«China’s middle and high income class is growing fast and will continue to expand at an even higher pace in the coming decade. China’s new consumers may become a new long term source of global aggregate demand if the country succeeds in boosting consumption by increasing the share of household income to GDP. This is indeed likely to happen: increasing the role of domestic consumption is one of the key objectives of China’s 12th Five Year Plan (2011-16).
This paper aims at analyzing recent trends in aggregate private consumption in China. The study focuses on the high income class who lives mainly in the cities of the Coastal provinces and has incomes comparable with developed countries. The growth of the high income class is of global importance given the weakness of Western consumers and is of high interest for Western enterprises that still have a comparative advantage in the market for high quality goods.
In the first part of the paper the importance of the Chinese high income class is quantified. Its development in the medium term is forecast using a simple method that provides a ball-park estimate of the size of this booming new class of consumers. This paragraph presents also the results of previous work quantifying the Chinese external demand potential of affordable luxury goods in the following industries: apparel and accessories, food and beverage, furniture and footwear (Par. A).
Because of the heterogeneity in Chinese income, in order to understand trends in consumption in such a vast country, in the second part of the paper we analyze income and consumption at provincial level and we distinguish between urban and rural areas. We find that Coastal provinces and urban consumers offer more growing opportunities. Disparities in China are not merely limited to GDP and consumption, but they extend to many other aspects. This paragraph presents also the striking example of disparities in the level of computerization (Par. B).
In the final part of the paper we draw the main conclusions of our study and highlight those characteristics of Chinese consumers that are most helpful in predicting their spending patterns: the age structure and the female growing purchasing power. Chinese consumers are younger than western ones and rising female labor force participation in leading positions gives more purchasing power to women, shifting spending decision towards their “preferred” sectors».