearly 40% increase on 2023 levels. As such it accounted for more than 60% of all EV sales globally last year.

It is also striking that half of the names in the top 10 constituent list for the MSCI China index hail from the Consumer Discretionary sector and as the chart shows, this sector has comfortably the largest weighting in the wider index. Many of these companies have substantial exposure to the domestic market.

This outlook is part of a series being sponsored by Templeton Emerging Markets Investment Trust. For more information on the trust, visit www.temit.co.uk

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