Chinese Consumer Wealth

Related entries: Consumer Market, General, Research

The Chinese consumer is the next big thing (or the big thing that is already upon us), so a lot of research has been done on the subject. What follows is gleaned from the McKinsey Quarterly, and provides some useful insights into who they are, (and how much they may have in their wallets):

    • The top one percent of consumers, based in the big cities, control almost 10 percent of urban disposable incomes. Earning over RMB100,000 renminbi (about US$12,500) a year, they are active consumers of international brands and luxury goods.

    • When accounting for purchasing-power parity, RMB100,000 (US$12,500) provides the equivalent in spending power to US$40,000 in the US.

    • 250 million people already have household incomes of more than US$1,000 a year and 50 million have over US$3,500 a year – again their buying power in China is much higher than the dollar figures suggest.

    • By 2025 the lower middle class could number 520 million people with total disposable incomes of 13.3 trillion renminbi (US$1.66 trillion).

    • By 2025 the spending power of urban Chinese households could reach RMB20 trillion (US$2.5 trillion) a year – without considering the impact of any appreciation of the RMB.

While the dream of “a billion customers” will remain just that, it is clear that China’s professional, urban elite now represent an important market for branded and luxury consumers goods and services. One report notes a Goldman Sachs estimate that in 2005:

    “China’s purchase of luxury goods reached 6 billion USD, bringing its share in the global luxury goods market to 12%, but only about 2% of this amount comes from domestic purchases, with Chinese tourists’ purchases abroad comprising about 10%. Goldman Sachs predicts that by 2015, China will be first in world consumption of luxury goods.”

Quite apart from the excellent research provided by McKinsey, Goldman’s and others, there is also plenty of anecdotal evidence of wealth and spending power. Recent examples I have seen or heard include:

    • The trader boyfriend in Shanghai who sent his girlfriend a limo for her birthday (not as a hire for the evening, but as a gift – and just the latest of several similar gestures).

    • The Beijing businessman who called up an English friend to ask where he could get hold of the latest model Aston Martin.

    • The picky Beijing drivers who bought more Bentley’s Mulliner 728 limousines (UD$1.2 million each) than those in any other city in the world.

    • The wealth management companies racing to engage with the many premium bank account holders who maintain balances in excess of a million US dollars.

    • The businesspeople who buy franchise businesses for their relatives for tens of thousands of dollars.

    • The tens of thousands of consumers who have bought very expensive and exclusive mobile phones (costing thousands, rather than hundreds of dollars).

For more insights on marketing to Chinese consumers, refer to the books “One Billion Customers” and “Billions”. Both can be found here.

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6 Responses to “Chinese Consumer Wealth”

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