New Chi­nese Con­sump­tion for a New Era

The cur­rent con­sump­tion up­grade in China, which is boost­ing do­mes­tic de­mand by up­grad­ing con­sump­tion struc­ture, pro­motes smooth and high- qual­ity growth of China’s econ­omy.

China Pictorial (English) - - Contents - Text by Lin Jiang

Gen­er­ally speak­ing, a con­sump­tion up­grade re­flects a coun­try’s con­sump­tion level and spend­ing evo­lu­tion. Since the be­gin­ning of China’s re­form and open­ing up in the late 1970s, the coun­try’s con­sump­tion struc­ture has been up­graded three times, driv­ing in­dus­trial struc­ture up­grade and fu­el­ing high-speed eco­nomic growth.

The first con­sump­tion up­grade hap­pened soon af­ter the be­gin­ning of China’s re­form and open­ing up. At that time, ex­pen­di­tures on grain dropped while con­sump­tion on light in­dus­trial prod­ucts rose. This change fa­cil­i­tated the rapid devel­op­ment of re­lated in­dus­tries and brought about China’s first round of eco­nomic growth since the coun­try’s re­form and open­ing up.

The sec­ond con­sump­tion up­grade took place from the late 1980s to the late 1990s. In those days, bi­cy­cles, wrist watches and ra­dios, known as the “three trea­sured house­hold pos­ses­sions” of the 1960s and 1970s, were re­placed by re­frig­er­a­tors, color TV sets and wash­ing ma­chines. This con­sump­tion trend drove the sec­ond round of eco­nomic growth.

To­day, China is un­der­go­ing the third con­sump­tion up­grade. The fastest- grow­ing fields in­clude ed­u­ca­tion, en­ter­tain­ment, cul­ture, trans­porta­tion, telecom­mu­ni­ca­tions, health­care, real es­tate, and tourism, es­pe­cially spend­ing re­lated to IT, au­to­mo­biles and real es­tate.

More Di­verse Con­sump­tion

Since the be­gin­ning of China’s re­form and open­ing up, the ra­tio of Chi­nese spend­ing on liveli­hood to the to­tal con­sump­tion has been de­creas­ing. China’s En­gel’s

co­ef­fi­cient, a ma­jor in­di­ca­tor of liv­ing stan­dards, dropped to 29.3 per­cent in 2017 from 63.9 per­cent in 1978. Spend­ing on devel­op­ment and leisure is ris­ing quickly, and con­sump­tion of ser­vices has wit­nessed fast devel­op­ment. In re­cent years, fields such as tourism, trans­porta­tion, telecom­mu­ni­ca­tions, ed­u­ca­tion, en­ter­tain­ment, cul­ture, and health­care have be­come new con­sump­tion hot spots which are driv­ing the up­grade of res­i­den­tial con­sump­tion pat­terns.

Along­side the rapid growth in spend­ing, Chi­nese res­i­dents have be­come more ma­ture and di­verse in terms of con­sump­tion psy­chol­ogy and be­hav­ior. Re­cently, the Chi­nese gov­ern­ment is­sued Sug­ges­tions on­im­prov­ing Sys­tems and­mech­a­nisms­forstim­u­lat­ing Con­sump­tion­to­pro­mote­spend­ing Po­ten­tials of Res­i­dents. The doc­u­ment clar­i­fied key fields and di­rec­tion of the coun­try’s con­sump­tion up­grade and out­lined plans to pro­mote spend­ing on goods and ser­vices, nur­ture new con­sump­tion modes and boost con­sump­tion up­grad­ing in ru­ral ar­eas. New Trends for Con­sump­tion

With the ar­rival of the in­ter­net era, the de­mands of Chi­nese res­i­dents have changed. Pre­vi­ously, most Chi­nese con­sumers fol­lowed broader trends and mim­icked their peers. Now, their con­sump­tion pat­terns have be­come more diver­si­fied and per­son­al­ized, fo­cus­ing on qual­ity goods and ser­vices. New con­sump­tion de­mands and pat­terns are emerg­ing ev­ery day. Greater at­ten­tion on brands and con­sump­tion qual­ity will be the high­light of the con­sump­tion up­grade in China in the near fu­ture.

Con­sid­er­ing the de­mo­graphic shift since China’s in­tro­duc­tion of the na­tion­wide two- child pol­icy in 2015, re­lated con­sump­tion soared. Young­sters born in the 1990s, which ac­count for 16 per­cent of China’s to­tal pop­u­la­tion, are be­com­ing new en­gines for the coun­try’s con­sump­tion up­grade. It is es­ti­mated that from now un­til 2030, they will con­trib­ute more than 20 per­cent of the coun­try’s con­sump­tion growth.

The cur­rent new out­break of tech­no­log­i­cal rev­o­lu­tion in China in­clud­ing the mo­bile in­ter­net, big data, cloud com­put­ing and ar­ti­fi­cial in­tel­li­gence will prompt a new batch of con­sump­tion growth points. Fur­ther devel­op­ment of the “in­ter­net+” econ­omy and dig­i­tal econ­omy will deeply in­flu­ence tra­di­tional con­sump­tion realms, driv­ing and pro­mot­ing the up­grade of tra­di­tional con­sump­tion fields.

Im­proved con­sump­tion con­cepts will make on­line spend­ing more in­ter­na­tional, per­son­al­ized and fi­nan­cial­ized. From “sav­ing for spend­ing” to “bor­row­ing for spend­ing,” the chang­ing con­sump­tion ideas of Chi­nese res­i­dents have boosted the rise of e- com­merce and shifted con­sump­tion de­mands. The en­ter­tain­ment and leisure sec­tors such as movies, gam­ing and tourism will con­tinue to have ro­bust con­sump­tion growth into the fu­ture.

Fi­nally, China’s ru­ral vi­tal­iza­tion strat­egy and the ac­cel­er­a­tion of its new type of ur­ban­iza­tion will vig­or­ously pro­mote con­sump­tion up­grade in ru­ral ar­eas. The coun­try’s fight against pol­lu­tion will fun­nel con­sump­tion to­wards low- car­bon, green, and en­vi­ron­men­tally friendly modes.

Mar­ket with Huge Po­ten­tial

The Chi­nese econ­omy is now en­ter­ing a phase of high- qual­ity devel­op­ment. Along­side the con­stant in­crease in their in­come, Chi­nese peo­ple’s spend­ing power is grow­ing. China’s do­mes­tic mar­ket, with a pop­u­la­tion of nearly 1.4 bil­lion, is de­vel­op­ing at a high speed. In 1978, per capita dis­pos­able in­come in China stood at only 171 yuan. This fig­ure soared to nearly 26,000 yuan in 2017 and is now march­ing to­wards 30,000 yuan. In the next 20 years, China’s mid­dle-in­come pop­u­la­tion will jump to 630 mil­lion from the cur­rent 230 mil­lion, which is bound to serve as the pri­mary force for the coun­try’s con­sump­tion up­grade.

Com­pared to de­vel­oped coun­tries, China still has plenty of room for con­sump­tion up­grade. In gen­eral, the ser­vice in­dus­try in de­vel­oped coun­tries ac­counts for more than 70 per­cent of GDP, and the fi­nal con­sump­tion rate stands at more than 65 per­cent, with the United States even ex­ceed­ing 70 per­cent. In 2017, China’s ser­vice in­dus­try ac­counted for 51.6 per­cent of its to­tal GDP and its fi­nal con­sump­tion rate mea­sured 53.6 per­cent, leav­ing huge room for spend­ing on ser­vices.

The trend to­wards an ag­ing so­ci­ety is trans­form­ing China into the world’s most promis­ing mar­ket for se­nior care in­dus­tries. Ac­cord­ing to the 2014Re­port on­the Devel­op­ment ofchina’s Sil­verindus­try, by 2050, China’s el­derly pop­u­la­tion will reach 480 mil­lion, ac­count­ing for nearly 25 per­cent of the world’s to­tal. By then, the coun­try will be home to the largest el­derly pop­u­la­tion on the planet. From 2014 to 2050, the to­tal spend­ing of China’s el­derly peo­ple is ex­pected to grow to 106 tril­lion yuan from four tril­lion yuan, ac­count­ing for 33 per­cent of the coun­try’s GDP from the pre­vi­ous eight per­cent. In the “sil­ver econ­omy,” con­sumer de­mand for se­nior-re­lated in­dus­tries such as fi­nance, health­care, tourism and real es­tate will be huge.

Septem­ber 27, 2018: Cus­tomers in a big-box store in Shang­hai. The Chi­nese cit­i­zens’ ex­pen­di­tures on liveli­hood have grown slowly while spend­ing on devel­op­ment and leisure has risen quickly. VCG

Oc­to­ber 2, 2017: Tourists at Minyuan Sta­dium, a Tian­jin cul­ture cen­ter which used to host foot­ball matches and art per­for­mances. Spend­ing dur­ing China’s one-week Na­tional Day hol­i­days has wit­nessed steady and rapid growth in re­cent years. VCG

April 29, 2018: Con­sumers at an in­ter­na­tional au­to­mo­bile ex­hi­bi­tion in Nan­jing In­ter­na­tional Ex­hi­bi­tion Cen­ter. Spend­ing on au­to­mo­biles has grown fast in China in re­cent years. IC

July 29, 2018: Cus­tomers shop at a Hema Xian­sheng fresh food su­per­mar­ket, Alibaba’s new on­line-to- off­line plat­form. Trends in the fresh food e- com­merce in­dus­try re­flect ris­ing liv­ing stan­dards in China, as con­sumers are fo­cus­ing more on qual­ity of life and are will­ing to pay for it. IC

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