beyondbrics

Over the next two weeks, beyondbrics will be taking a closer look at the rise of the emerging market consumer.

We’ll be looking across countries and continents, sectors and demographics, at the local affects of rising incomes. We’ll also explore the wider implications for the investment community, and for global businesses – whether they sell wrinkle creams, smartphones, or plane tickets.

Why? The rationale is simple: the shifting wealth of the world – to the south and the east – represents the biggest historical change in how the world consumes. And the numbers are startling.

Firstly, as with so many emerging markets stories, you have to look to China. The recent wave of strikes and resultant wage rises is part of a much bigger trend: the average Chinese person is getting wealthier. Here’s a chart from StanChart’s chief

China economist Stephen Green, showing the annual growth in disposable incomes:

As wages go up, so does spending. Although typically a nation of savers, China’s government has taken a number of steps recently to help boost domestic demand and consumption as a driver of growth.

That has had a some unintended consequences, including a housing market subject to high volatility, and sometimes eye-watering prices.

But as China opens up new avenues of investment – including Hong Kong share listings, gold, and even ETFs, the Chinese could gradually turn into a nation of investors, and of spenders.

And just look how many of them there could be, not just  in China but in the rest of the Bric economies too. Perhaps this is the chart that best explains why the current rise of the emerging middle classes is going to be the powerful force in the global economy in the decade to come:

This chart, from Morgan Stanley’s Jonathan Garner, suggests that by the end of this decade, there will be more households with a disposable income of over $10,000 in the Bric countries than in the US and the eurozone combined.

Naturally that has global implications for all business. With the US and European consumer still feeling the pain of the financial crisis, recession, and pending budget cuts, the emerging consumer offers perhaps the best hope to keep multinationals growing. EM spending could also help ease some of the pressures caused by global economic imbalances.

Companies in the west are already scrambling to get a piece of the action. P&G recently said it hopes to add a billion new customers in emerging markets in the next 5 years – it already serves 4 billion globally. Food chains like McDonald’s, Yum! Brands, and Wendy’s/Arby’s are evermore reliant on their Chinese, Indian, Brazilian and Russian diners to fuel growth. Here’s another chart from Garner that helps make the point, this time on car sales:

But beyond what people wear and eat, what they brush their teeth with, and how they get to work, there’s also the huge potential for growth in the financial services industry, education, and healthcare.

Over the next couple of weeks, we’ll be looking at all these trends – from the frivolous to the fundamental - and we’ll ask what the implications are for businesses and investors in the west.

Without doubt, the rise of a new consumer is the heart of the emerging markets story, and we hope you’ll add your views and comments to the discussion.

Related reading:

[Hey Bric Spender series]

Chinese brands step up their game – beyondbrics
Guest post: India’s consumer juggernaut – beyondbrics
The politics of Chinese consumption – beyondbrics
A healthier Ramadan in Dubai – beyondbrics
Moscow: open for business 24 hours – beyondbrics
Low-cost treadmills for Brazilian joggers – beyondbrics
Guest post: Consumers are trading up – beyondbrics
Russians click their way to bargains – beyondbrics
Scrambling for eggs – beyondbrics
Asia’s middle class: growing but fragile – beyondbrics
LatAm airlines fly high on consumer demand – beyondbrics
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Buying security in South Africa’s townships – beyondbrics
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Building Brics – In depth, FT