Consumer confidence is at a 10-year high in China while Chinese consumers are into health and fitness, with the post-90s generation emerging as a new engine of consumption, said McKinsey & Company that recently released its survey report titled Double-clicking on the Chinese Consumer.
The report is based on results of a survey of 10,000 Chinese consumers aged 18 to 65 across 44 cities and seven rural towns and villages.
“Singles Day reinforces what we already know: Chinese consumers today are earning much more money and are spending that money on a wider variety of higher-quality and pricier goods and, increasingly, on services,” said McKinsey in a statement.
Risks: debt and slower income growth
While consumer confidence is on the rise, there are several reasons to take a more cautious stance toward the future starting with the very high levels of debt that the Chinese economy overall and households are taking on, said McKinsey.
In 2017, the total leverage ratio in China hit 266%, the highest level it has ever reached. Meanwhile, household debt reached 50%, the highest it has been since the government started recording this figure, albeit still lower than developed countries. Debt levels aside, the real driver of spending is income growth, and this has slowed considerably, dropping from 10.1% in 2012 to 6.3 percent in 2016, Mckinsey observed.
Chinese consumers are also running up against high real-estate costs, especially in tier-one cities, despite government measures to cool the market, the consulting firm added.
“While these are all relatively short-term indicators, in the longer term, the rising costs of caring for elderly family members, particularly the healthcare expenses associated with such care, is set to become one of the biggest burdens on the budgets of Chinese consumers,” McKinsey noted.
Heath and fitness concerns
- Consumers are more health-conscious than ever before but different consumers define health differently.
- 65% are seeking ways to lead a healthier lifestyle.
- 41% said “almost never” to eating unhealthy food. The instant-noodle and soda markets shrank by 7% and 2% respectively in 2016 compared with 2015. And, fast-food chains, already thought of as healthier than hole-in-the-wall restaurants and roadside stalls, continue to expand with healthier menu options.
- The “back to basics,” “balance seekers,” and the “exercise enthusiasts” will become more important and companies will need to create thoughtful messaging and marketing.
Post-90s generation: a new engine of consumption
- People born between 1990 and 1999 exhibit very different behavior and attitudes not only with older generations of Chinese consumers but also the generation that we call the “post-80s,” which is generally lumped together with the post-90s generation in media reports that cover this topic. They also differ to Western millennials.
- Comprising 16% of China’s population today, this generation is projected to account for more than 20% t of total consumption growth in China between now and 2030, higher than any other demographic segment.
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