Trends mixed in China

02 November 2011

BEIJING: A majority of Chinese consumers are boosting their expenditure levels, but this is as much the result of price inflation as incremental spending, new research has revealed.

McKinsey, the consultancy, surveyed 15,000 adults living in 49 cities across the country, and found 58% of participants expected their personal income would rise in the next year.

This constituted an improvement from the 39% recorded in the firm's equivalent study from 2010, and surpassed comparative scores of 33% and 28% yielded by US and UK shoppers respectively.

More broadly, 83% of the sample had increased their outlay in at least one product category over the course of 2011, versus 81% in 2010.

Exactly 50% of contributors stated that inflation was the main driver behind this lift in expenditure. Indeed, 65% of people questioned said housing and utility prices were rising, beating food on 63%.

Another 49% of those polled suggested accessories and apparel were now more expensive, reaching 40% for transport, 32% for appliances, 29% for entertainment and 24% for digital gadgets.

Elsewhere, 35% of shoppers reported that they were trading up in a minimum of one category, an increase on 26% in 2010.

An additional 60% of interviewees are buying in greater volume than before, growing from 54% during the same period. A modest 5% are spending more on new products.

Some 42% of respondents thought "well-known brands" offered "better quality", a rating which actually hit an even higher 45% in 2009.

However, similar research conducted by McKinsey in the US pegged this figure at 31%, falling further, to 27%, in France.

Word of mouth remains a particularly influential factor for Chinese shoppers, 71% of which had learned about an electronics product from a recommendation by a friend or family member.

Moreover, 68% of consumers had previously been pointed towards an item of clothing thanks to the favourable feedback provided by a trusted source of information.

"The role of friends and family is incredibly important in China, more than anywhere else in the world," Max Magni, head of McKinsey's consumer practice in Greater China, said "It's so deeply ingrained in the culture."

Data sourced from Financial Times, Wall Street Journal, China Daily, People's Daily; additional content by Warc staff