Op­por­tu­ni­ties knock

China’s mid­dle-in­come buy­ers keep grow­ing in num­ber

China Daily (USA) - - FRONT PAGE - By DUJUAN dujuan@chi­nadaily.com.cn

China’s grow­ing con­sump­tion will con­tinue to bring op­por­tu­ni­ties to com­pa­nies in many in­dus­tries as the coun­try’s mid­dle-in­come pop­u­la­tion grows rapidly in the next 15 years.

Ac­cord­ing to a re­port re­leased onWed­nes­day by The Econ­o­mist In­tel­li­gence Unit, the por­tion of the pop­u­la­tion de­fined as mid­dle-in­come will grow from 11 per­cent in 2015 to 36.9 per­cent in 2030 while the share of high-in­come con­sumers, with an­nual dis­pos­able in­come of more than 200,000 yuan ($32,100), will rise from just 2.6 per­cent last year to 14.5 per­cent in 2030.

“Those peo­ple will bring huge con­sump­tion power in sec­tors in­clud­ing brand cars, lux­u­ries, high-end tourist prod­ucts and bet­ter fi­nan­cial ser­vices,” saidWang Dan, China an­a­lyst with the EIU.

Wang, who wrote the re­port, said that the in­cre­men­tal gain in Chi­nese pri­vate con­sump­tion in the next 15 An­nual dis­pos­able in­come per capita dis­tri­bu­tion years will be big­ger than the en­tire con­sumer econ­omy of the Euro­pean Union to­day.

“From this an­gle, con­sump­tion will def­i­nitely be the lead­ing en­gine of China’s eco­nomic growth and will play an in­creas­ingly im­por­tant role in fu­ture as China’s econ­omy slows,” she said.

This will bring both chal­lenges and op­por­tu­ni­ties for busi­nesses.

“Since China’s mar­ket is big enough, a com­pany which finds one place is full of com­pe­ti­tion and hard to make profit in may turn to an­other re­gion to ex­pand the mar­ket. How­ever, in some in­dus­tries — au­to­mo­bile for in­stance, the com­pe­ti­tion is al­ready ex­tremely fierce, which might be chal­leng­ing for new in­vestors,” she said. “It seems that the time when a com­pany can make a for­tune from one sin­gle prod­uct has gone for­ever.”

The prod­ucts need to be in­no­va­tive to at­tract con­sumers. Chi­nese high-in­come con­sumers tend to buy health­ier food, high-end cars and their tourist des­ti­na­tions are chang­ing from neigh­bor­ing coun­tries to places such as Italy and France where there are rich cul­tures to ex­pe­ri­ence or ar­eas like Africa to ex­plore, she said.

“As a re­sult, busi­nesses re­lated to those sec­tors will be pros­per­ous,” Wang said. Ding Zhe, an ac­coun­tant at con­struc­tion com­pany in a Beijing, said he started to buy or­ganic food and top brand out­door equip­ment since his salary in­creased to a cer­tain level.

In the past decade, Chi­nese con­sump­tion pat­terns have changed dra­mat­i­cally. The re­port said the most no­table change has been a re­duc­tion in the pro­por­tion of spend­ing on ba­sic ne­ces­si­ties.

Chi­nese ex­pen­di­ture spent on food, bev­er­ages and to­bacco has fallen from 37 per­cent in 2005 to 30 per­cent in 2015.

As in­comes in­crease, con­sumers spend across a broader range of cat­e­gories in­clud­ing au­to­mo­biles, cloth­ing, house­hold elec­tron­ics and jew­elry.

Even so, China’s con­sump­tion level is still in its early stages at present, and is equal to the US level 30 years ago, Wang said.

“The con­sump­tion struc­ture and econ­omy is sta­ble in the US, which sup­ported the coun­try’s con­sump­tion,” she said.

How­ever, the gap be­tween China and theUS will grad­u­ally nar­row in the fol­low­ing years, she added.

WANG ZHUANGFEI / CHINA DAILY

Two boys sit on a mo­tor­cy­cle at an auto expo in Beijing.

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