China is expected to overtake the US to become the world’s largest retail market this year, according to a new report that attributes the shift to the emergence of millions of new middle class Chinese consumers.

Despite news this week that China’s annual growth rate slowed to 6.6% last year, its lowest rate for almost three decades, research firm eMarketer forecasts that total retail sales in the country will increase 7.5% to $5.636 trillion in 2019.

That will surpass the US retail market by more than $100bn, as US retail sales are forecast to grow at less than half (3.3%) the Chinese rate to reach $5.529 trillion this year.

And the trend is expected to continue through to 2022, the end of eMarketer’s forecast period, when total retail sales in China (excluding Hong Kong) are expected to reach $6.757 trillion compared with $6.03 trillion in the US.

Monica Peart, senior forecasting director at eMarketer, explained that Chinese consumers have experienced rising incomes in recent years, “catapulting millions into the new middle class”. “The result has been a marked rise in purchasing power and average spending per person,” she said.

E-commerce is a major driver of China’s retail economy, eMarketer reported, noting that online sales are expected to grow 30% to $1.989 trillion in 2019.

With more than a third (35.3%) of the country’s total retail sales expected to occur online this year, the eMarketer analysts forecast that China will account for 55.8% of the world’s online retail sales this year.

That will far exceed even the US, where e-commerce is expected to account for 10.9% of retail sales in 2019, giving the US a 17% global share of e-commerce sales.

Alibaba is forecast to account for more than half (53.3%) of e-commerce sales in China this year, but its market share is declining in the face of competition from smaller players.

“Relative newcomers and multichannel retailers continue to take share from giants Alibaba and,” Peart said. “Smaller local players are finding their niche in the Chinese e-commerce market by integrating WeChat and using online-to-offline data to better target consumers.”

Sourced from eMarketer, BBC; additional content by WARC staff