26 July 2017
China’s Middle-Class Consumers: Attitudes towards Service Consumption
- Chart: Reasons Driving Consumption of Innovative or High-end Services
- Chart: Consumption of Leisure_Entertainment_Sports Services in the Past Year
- Table: Breakdown of Responses on Consumption Attitudes towards Training Courses
- Chart: Consumption of Travel Services in the Past Year
- Table: Consumption of Travel Services in the Past Year
- Table: Breakdown of Consumption Attitudes towards Travelling
- Chart: Financial Services Used in the Past Year
- Table: Financial Services Used in the Past Year
- Chart: Attitudes towards “Future Money Requiring Interest Payment”
- Table: Attitudes towards “Future Money Requiring Interest Payment”
- Table: Design of Focus Groups
- Table: Design of Online Questionnaire Survey
- Table: Average Monthly Household Income of Respondents (RMB)
- Table: Occupation of Respondents, by City (%)
- Table: Education Level of Respondents, by City (%)
- Table: Marital Status of Respondents, by City (%)
One of the policy directions of China’s 13th Five-Year Plan related to the promotion of consumption is to expand service consumption. According to a recent survey conducted by the HKTDC , consumption of leisure, entertainment and sports services by middle-class consumers in the Chinese mainland grew rapidly, with consumption in fitness, beauty and overseas travel services set to grow further. Meanwhile, demand for training in lifestyle interest pursuits and personal enhancement are also increasing briskly.
Consumers, open-minded about innovative investment products, are willing to pay for premium quality, professional financial services and are receptive to “spending future money”. Of the survey respondents, 66% said that “pleasing themselves” and “wanting to experience better and more unique services” are the reasons driving them to consume innovative or high-end services.
Demand for Quality, Style and Comfort
From consumer focus group discussions it is evident that the mainland middle-class not only demands high-end service consumption, they are also more fastidious about all aspects of living and will pay more attention to the style, comfort and professionalism associated with a service. For example, the special ambience of a restaurant is a new consumption element which people are attracted to and willing to pay for. Likewise, in female fitness training, “slimness” is no longer taken simply as the criterion for beauty. It has been replaced by “body shapeliness” with muscle definition and strength, which symbolises the notion of breaking away from traditions and a bold expression of self-confidence.
As the middle class travels aboard more often, they also enjoy trips that address specific needs, so they have evolved from taking self-guided trips to taking “tailor-made trips” and “high quality unwinding vacation trips”. The middle class is also pursuing lifestyle interests and personal enhancement. For example, as society is clamouring for quick success and instant benefit, a number of the participants mentioned that they have taken classes in oil painting, flower arrangement and baking/cooking in a bid to achieve balance and stillness of the mind. With China’s deepening integration with the rest of the world, Western lifestyle and food are having increasing impacts on the middle class and Western style living is proliferating.
At the focus groups, participants made the following remarks:
“Previously, restaurants of the same class were decked out similarly, so location was the reason for choosing. Now there are many places with special decoration themes; their food is quite good, and they often draw a full house.”
“Previously, when I went to the gym, I simply wanted to work out and use the spa afterwards. Now I would shell out for a private trainer to design customised diet and fitness exercises on a one-on-one basis to ensure safety.”
“The boss of a French-style dessert shop is a cordon bleu cook, so I just go and try it out.”
“I’m here for a vacation and I don’t want too much bustle. So I’ll set a slow pace for the whole trip. Every day I’ll sleep until I wake up naturally, eat something and then go out to take a stroll.”
“I have joined a baking class. I like to prepare different types of cakes using different ingredients all by myself after the rest of my family have gone to bed. I think this process can calm me down.”
“Pleasing Oneself” Drives Innovative or High-end Service Consumption
The focus group discussions formed an impression that the new generation have many chances of coming in contact with good brands and good products in the course of growing up. A good family environment results in their having a sense of fashion that is more subdued rather than what’s in vogue, and they do not seek other people’s recognition of their social status.
It has been said that China’s one-child policy in the past has produced a new-generation middle class who are more focused on their own living than any generation before them. This affluent new generation is more confident and assertive, and their consumption philosophy has also changed from ‘brand flaunting’ to a more personalised one, featuring diversified pursuits for ‘pleasing themselves’.
The survey shows that 66% and 65% of the respondents respectively agree that “pleasing oneself” and “wanting to experience better and more unique services” are the main reasons driving them to consume innovative or high-end services. Among the female respondents, 73% agree that “pleasing themselves” is the main driver, compared with only 60% of male respondents.
Consumption in Leisure/Entertainment/Sports Services Grows Rapidly
Among the lifestyle services used by the respondents in the past year, demand for fitness services and beauty services continues to rise, making them the top two items in leisure/entertainment/sports consumption. In the past year 43% of respondents say they “had membership of a fitness club and worked out regularly”, while 37% “visited beauty parlours/spas to get massage/facial/skin treatments”. Compared with the 32% and 28% of respondents respectively in 2013 survey, there are significant increases in these two items. In the current survey, these services are also the two identified by most respondents in which consumption frequency has increased.
Demand for training in pursuing lifestyle interests and in personal enhancement is also growing rapidly. Whether training to acquire professional qualifications or to pursue personal interest, demand is significantly higher than in the 2013 survey. 24% and 23% of the respondents have “attended training courses to obtain professional qualifications” and “attended courses purely for personal interest (art, cooking, etc)”, compared with only 12% and 11% respectively in 2013.
The survey also shows that training courses purely for personal interest are the most popular, with 48% of respondents agreeing that “I prefer lifestyle interest courses purely for personal interest; I attend because I like them” most accurately describes their attitudes. Male respondents compared with female respondents agree more that “I prefer training courses because they can raise my professional qualifications or help me in my work”. Female respondents, on the other hand, agree more that “I prefer courses in personal enhancement such as art courses that can raise my appreciation capability.”
The current survey shows that 68% of respondents say that “regular exercise has already become part of daily life”. In addition to having “membership of a fitness club and worked out regularly”, 10% of the respondents have participated in various types of marathons in the past year. In fact, marathons have become all the rage in the mainland in recent years. It has been reported that, in 2016 alone, China hosted as many as 306 marathons and related races registered with the Chinese Athletic Association. Compared with only 22 races in 2011, the growth has been explosive and such a boom in sports should prompt the sales of various types of sports equipment.
Outbound Travel Boom
According to World Tourism Organisation figures, China’s outbound tourist numbers were up 6% in 2016 to 135 million. Since 2012, China has become the largest source of outbound travellers in the world. The HKTDC’s survey shows that 40% of respondents have travelled to Hong Kong, Macau or Taiwan under the Individual Visit Scheme, versus only 29% in the 2013 survey. Moreover, 34% and 31% respectively have travelled abroad in groups (excluding Hong Kong/Macau/Taiwan) and in self-guided trips (excluding Hong Kong/Macau/Taiwan). In contrast, the 2013 survey showed that only 16% of respondents had travelled abroad.
In addition to the increase in overseas trips, the demand for premium vacations and high-end hotels continues to grow, with 36% of respondents having stayed in five-star or above hotels in the past year. The higher the household income, the more travels the respondents have made, and the proportion of increased travel frequency is also higher.
From Sightseeing to Unwinding
The focus group discussions clearly showed how mainland middle class’ travel demand has evolved from sightseeing to self-guided trips. As the middle class’ travel frequency increases (the majority of the focus group participants say they travel two to three times a year), they will categorise their trips into ones that address specific needs. For shopping trips, their requirements are to stay in downtown areas with convenient shopping, eat good food and buy good things. For leisure trips, they would require good hotels so that they can relax every day. For nature sightseeing trips they want to see the novel and the rare, particularly unusual scenery.
Though the proportion of respondents who have travelled abroad in groups is still slightly higher than the proportion that have taken self-guided trips, the increase in proportion of self-guided trips is higher. In the survey of middle-class attitudes towards travel consumption, more than 50% of the respondents prefer “tours with detailed schedule and planning”, whereas the proportion of those who prefer joining tour groups is only 12%. Thus in future, the travel preferences of the middle-class may further evolve from “self-guided trips” to in-depth “private tailor-made trips” and “high quality unwinding vacation trips” with specific objectives.
Open-minded About Innovative Investment Products
From the focus group discussions it can be seen that many middle-class consumers have a habit of managing their own finances. In recent years, with a great variety of financial products launched on the internet, many respondents have begun buying financial management products online, while they are also very receptive to trying out innovative financial investment products.
Focus group participants made the following comments:
“I have invested in some P2P products. These are offered by private businesses and (I’m) not sure if they have been filed with the authorities. It could be a type of usury in disguise; there is a term limit and there will be some risks, but so far interest has been paid out regularly.”
“I have bought into two new products through equity crowdfunding schemes; one is a total loss, and the other has been generating profits so far.”
Over 50% of the respondents have used innovative investment products in the past year, reflecting that the mainland middle class is open-minded about innovative investment products. In addition, 30% of respondents have a financial card that charges high annual fees while 29% have used intermediary service for professional financial planning, demonstrating that they are willing to pay for premium professional services. The proportion of male respondents using innovative investment products is markedly higher than their female counterparts, but the proportion of female respondents using intermediary service for professional financial planning is higher.
Not Averse to “Spending Future Money”
Mainland middle-class consumers are not only open-minded about innovative investment products, they are also receptive to consumer borrowing. Among the respondents, 40% said they have used “future money requiring interest payment” and paid interest through instalment payment/paying the minimum repayment amount in order to buy the products or services they desire (excluding big-ticket items, such as real estate and car). In addition, 48% of respondents also said that when funds are tight they are not averse to “future money that requires interest payment”. In other words, 88% of the respondents are receptive to consumer borrowing.
With its high spending power and penchant for consumption, the mainland middle class is the main target of Hong Kong manufacturers and traders eyeing the mainland market. HKTDC Research has carried out several studies on mainland middle-class consumers in the past for the purpose of tracking and understanding their spending patterns, mentality and changes in lifestyles, in order to provide points of reference for Hong Kong companies wishing to tap the mainland market.
Apart from trying to discover the general characteristics of middle-class consumption behaviour, the present survey also explores the impact China’s 13th Five-Year Plan on middle-class consumption and way of life. One of the policy directions of the Plan is promoting new consumption patterns, which includes encouraging the consumption of green, fashionable and quality products, encouraging the development of custom-made services to meet the demand for personalisation, expanding service consumption, and advancing online/offline integration. Moreover, to take into account the post-80s consumers, who grew up in times when China experienced substantial economic growth and whose upbringing is very different from that of their parents, efforts were made in this survey to reflect their consumption characteristics.
The survey was carried out in January 2017 in eight mainland cities where a total of 2,000 consumers were polled by online questionnaire. Before conducting the questionnaire survey, six consumer focus group discussions were held in Shanghai, Wuhan and Chengdu (two in each city). The objective of the focus group discussions was to further understand the spending mentality of mainland consumers by way of qualitative analysis.
 See appendix for details of the survey.