THURSDAY, March 28, 2024
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Urban Chinese turn cautious on spending

Urban Chinese turn cautious on spending

WHILE CHINA’S economy continues to grow at a moderate pace, consumers have become more selective spenders because of increased pressures both at work and with their personal finances.

Research from global market intelligence agency Mintel reveals that urban Chinese consumers are more conservative when increasing their spending today than last year. 
About 36 per cent of surveyed consumers reported spending more in 2017 compared to 43 per cent in 2016. 
Consumers are more likely to control their spending this year, with nearly half reporting that they are spending “about the same” as they did last year. 
The survey was conducted in January on 3,000 Internet users in tier 1-3 cities aged 20-49.
While consumers in general have a positive outlook for their financial status, they are aware of potential future risks in life and want to make sure that every purchase they make can be justified, and that what they buy is worth the price.
Overall consumer expenditure increased 10.5 per cent to 33.51 trillion yuan (Bt165.7 trillion) last year. 
The categories that experienced the most growth in 2016 were transportation, holiday, leisure and entertainment, and OTC (over-the-counter) and pharmaceuticals. 
Consumer expenditure will increase 8.4 per cent through 2021, while holidays will surpass clothing and accessories to become the third largest spending sector. Transport, and leisure and entertainment, as well as beauty and personal care, will also see an increase in consumer spending.
Laurel Gu, research director at Mintel, said demand for upgraded consumption for new options, better quality and greater convenience will be the major driving factor this year. 
The development of the consumer products and services market is expected to remain active over the next five years, with health and experience being the two major themes. 
When it comes to Chinese consumers in tier one to three cities, perceived trends in spending are similar with holidays being the most popular and alcoholic drinks the least popular. 
However, although in-home food, clothing and accessories, as well as eating out, are enjoying moderate increases in spending, they are among the top sectors where consumers claim to be spending more this year. 
This suggests potential gaps that consumers living in towns or rural areas are not yet picking up as a part of upgrading their living quality.
Achieving a healthy lifestyle continues to be Chinese consumers’ top priority, with “have a healthier diet” (80 per cent of consumers say they will definitely do this) and “exercise more” (75 per cent report they will definitely do this) the top two goals that consumers are determined to achieve in 2017, as was the case in 2014. 
“Travelling to new places” is a goal that has become increasingly important to consumers over the last four years, rising from ninth place in 2014 to third place in 2017. 
“Spend more time with family” – which 73 per cent of consumers say they will do this year – dropped from third position in 2014 to sixth position in 2017.
“While living a healthy lifestyle continues to be a focus area for consumers, over the last few years we see that spending time with family and having a better work-life balance are being deprioritised for other goals like travelling and getting household finances in order. 
“The reason for these changes in life priorities is likely because consumers, Mintropolitans in particular, tend to associate a healthy lifestyle with not just exercising and watching what they eat, but also a variety of meaningful leisure and social experiences,” Laurel said.
When it comes to the quality of their life, one-quarter of Chinese consumers say spending on holidays is what makes them feel their quality of living has improved. Other top areas are spending on technology such as mobile phones (9 per cent), clothes and accessories such as apparel (9 per cent) and leisure such as working out (4 per cent), which is largely in line with consumers’ spending priorities.
Mintel’s annual Chinese consumer report tracks spending across 15 major consumer markets, revealing the categories that present areas of opportunity, disruption and innovation in the years ahead. 
Highlights from the 2017 report are the following:
Better-for-you foods drive further growth. The in-home food market will reach 7 billion yuan by 2021, driven by the demand for more trading-up options in the form of better-for-you versions and higher quality ingredients. 
Looking forward, yogurt products positioned as an indulgent pleasure and cheese for snacking occasions will see the greatest potential, while ready meals and instant noodles are in jeopardy due to the thriving food delivery service. 
Healthy drinks take leading positions in non-alcoholic drink market
Thanks to a nourishing and healthy image, plant protein drinks, functional beverages like sports and energy drinks, as well as some light flavoured beverages are all growing in popularity. Overall, the Chinese non-alcoholic drink market is likely to retain its positive growth with an annual rate of 7.2 per cent in the next five years. 
 

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