BEIJING: A combination of more high earners and easier finance is set to drive growth in China's consumer spending over the next decade.
A new report from the Economist Intelligence Unit (EIU) has predicted that the proportion of the population commanding upper-middle and high incomes will more than treble to 35% by 2030; by that year the number of people earning above US$10,000 per year will reach 480m, Shanghai Daily reported.
"We expect that the purchasing power of individual Chinese consumers in 2030 will be roughly akin to that of South Korea today or the US in 2000," said Wang Dan, EIU China analyst.
The consequence is likely to be that Chinese consumers, and especially younger ones, will look to trade up to premium brands and to spend more on leisure and tourism.
Further down the earnings scale, a new development has been the growth of consumer finance firms targeting low-income groups such as migrant workers, who frequently lack access to traditional banking services.
According the South China Morning Post, 15 such firms were operating on the mainland in June, with more seeking licences to enter this market, as data technology allows a better assessment of risk.
One of them, Home Credit, reports that more than 60% of its mainland clients are aged between 20 and 30, and most do not have a credit card.
These consumers are now borrowing to buy products ranging from smartphones to motorcycles, marking a significant shift in consumer mentality from that of previous generations.
"Unlike the older generation of migrant workers, who opted to send most of their hard-earned money back home, the young generation of Chinese migrant workers are trying hard to fit into an urban lifestyle," noted Zhang Hong, a financial sector analyst at market research firm TNS.
"For them, buying an iPhone could make a difference psychologically and they are willing to buy it on credit."
A separate report from real estate business CBRE found that more than 60% of mainland Chinese millennials were still living with their parents, in part because of high property prices in China's cities.
These people were said to be spending 14% of their income on non-food shopping – the highest rate in the Asia-Pacific region – but the report also warned they could save more they spend in the future.
Warc's latest International Ad Forecast anticipates a 7.0% rise in Chinese consumer spend this year, before the growth rate eases to +6.5% in 2017.
Data sourced from Shanghai Daily, South China Morning Post, Ecns; additional content by Warc staff