Meet the Chinese Consumer 2020

Meet the Chinese consumer 2020

Summary

Most large consumer facing:

The Consumption in China will be the driving force for GDP growth. It will account for 43 percent of total GDP growth by 2020, compared with a forecast contribution from investment of 38 percent. Transition from investment-led to consumption-led growth will depend on several factors: continuous rapid urbanization, government measures to improve social security and boost private consumption (aggressive measures to boost private consumption are a key plank of the latest five-year plan), and financial sector and industrial reforms that will lead to the creation of service sector employment and increase income.

Changing Demographics:

Many of the changes taking place are common features of rapid industrialization: rising incomes, urban living, better education, postponed life stages, and greater mobility, for example. But there are also some unique factors:

* Per capita disposable income of urban consumers will double between 2010 and 2020, from about $4,000 to about $8,000.

* “Mainstream” consumers (relatively wealthy households-annual disposable income of between $16,000 and $34,00) is expected to reach 51 percent of the urban population compared to 6 percent at present.

* Why is this important for companies? 82% of the consumers fall currently into the “value” category ($ 6,000 to $16,000 annual disposable income), which has clear implications for companies that must decide between targeting the smaller group of affluent/mainstream consumers or stretch their brands to serve value consumers. This will not be the case in 2020.

* Currently, around 85 percent of mainstream consumers are living in the top 100 wealthiest cities. Another 10 percent of mainstream consumers live in the next 300 cities today, but this percentage will swell to nearly 30 percent by 2020.

* Life expectancy rises and birth rates fall—the latter the result of the one-child policy that was introduced in...