Chinese consumers continue to spend

17 November 2009

BEIJING: Consumer spending levels in China have recorded a double-digit improvement over the course of this year to date, but considerable room for growth still remains for brands in a variety of different sectors.

Retail sales increased by 15.3% in real terms in the world's most populous nation during the period from January to October, an uptick of 2% on the expansion registered over the previous nine months.

Even categories facing considerable challenges in the US and Western Europe have enjoyed growth in the rapidly-developing market, with, for example, sales of passenger cars leaping 76% in China in October.

However, consumer spending accounted for just 35% of Chinese GDP last year, compared with 46% in 2000, while the savings rate for disposable income also stood at 28% in 2008, and these trends remain influential.

"The consumer revolution already has been happening, but it could be much, much better," argued Yuwa Hedrick-Wong, a specialist advisor to MasterCard Worldwide.

Recent figures from Nielsen have shown that confidence levels in the Asian economy are rising, with 57% of people categorising their employment prospects for the 12 months as being "excellent."

Mitch Barns, president of Nielsen Greater China, said that, in July, the popular perception of the financial climate was that the economy was "on the road to recovery", and this optimism has continued to grow.

"Consumers are gradually feeling more comfortable with their situation and feel that the economy is moving in the right direction," he added.

The research firm further suggested that product launches and original goods can be expected to enjoy a considerable advantage among shoppers.

"Companies that focus on innovation and introducing new products to the market will be the ones to drive consumption throughout China," said Barns.

More specifically, it appears wealthy consumers are spending a smaller share of their income compared with their less well-off counterparts.

Athar Hussain, director of the Asia Research Center at the London School of Economics, said "the poorer people tend to consume higher proportions of their income than richer people."

"So if China shifts the distribution of income in favour of lower-income groups, consumption will increase," he concluded.

Data sourced from China Daily/Time; additional content by Warc staff