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China consumer spending won't slow

News, 14 March 2016

SHANGHAI: The relative economic slowdown in China is unlikely to have a major impact on consumer expenditure, as three “megatrends” will add the equivalent of the Japanese economy in incremental spending over the next four years.

That's the view of leading internet business Alibaba; in Forces of change: Chinese consumer spending in 2016, an article published on Warc, it highlights rising incomes, a free-spending younger generation and the growth of e-commerce as factors that will drive spending in the years ahead.

Recent research from Nielsen has also indicated that Chinese consumer confidence remains buoyant with many Chinese planning to spend despite slowing economic growth. Consequently, prospects for brands in China may be brighter than previously thought.

Alibaba cited figures from Boston Consulting Group suggesting that even if China's GDP growth slows to 5.5%, a full point below the 6.5% government target, the country's consumer economy will expand by more than half to reach more than $6.5tn by 2020.

China's anticipated consumer market growth for the next five years, even on slowdown models, is equivalent to the size of the entire Japanese consumer economy.

Millennial Chinese in big cities, who are mostly college educated and brand conscious, will lay out more cash on products and services than the generations that came before.

Consumption by shoppers under 35-years-old is growing at 14% annually, double that of their elders, and they are outspending older generations by up to 40% in many product categories.

E-commerce will play an ever-bigger role in China's economy, it said, particularly in rural areas where demand for products available in China's cities continues to grow. FMCG products and home appliances are likely to be the big movers.

And it's not just millennials who are buying online. Nielsen's research indicated that 45% of female respondents born in the 1970s had made online purchases in the last quarter of 2015.

Overall, e-commerce accounts for between 15% and 20% of China's total transactions, up from 3% just five years ago, and is set to take 25% by 2020.

Data sourced from Alibaba, Marketing; additional content by Warc staff