China's $10 Trillion Import Machine Says Goodbye To Cheap Energy, Food

China‘s newly minted Premier Li Keqiang said Monday that his country is likely to import as much as $10 trillion worth of commodities and services in the next five years to boost domestic consumption,China Daily reported Tuesday.

Li renewed the nation’s pledge to maintain its open policy, and promised a further opening up of services and industries related to energy-saving and environmental protection.

That mammoth $10 trillion number comes as no surprise to Boston Consulting Group senior partner Michael Silverstein.  He co-authored the book that spelled it out last year titled — no kidding — “The $10 Trillion Prize: Captivating the Newly Affluent in China and India“.  Only the Boston Consulting Group team that worked on the book forecast $10 trillion by 2020.  Li’s moved it up to 2018.

“We are in the third or fourth inning of the China consumer growth story,” Silverstein said in an interview with Forbes.  ”China consumer demand is going to make water scarce, wheat prices stable to high and keep luxury brands extremely happy.”

In his closing remarks this weekend at the China Development Forum in Beijing, Li said, “China will expand its opening-up policy. The nation needs to promote domestic consumption through continuing to open up its markets.”

China consumers are a big part of China’s future.  As part of the 12th Five-Year Plan (2011-15), the government has vowed to expand domestic consumption to help the nation move away from its export-driven, cheap labor model.

China is facing two unprecedented transformations, Li said. One is for a nation of 1.3 billion people to complete its modernization process without destroying the environment or creating gaping income gaps. China is currently losing both of those fights.  That leads to the second challenge, to address and implement policies that will avoid these problems in the future, especially concerning environmental protection.  China is one of the most polluted countries on Earth.

On the way to maintaining sustainable economic growth, China is facing “huge opportunities and complicated and severe challenges,” and “we have to rely on domestic consumption in the long-term,” with “urbanization” being a major contributor to that growth, Li said.

The Boston Consulting Group forecasts that between now and 2020, China consumers will spend $41.5 trillion with annual expenditures rising from $2 trillion in 2010 to $6.2 trillion in 2020, an increase of 203%.  Chinese children born today will continue to live in a country on the path of rapid economic progress and growth.  They will consume 38 times more material goods — from food to shelter — than their grandparents before them, Silverstein estimated.