HONG KONG -- China is expected to overtake the U.S. to become the world's largest consumer of goods this year despite a slowdown in the economy and retail sales, according to a research report.
In the latest forecast by New York-based research company eMarketer released Wednesday, analysts predict China will end the year with total retail sales of $5,074 trillion, exceeding that expected for the U.S. by more than $100 billion.
The forecast is based on estimates of retail sales growth of 7.5% in China and 3.3% in the U.S. for 2019. Both figures are lower than their previous readings.
The rising incomes of Chinese over the past years have catapulted millions into a middle class that has experienced a marked expansion in purchasing power, said Monica Peart, senior forecasting director at eMarketer.
The growth momentum will continue in the long run, Peart said, despite official figures that showed retail sales expanded just 9.0% last year, down from 10.2% in 2017.
A senior economist at Oxford Economics, He Tianjie, said concerns about China's consumption slowdown are "largely overdone."
"A rash of headline stories on Chinese customers downgrading their consumption by cutting discretionary spending and turning to cheaper substitutes has led to concerns about China's consumption running out of steam," He wrote in a research note. "However, overall consumption has slowed only modestly."
He said retail sales excluding vehicles have held up well and consumer confidence has also improved. Weaker retail sales in 2018 were mainly dragged down by a decline in automobile sales, which was in part due to the expiry of tax breaks for small vehicles.
He does expect lower consumption growth in the year ahead, weighed down by slowing real income growth and a weaker housing market.
Analysts at eMarketer said e-commerce will remain a key driver of stable retail sales growth.
While China's overall consumption of goods slowed, online sales accelerated in December to grow 25.4% on a yearly basis, compared with 17.8% in November, according to the National Bureau of Statistics. Growth was helped by strong sales of food and apparel, which rose 33.8% and 22% year on year, respectively, in December.
The research company expects e-commerce sales to grow another 30% in 2019 to reach $1.99 trillion, accounting for 35.3% of China's total retail sales. This means China will account for 55.8% of the world's online sales by the end of this year, while the U.S. share will drop to 17%.
The online market share commanded by Alibaba Group Holding, China's largest e-commerce player, is expected to fall by nearly 5 percentage points to 53.3% in 2019. This is in line with the company's downward revision of its full-year target in November amid lackluster earnings in the July-September quarter that missed analysts' expectation.
This latest forecast could raise more worries about Alibaba's ability to withstand the impact of a slowing economy in China as its online retail sales contribute about 85% of its total revenue. E-commerce newcomers including Pinduoduo, which uses social media data to target consumers, are increasingly snatching market share.
"[While] the mature players set their sights on further international expansion, smaller local players are finding their niche in the Chinese e-commerce market," Peart said.