Davos WEF
Davos WEF

The 'real story' behind China's growth is all about consumption, private equity chief says

Key Points
  • Growth in the Chinese economy has plenty to do with the country's rebalancing to a consumption-driven model, according to Hony Capital CEO John Zhao.
  • The International Monetary Fund revised upward its projection for China's economic growth this year to 6.6 percent
China still the world’s factory, Hony Capital CEO says
China still the world’s factory, Hony Capital CEO says

The International Monetary Fund raised its projection for growth in China this year and the Chinese consumer is set to be a big part of that story.

"I think IMF's renewed number is very realistic," John Zhao, CEO of private equity firm Hony Capital, told CNBC at the World Economic Forum in Davos.

The organization projected China's economic growth this year to come in at 6.6 percent, a touch above the 6.5 percent growth the organization had projected in October last year.

The upward revision earlier this week came amid concerns that the possibility of a slowdown could be in the works as Beijing attempts to crack down on debt.

Official numbers announced earlier this month indicated that the Chinese economy grew 6.9 percent in 2017, handily beating a government target of around 6.5 percent.

According to Zhao, the IMF's forecast was justified and a "rather sustainable" gauge due mainly to restructuring that has been taking place in the Chinese economy.

"China continues to be the world's factory," Zhao said.

"A lot of that is 'new economy.' China is arguably the world's best consumption market ... China hosts the largest middle-income crowd, growing very fast, buying things left and right, and that trend continues," he added, referring to China's years-long attempt to shift from a manufacturing-led growth model to one anchored by the domestic consumption of products and services.

And while the government's efforts to tackle overcapacity through supply-side reforms were starting to show some positive signs, Zhao reiterated that China's status as the world's largest consumption market was more significant.

"The real story about Chinese growth is consumption," Zhao said.