Disposable income surges in China

27 June 2012

BEIJING: Disposable income levels in China have increased more than ten-fold in the last thirty years, a shift now yielding substantial opportunities for brand owners in the country.

According to analysis by the China Market Research Group, the insights provider, of official government data, the typical disposable income for Chinese households has surpassed $3,000 per year.

This total can be compared with the $760 logged in 2000, some $316 in 1990, and $280 in 1980, the company estimated.

More specifically, the firm's study demonstrated that there remains a major variation in the spending power of people in China's cities when measured against their peers in rural regions.

As such, in metropolitan centres like Beijing, Shanghai and Shenzhen, disposable income rates stand at $12,000 per year, versus $1,000 in the countryside.

The average person living in these cities can afford to rent a 700-square-foot apartment, spend 35% of their income on food and save a further 20%.

Generally, members of this audience use public transport rather than owning a car, rarely owning or using credit cards, and paying around $10 per month for a mobile phone, or $20 for iPhone users.

Many will eat out once or maybe twice per week, with KFC and Pizza Hut, the fast-food chains, among the operators benefiting from this trend. These consumers are also able "to be brand-conscious" on occasion, the study stated.

"In most cases the wife, who typically has a full-time job, makes most household purchasing decisions and is willing to trade up to buy foreign brands from companies like Procter & Gamble and Unilever for products like shampoo," James Roy, senior analyst at the China Market Research Group, told CNN.

Helen Wang, a consultant and author, argued a Chinese "middle class" household earns between $10,000 and $60,000 a year. Approximately 300m people are in this demographic today, an amount anticipated to hit at least 600m in fifteen years' time.

"Somehow people always seem to have a lot of cash, even though official data shows income at about $3,000 per capita," said Wang. "There's a lot of grey income in China."

"Buying Louis Vuitton, Apple or other cool stuff is important for many Chinese, showing off that they're modern, sophisticated and have status," she added.

Previous research from Credit Suisse, the financial services provider, and led by Professor Wang Xiaolu of the China Reform Foundation, suggested average income rates in China could be 90% higher than the government's projections.

Data sourced from CNN; additional content by Warc staff