Young consumers keen to spend in China

05 August 2010

BEIJING: Young consumers in China are "unbelievably optimistic" about their future prospects, a trend which has resulted in a spending boom among the demographic.

Analysis from the China Market Research Group suggests this emerging generation of shoppers are a driving force behind the current surge in expenditure in the country.

"We interviewed 5,000 people under the age of 32 across China. They have an effective savings rate of zero," said Shaun Rein, the company's managing director.

"Younger Chinese are unbelievably optimistic. That's why what you see is a secretary earning $600 (£376; €454) or $700 dollars a month – they're the ones buying thousand dollar Gucci bags."

This compares starkly to the habits of older consumers, who typically attempt to retain around half of their income.

In a further indication of a shift in behaviour, Rein stated the number of credit cards in circulation now stands at 200 million, measured against 13.5 million just five years ago.

Another primary feature of the Chinese industry landscape is that graduates and their peers of a similar age tend to change jobs with an unusual degree of frequency.

Rein added the annual labour turnover in China has reached approximately 30%, three times the total recorded in the US.

Ongoing polls of 10,000 adults in 15 cities throughout China have revealed a variety of broader findings.

For example, women are often playing the lead role when it comes to making big-ticket purchases, and regularly command the highest salary in a household.

This has led to a heightened emphasis on issues such as food safety, following on from the scandal related to the sale of tainted baby milk.

The quality of products is subject to equal scrutiny, with luxury items, and particularly those made by foreign manufacturers, gaining ground as a consequence.

Spending is also rapidly accelerating in rural regions and lower-tier cities, to the benefit of white goods and other offerings included in the government's stimulus package.

While Chinese shoppers officially contribute only 36% of GDP, Rein argued formal estimates neglect the grey market, which lifts this total to between 50% and 70%.

Many companies also provide misleading data to the authorities with regard to how much employees earn, thus reducing corporate tax and social security payments.

"When you look at spurring consumption in China, we don't have to worry about it, because it's already happening," Rein concluded.

Data sourced from; additional content by Warc staff