China's growth may be slowing, but its consumer economy is still growing - and growing fast.
According to a new report, Chinese consumption is growing by 10% a year, faster than any other country on the planet. By 2021, China will add $1.8 trillion in new consumption - roughly the size of Germany's consumer economy today. A quarter of all consumption growth across major economies is down to China.
The report was launched by BCG and AliResearch (the research arm of Alibaba, one of the world's biggest retailers) in a session at the World Economic Forum's Annual Meeting of the New Champions 2017 in Dalian.
Young, wealthy and connected
So what's driving this rapid growth? The report names three principle factors behind China's frenzied spending. The country's economy is benefiting from an emerging upper-middle class and more affluent households, a young population that is eager to spend, and the rise and rise of online shopping.
“Because of these factors, Chinese consumers in the aggregate are spending more, and they’re trading up to higher-quality products,” said Jeff Walters, a partner at BCG and one of the authors of the report.
“Digital technology is one of the underlying drivers that will continue to spur purchases. The Chinese population is more connected than people in other countries, and by 2021, 90% of all purchases will involve digital at some point in the process – browsing, comparing prices or making the actual purchase.”
Chinese consumers are not just spending more, they are trading up to more high-end goods, especially electronics, food, apparel and children’s products.
The younger generation (aged 18-35), meanwhile, are showing a greater appetite for splashing the cash. In 2016, this group made $1.5 trillion worth of purchases (an increase from $700 billion in 2011), and this is projected to rise to $2.6 trillion in 2021. By this point, spending by young people will exceed that of older age groups in China.
As the Chinese economy matures and demographics shift, it has created new groups of consumers. For example, people in China are increasingly likely to remain unmarried. A decade ago, only 4% of city dwellers older than 35 were single. Today, that number has climbed to 21%. This means a growing demand for different types of products, such as smaller appliances and food sold in smaller packaging.
This is backed up by the staggering sales figures that occur on China's “Singles' Day”, a major holiday which comes with a big surge in online shopping that makes it bigger than Black Friday and Cyber Monday combined.
In 2016, $1 billion-worth of orders was placed in the first five minutes, and the total trade volume of the day was more than $17 billion. The holiday started as an anti-Valentine’s Day joke in a country with nearly 200 million single people.
And just as China's government is investing heavily in renewable energy, Chinese consumers are also becoming more eco-conscious. The report found that 66 million, or 16.2% of Alibaba customers, bought five or more green products in 2015, up from just 4 million in 2011.