18 July 2017
China’s Middle-Class Consumers: Preferences and Spending Trends
- Chart: Expected Income in Next 2-3 Years_Impact of Economic Slowdown on Daily Expenditure
- Table: Average Ownership of Household Assets (%)
- Table: Allocation of Monthly Personal Expenses
- Chart: Products Purchased in the Past Year
- Table: Products Purchased in the Past Year
- Table: Products Purchased in the Past Year
- Chart: Custom-made Products or Tailor-made Products Purchased
- Chart: Change in Lifestyle in Recent Years
- Table: Change in Lifestyle in Recent Years
- Chart: Attitude Towards Quality and Spending_Attitude Towards Trends
- Chart: Attitude Towards Brands_Attitude Towards Imported Products
- Table: Attitude Towards Quality and Spending
- Table: Attitude Towards Quality and Spending, by City
- Table: Attitude Towards Trends
- Table: Attitude Towards Trends, by City
- Table: Attitude Towards Brands
- Table: Attitude Towards Brands, by City
- Table: Attitude Towards Imported Products
- Table: Attitude Towards Imported Products, by City
- Table: Design of Focus Groups
- Chart: 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 (%)
Although China’s economic growth has slackened in recent years with its growth rate entering a “new normal”, mainland middle-class consumers are generally optimistic about the prospects for their income and spending. According to a recent survey conducted by the Hong Kong Trade Development Council , 81% of the mainland middle-class consumers expect their income to continue to increase in the coming two to three years. Regarding the impact economic slowdown may have on consumption, only 14% of the respondents say they will be more prudent in their daily expenditure, while 51% say they will spend more than before in pursuit of a higher quality of life. Taking regular exercise and eating western food have become features of the middle-class lifestyle. The continued rise in demand for better quality shows that mainland middle-class consumers are attaching more importance to personal feeling and are more confident and assertive in spending.
Confidence about Future Income and Spending
Although China’s economic growth has slackened in recent years with its growth rate entering a “new normal”, mainland middle-class consumers are still upbeat about the prospects for their income and spending. According to the present survey, 81% of the mainland middle-class respondents expect their income to continue to increase in the coming two to three years. Regarding the impact economic slowdown may have on day-to-day consumption, 51% of the respondents say they will spend more than before in pursuit of a higher quality of life, while only 14% say they will be more prudent in their daily expenditure.
There is little obvious difference between the responses of those surveyed in different cities when it comes to confidence about future income and consumption. For instance, 85% of the respondents in Beijing and Harbin expect their income to increase, the highest proportion among all cities polled, while 77% of the respondents in Shanghai hold the same view. Of all the cities featured in the survey, Wuhan has the highest proportion of respondents saying that they will spend more prudently than before, at 17%, while the rate in Harbin is the lowest, at 10%.
Demand for Financial Investment and Insurance Services Rises
As income increases, the household assets of the respondents, including home and car ownership, are also rising. Among the households interviewed in this survey, 95% own property on the mainland, an increase on the 89% figure from the 2013 survey. It is worth noting that 36% of the respondents own “housing under mortgage”, markedly higher than the 27% in the 2013 survey, while the total percentage of those who own “housing under mortgage” and those who own “housing with mortgage paid off” is higher than the 95% of home ownership. This shows that the proportion of respondents who have bought more than one residential unit has increased.
79% of respondents owned cars, a figure significantly higher than the 55% in the 2013 survey. 50% of the cars owned have a value exceeding RMB150,000. The ownership of VIP club/recreation club membership is 19%, again significantly higher than the figure of 4% in the 2013 survey.
Spending on household/personal daily consumption still takes up the lion’s share of how household income is allocated. However, as income continues to rise, middle-class households are putting more of their income into financial investment and insurance. It now accounts for more than a quarter of respondents’ household income, up from 15.8% in the 2013 survey. As a share of household income, money put towards financial investment and insurance registered the highest growth of any of the categories in the survey. Instalment payments for housing loans and auto loans have also surged as a proportion of household expenditure.
Spending on Imported Food, Organic Products and Overseas Online Shopping Trending Upwards
It is said of mainland consumers that, as they get wealthier, there is a shift in their consumption patterns – starting at “from (having) nothing to something”, moving to “from something to more”, and then to “from more to better”. This is particularly the case with the middle class, whose demand for higher product quality has increased in recent years, especially in their demand for health-related products.
The survey shows that the category labelled “imported foods/beverages/health foods” was the one with the highest purchase rate in the past year, with 75% of the respondents indicating they have bought such products and 47% saying their purchase frequency was higher than before. It is believed that this phenomenon is related to the rise in overseas online shopping (a practice commonly known as “haitao”) and e-commerce in recent years, which has made it much more convenient for people to buy imported goods. Meanwhile, the purchase rate of “organic products” is 69%, with 37% of the respondents saying that their purchase frequency was higher than before.
Some participants in the focus groups remarked that the rise of online shopping of live and fresh foods has made it much easier for them to buy green foods, especially organic vegetables and imported meats. Many of the respondents have already developed the habit of buying live and fresh foods online and some of them even order organic vegetables on a regular basis. The purchase rate of “foreign products via haitao” is 43%, a figure significantly higher than that found in the 2013 survey . It is interesting to note that the higher the household income, the greater the variety of products bought, especially where professional sporting equipment, haitao goods, exclusive designer products and custom-made products are concerned.
As regards gender differences in consumer preference, women in general go more for beauty and food products while men favour “smart” and high-tech products and sporting goods. The survey finds that female respondents tend to purchase more imported foods, high-end fashion items and accessories, international brand cosmetics, and products bought via haitao, while male respondents tend to buy more of the latest models of electronic products/high-tech products, smart household appliances, and professional sporting equipment.
Wider Range of Custom-made Products
One of the policy directions set out in China’s 13th Five-Year Plan involves promoting consumption by encouraging the development of custom-made services meeting the demand for personalisation. According to the survey, 12% of the respondents have purchased custom-made products in the preceding year, a figure more or less the same as that found in the 2013 survey. However, the proportion of respondents with a monthly household income of over RMB40,000 who have bought custom-made products stood at a high of 26%.
Although overall the proportion of consumers who have purchased custom-made products is not high, in terms of the type of custom-made product bought, the purchase rate of certain products registered significant growth. For instance, compared with the 2013 survey, the proportion of respondents who have purchased custom-made furniture rose from 11% to 52%, custom-made household decorative items/displays from 6% to 40%, custom-made bags (handbags, wallets, luggage etc) from 5% to 38%, and custom-made cosmetics/skincare products from 5% to 29%. This suggests that consumers interested in custom-made products are now interested in a wider range of products. The main reasons given for buying custom-made products are to “meet personal demands or styles” and to “express my personal tastes”.
Change in Lifestyle: Regular Exercise and Western-style Food
Both the focus groups and questionnaires found that exercise has become part of the daily life of mainland middle-class consumers. The fact that they are paying greater attention to health reflects the impact keeping fit has on the mainland. 68% of the respondents in the survey said that they were “exercising more, and regular exercise has become part of (their) daily life”. Nearly 50% of the respondents said they were “patronising western eateries more often than before”, which shows that the impact western lifestyle and food has on the mainland middle class is increasing. About half (51%) of the male respondents said that they “keep an eye on information about foreign technology so (they) can learn more about the latest innovative high-tech products”, but only 38% of female respondents hold the same view. Women tend to “keep an eye on information about foreign trends so (they) can learn more about new trendy products”.
Trading Up and Becoming More Assertive
In recent years, middle-class mainlanders’ demand for premium products has risen greatly. In the survey, 60% of the respondents said that “the grade of products and services I use now is higher than before, even though this means greater spending”. As many as 73% of respondents with a monthly household income of over RMB40,000 agreed with this statement. In Beijing, Guangzhou, Shenyang and Harbin, over 60% of the respondents agreed with it.
The main reasons for buying higher quality products are changing. In the past, many consumers tended to buy high-end branded products in order to show off. While 52% of the respondents agreed that “using products of well-known brands can lift my self-image”, 56% of them also concurred that “I attach more importance to personal feeling and style and would not follow trends blindly”. Findings of the focus groups and questionnaires show that the new-generation consumers in particular do not seek to identify themselves with brands although they do use brands. In other words, they are more confident and seek to “please themselves” without desiring other people’s recognition of their status.
In the last 10 years, as the purchasing power of mainland middle-class consumers has continued to rise, many leading international brands have made their way into the life or home of the middle class in various forms. From the consumer focus groups, it became clear that – after going through a wave of buying renowned international brands – people now care less about lifting their self-image through brands. Today, people no longer go after leading brands, but instead create a self-image with personal taste through mixing and matching and creating unique designs. At the focus groups, respondents have made the following remarks:
“There was one occasion when (I) bought a dress of a certain brand and thought it was cool, but then (I) saw two other people wearing the same design in the street and immediately (I) felt very embarrassed about wearing the same dress.”
“I would spend a lot of efforts finding clothes via haitao; their prices are better and (my) hope is they are unique.”
“I would look for some foreign designer brands. Once (I) have found (brands) that suit my style, (I) would keep on buying.”
“In the past popular meant ‘used by everyone’ and ‘bought by everyone’. But now I go after things that ‘suit me’.”
Mainland middle-class consumers are now moving from buying quality for the sake of it to pursuing “personalised trendiness”, which means they are devoting more efforts to creating a unique individual style while becoming increasingly dissatisfied with popular brands. This is particularly the case with young consumers. Among respondents within the 25-30 age group, 29% agree that “it is not important whether the brand is well-known or not, the most important thing is whether it is fashionable and stylish”, a percentage significantly higher than the 24% of respondents within the 37-50 age group who hold this view. 32% of female respondents agreed with that statement, while only 22% of male respondents did so.
Many middle-class consumers have a penchant for imported products, with 33% of the respondents saying that “I tend to use imported products more than domestic products even though the prices are higher.” At the focus group discussions, many participants remarked that they tend to buy foreign products. This is partly due to there being a diversity of online platforms and an increasing range of imported products, making it much more convenient for people to buy products from all over the world. Another reason for this phenomenon is that people in general are still skeptical about the quality and safety of mainland products, especially products which are directly related to health.
However, the questionnaire revealed that 27% of the respondents agree with the statement “I find the quality of domestic brands is becoming better and better; I am more willing to use domestic brands than before.” Interestingly, 34% of male respondents agreed with it but only 19% of the female respondents did so. In the face of competition from foreign products, mainland brands must improve their quality. As China’s middle-class consumers are becoming increasingly mature and rational, mainland brands with improved quality and design could offer them a wider range of choices. In certain product categories, such as household appliances, mainland brands already command major market shares. Some designer brands have also begun to attract attention. According to a market survey, in the first quarter of 2017, four of the top 10 best-selling flagship smartphones were mainland brands . This trend is worth noting.
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 has 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 is to further understand the spending mentality of mainland consumers by way of qualitative analysis.
 See Appendix for details of the survey.
 According to the 2013 survey on China’s Middle-Class Consumers, among respondents who had done online shopping, 13% had used haitao.
 Source: Counterpoint Technology Market Research