China will likely see “strong” increases in salaries in the five years through 2015 as the nation’s supply of labor dwindles and consumers begin to spend more and save less, Credit Suisse Group AG said in a report.
Wages may increase to be equal to 62 percent of China’s gross domestic product by 2015 from 50.5 percent last year, a team of Credit Suisse analysts led by Vincent Chan and Peggy Chan wrote in a report. Economic growth may be about 9 percent a year from 2011 through 2015 as wages rise by 19 percent annually, according to the report. Private consumption may climb to 41.7 percent of GDP in 2015 from 35.6 percent last year, it said.
China’s leaders said last month that boosting incomes is a major task for the nation in its 12th Five-Year Plan (2011-2015). Companies in the online shopping and financial industries will benefit most from the increase in wages and consumer spending during the period, Credit Suisse said.
Investment in highways and high-speed rail, which were expanded “aggressively” in 2008 and 2009 to counter the global financial crisis, may start to decline, according to the report.
The ratio of investment to GDP will remain stable in the 12th Five-Year Plan period, Credit Suisse estimated.
Retail sales in China may more than double to 40.5 trillion yuan ($6.1 trillion) a year in 2015 from 15.7 trillion yuan last year, the Credit Suisse analysts estimated. Household incomes may rise to 55.8 trillion yuan in 2015 from 24.2 trillion yuan last year, according to the report.
China Merchants Bank Co, Dongfeng Motor Group Co and Tencent Holdings Ltd are some of the companies that may benefit most from the increases in consumption, Credit Suisse said.
Possible risks to the forecasts include an inability of companies in Guangdong province and other coastal regions to maintain profitability as wages increase, according to the report. China’s success in boosting incomes and domestic consumption will also depend on the government’s ability to bolster spending on social services and to control asset bubbles, such as in the property and stock markets, Credit Suisse said.