Three-Quarters of Chinese Consumers Plan to Maintain or Increase Spending in 2016

BEIJING, CHINA--(Marketwired - Jun 19, 2016) - Despite slowing economic growth and market volatility, China's consumers continue to spend, albeit a bit slower at the moment, and consumption growth remains on a staggering trajectory, according to new research by The Boston Consulting Group (BCG). BCG's latest survey of consumer sentiment, conducted by BCG's Center for Customer Insight, found that three-quarters of Chinese consumers plan to maintain or increase the level of their spending in 2016 down only slightly from 81% in 2015.

The two principal drivers of growth in consumption are consumers' ability and their willingness to spend more. The ability to spend remains strong: more than 40% of Chinese urban households today are firmly in the middle class and affluent (MAC) category. The willingness to spend is strong as well, but it's down from its peak in 2007 as slowing household-income growth takes a modest toll. Household income growth declined to 8.7% in the first quarter of 2016 from 9.4% a year earlier, a result of the slowdown in the industrial sectors of the economy, which is leading to a more cautious stance among many consumers employed in these sectors.

"Even as sentiment moderates a bit, it is important to note that we are looking at a slowdown in consumption growth," said Jeff Walters, a BCG partner who oversaw the research. "Consumption in 2016 will be tantamount to consumers' moving from the fast lane to the middle lane on the economic highway. They are not pulling into the breakdown lane."

The Forces Behind Rising Consumption
Two of the forces behind continuing strong consumption in China are the rise of upper-middle-class (UMC) households and small-city MACs, and the emergence of a new generation of younger, freer-spending, sophisticated consumers. By 2020, the number of UMC and affluent households will have almost doubled to about 100 million and will account for 30% of the urban population. The spending intentions of this group remain constant, and the spending growth rate is rapid at 17%. Almost 30% -- the same as in 2015 -- are planning to spend more this year. A big reason for the spending resilience among UMC and affluent consumers is that half of UMC consumers and three-quarters of affluent consumers are employed in the high-end service sector. Consumers in the emerging middle class, middle class, and aspirant categories, whose spending has been growing at 5%, indicated that some belt tightening was in order. Only about a quarter of these consumers intend to spend more in 2016.