Chinese consumers will become more emotional and individualistic this decade, as the Asian giant’s economic engine shifts gear from investment to consumption, a new survey showed yesterday.
“Meet the 2020 Chinese Consumer”, a report by consultancy group McKinsey, says consumption will account for about 43 per cent of China’s economic growth by 2020, compared to 33 per cent in 2010.
Discretionary spending will grow 13.4 per cent during the same period, said the report, which was based on interviews with over 15,000 people.
“The difference henceforth is that consumption, rather than investment, will be the driving force,” it said.
The report forecasts major shifts in the spending behaviour of consumers in the world’s second largest economy, with huge consequences for companies trying to tap the Chinese market.
Higher wages, urbanisation and industrialisation, greater social mobility, improved education, the one-child policy and stark “imbalances” between different regions would be key factors in China’s future spending habits.
Average per household annual disposable income would double from about $4,000 to $8,000 over the decade, as the economy grew 7.9 per cent annually compared to 2.8 per cent in the United States.
The number of relatively wealthy “mainstream” consumers in households with annual disposable income of $16,000 to $34,000 would soar from six per cent of the urban population in 2010 to 51 per cent in 2020.
“Although their absolute level of wealth will still be quite low compared with that of consumers in developed countries, this group comprising of close to 400 million people will become the standard setters for consumption,” the report said.
While the Chinese would remain canny buyers who compare products before parting with their hard-earned cash, they would also become more inclined to let emotions govern their choices.
“As income continues to grow, (spending patterns) will shift to the emotional aspect of whether this is something that ‘makes me feel good’,” McKinsey’s head of consumer goods for Greater China, Max Magni, told reporters.
“We will see a much more sophisticated shopper.”
Citing an example, the report said that when buying a chocolate, only eight per cent of Chinese consumers in 2009 thought concepts such as “showing my status” or “this is a brand for people like me” were important. The figure now stands at 19 per cent, and 24 per cent for wealthier consumers. Even so, impulse purchases will remain relatively rare, with only 28 per cent of Chinese admitting to buying on impulse compared with 49 per cent in the United Kingdom.