BEIJING: Annual consumer expenditure is set to almost triple in China by 2020, providing considerable opportunities for brands, McKinsey has argued.

The consultancy predicted that China's GDP would expand by 7.9% annually to 2020, with consumption accounting for 43% of this growth, higher than the 38% attributable to investment.

More specifically, shopper spending should increase from $1.5tr in 2010 to $4.4tr in 2020, as discretionary categories grow by 13.4% overall, semi-necessities like apparel and household products up by 10.9%, and food by 7.2%.

Urbanisation is likely to exert a profound impact in widening the demand, availability and affordability of goods, as the number of people living in developed rises to 850m in 2020, versus 650m in 2010.

Indeed, growth will be "concentrated" in these areas, with 14 of China's largest metropolitan centres appearing among the top 25 cities globally in terms of GDP growth during the timeframe under assessment.

Household disposable income levels in cities should also improve from $4,149 in 2010 to $8,185 in 2020. By the latter date, 51% of shoppers, or 167m residences, will be in the "mainstream" segment, with annual incomes of between $16,000 and $34,000.

Another 116m households, 36% of the total, could fall into the $6,000-$16,000 a year bracket, making them "value" customers. This group is currently the largest in China, comprising 184m households.

The affluent segment, with annual earnings of at least $34,001, will have reached 21m households by the end of the forecast period, some 5m more than in Germany, and only around 4.5m behind Japan.

Meanwhile, the average age of the Chinese population will rise from 34 years old to 37 years old by the close of the decade, with 20% of people in "city clusters" like Shanghai, Nanjing and Jiagjinji over 65 years old by this date.

By contrast, in Guamgzhou, Shenzhen, Nanning and Kunming, a majority of citizens will be under 34 years of age.

As affluence increases, the role of female consumers is also changing. The average age at which women have their first child has climbed from 24 years old to 27 years old in the past ten years, and 67% of females are already part of the workforce.

Elsewhere, the study predicted ecommerce will deliver around 14% of all retail sales. This figure is expected to contract to around 10% for groceries, but could reach 40% for electronics, McKinsey said.

Data sourced from McKinsey; additional content by Warc staff