Many Chinese consumers unwilling to spend

25 August 2010

BEIJING: Consumers in urban and rural areas of China are displaying considerable differences in terms of their current attitudes and spending plans, according to a new report.

The Economist Intelligence Unit surveyed 2,651 adults to assess whether the government's 4tn yuan ($588bn; €465bn; £382bn) stimulus package had led to the desired changes in behaviour among shoppers.

Overall, 91% of respondents said they are positive about the future, a trend that was particularly pronounced for comparatively wealthy people living in cities.

Just 17% of this group displayed hesitancy when it came to spending money, and 98% agreed their outlay had expanded during the last two years.

Television and mobile phone penetration has reached 100% in urban areas, and 99% concerning personal computers and most mainstream white goods.

Members of this demographic enjoyed far higher levels of car ownership than the norm at 61%, but the enthusiasm to acquire a new vehicle was high throughout China.

However, the vast majority of participants in the countryside were unwilling to boost household expenditure, and few were planning to make big-ticket purchases or upgrade existing products.

Even among the 50% of people in these areas that do not own a fridge, only 40% expressed a wish to buy one, and a third believed it would be at least two years before they did so.

In all, 10% of contributors from villages and similar locations were connected to the web and approximately 16% had used the internet, the same number as possessed a PC.

While 91% of the sample in undeveloped regions had a mobile phone, a 9% minority utilised wireless devices to surf the net, due to issues linked to affordability and a lack of digital literacy.

Television has an almost ubiquitous presence in rural markets, and 17% of people in villages wanted to obtain a better TV set, close to double the total for mobile phones, in second place on this metric on 9%.

Food made up 35% of monthly expenditure for shoppers in the countryside, compared to 26% in Beijing, Guangzhou and other such urban hubs.

More broadly, financial conservatism was largely a nationwide trait, with 67% of those polled in Tier 1 cities like Shanghai and Beijing saving around 25% of their income, and a third retaining at least 35%.

Elsewhere, 70% of the panel in Tier 2 and Tier, as well as 69% in Tier 4, saved a quarter of their monthly earnings, despite benefiting from a lower cost of living than in Tier 1.

Slightly over a fifth of rural respondents were saving to buy "major consumer goods", under half the figure recorded in cities.

"We believe that in order for Chinese consumption to be truly unleashed, consumers need to feel confident that life is getting better," the EIU report argued.

"If they are worried about the future, and about basic needs such as healthcare and education, they will be less likely to spend."

Eight out of ten rural participants to the survey listed health as primary concerns, falling to 46% in urban centres, where employment followed in second place on 31%.

Some 54% of city-dwellers thought the environment was a matter of importance, suggesting brands with strong sustainability and eco-friendly credentials may find a receptive audience.

Data sourced from Economist Intelligence Unit; additional content by Warc staff