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McKinsey: Chinese consumer spending patterns rapidly approaching those of developed nations

(People's Daily Online)

14:09, September 26, 2012

Shanghai, September 24, 2012 —As accelerated economic growth is raising China’s living standards, consumer spending patterns are becoming more typical of developed nations. According to a new report by McKinsey & Company, “From mass to mainstream – Keeping pace with China’s rapidly changing consumers”, a new class of consumer is rapidly advancing in size and purchasing power. “New mainstream consumers”, those with incomes above RMB 106,000 ($16,000 USD), are exhibiting markedly different spending behaviors than the broader mass of consumers, which still comprise the vast share of Chinese consumers. If China's growth trends unfold as projected, the new mainstream consumers will comprise nearly 400 million people by 2020, making them the standard-setters for the nation's consumption.

The report details several spending trends of new mainstream consumers. Unlike the majority of the urban population who are still in the early stage of buying products that exceed their basic needs, the new mainstream consumer is becoming more self-indulgent, more individualistic in spending choices, and more loyal to certain brands.

This dichotomy is emerging rapidly as more and more mass consumers are becoming new mainstream consumers and attain mainstream income levels.

While consumption is rising in China, it still only represents only a third of GDP – half of the consumption rate in the United States. However, even amidst a slower growing economy, consumer rates will soar – the share of urban households with high enough levels of disposable income to afford a family car and small luxury goods will reach 57 percent, a sixth fold increase.

Although still among the world’s leading optimists concerning their economy, the Chinese expressed a dimmer view with regard to raises to their income levels: 56 percent of respondents agreed that “they expect their household income to significantly increase over the next five years,” down from 60 percent a year ago. While the Chinese are spending more and more, they still continue to save high levels of their money. The report found that the average 2012 respondent reported saving 22 percent of his income, a full 8 percentage points higher than his American and British counterparts.

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Data provided by McKinsey company.

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