For the first time ever, sales of consumer electronics last year in Asia, led by China, exceeded sales in North America. To industry observers and demographers alike, the rapid growth of the Chinese market for consumer electronics comes as no surprise: There are now more than 160 cities in China with a population of more than 1 million people. In the United States, there are just nine.
This year, China's gross domestic product is also expected to rise, to 7.4%, and it is rising faster than that of the United States. Despite this growth, the sale of worldwide consumer electronics in Asia is predicted to drop 1% this year, according to the Consumer Electronics Association.
The dip isn't out of line with the global outlook for the year: Worldwide tech sales are expected to fall to $1.055 trillion this year, down from $1.068 trillion last year. (Why? For one thing, the tremendous undertow that is price pressure: The prices for technology-related products tend to fall faster than demand rises.) Still, for a rapidly growing market, it is not unreasonable to expect China to buck the global trend.
Amid uncertain global economic trends, the Chinese economy slowed down. That led to a series of falling dominoes: first, a decline in consumer confidence, then, a drop in sales of products that are not considered to be daily necessities. Add the May 2013 cessation of government subsidies for consumer electronic products in China -- for several years, the country's consumer electronics market relied on them to help stimulate demand in rural and lower-class areas -- and the country's demand for consumer electronics began to flag.
"We had seen stories where people in China were buying electronics because the subsidies were in place," said Shawn DuBravac, chief economist for the CEA. "People buy products when they have the means, and the subsidies were a big part of this. The products that the Chinese were buying included large-screen TVs -- it was like in the United States after World War II, when having a radio and later a TV was a sign of a rising middle class. This is true of all countries around the world, whether it is in Africa, southeast Asia, or China."
Though the subsidies from Beijing have ended, it won't mean an end to China's growing middle class, DuBravac said. "Subsidies have played a role," he told Fortune, "but they are not the defining role."