Western economists have long said that China needed a base of American-style consumers to bring the country sustained economic growth. Now China has one: Its young people.
While previous generations were frugal savers—a product of their years growing up in a turbulent economy with a weak social safety net—the more than 330 million people born in China between 1990 and 2009 behave much more like Americans, spending avidly on gadgets, entertainment and travel.
The freewheeling consumption is helping China diversify its economy at a crucial time. Beijing has relied on exports and infrastructure-building to drive growth for decades, but recent signs point to a slowdown amid tariffs from the Trump administration. The new spending patterns have benefited Alibaba Group Holding Ltd. , Tencent Holdings Ltd. and other tech companies, whose rapid growth has helped energize China’s economy.
Yet all this consumption has a downside. Household debt levels have risen rapidly over the past several years, with many young Chinese borrowing money for their purchases.
High levels of corporate and government debt are already longstanding concerns for Beijing. As household debt climbs, some economists worry the country’s debt burdens overall could become unmanageable and weigh on China’s growth.