China’s focus on building a consumer economy is going to disrupt the world and put an end to the era of low-priced goods, said Li & Fung chairman Dr William Fung.
Fung told the World Retail Congress in Paris that as China switches its focus from manufacturing to a consumer economy, retailers should expect production prices to rise.
He said: “China will disrupt the world. When China was becoming the world’s factory, it subsidised the world’s price of consumer goods.
“For the past 30 years people like us have enjoyed very good margins. Going forward, it’s not going to be so easy anymore.”
“I’m predicting we’ll see a ring of price increases and a decrease in margins unless we pass it on to consumers.”
China is in the middle of a five-year plan to boost consumer buying power. Minimum wages are increasing 13.5% each year from 2011 to 2016.
Fung said it is on course to topple the US as the biggest consumer market in the world. At present, US consumer spending is around $16trn (£9.87trn) compared with $8trn (£4.93trn) to $9trn (£5.55trn) in China, he said.
This will also offer retailers a big opportunity as both China and India would add an additional one billion middle-class shoppers to the world, he said.
Fung also flagged that the Rana Plaza disaster had created a “sea change” in the way that retailers source products.
He said consumers were no longer concerned solely with price. “The world’s sensibilities are changing. The future consumer is asking not just about what it is but how it’s made. The world can no longer accept it if the way it’s made is non-compliant,” he said.