Chinese consumers are willing to pay a premium price when it comes to quality products, but have become more rational when it comes to what they spend their money on overall, said a report recently released by Nielsen, a global measurement and data analytics company.

Nielsen's latest study, published on Nov. 28, showed that China’s Consumer Trend Index reached 112 points in the third quarter of this year, down 1 point from the last quarter. The index, which measures perceptions of local job prospects, personal finance and willingness to spend, rates Consumer Trend levels above and below a baseline of 100 with optimism or pessimism, respectively.

Since 2015, China’s Consumer Trend Index has surpassed the global average, amounting to 114 points in the first half of 2018, far higher than the worldwide average of 105.

Increase in disposable income means upgrade in consumption

Data from the National Bureau of Statistics showed that China’s GDP increased by 6.5 percent between July and September of this year. Andy Zhao, president of Nielsen China, explained, "Thanks to a slew of stable policies, employment, finance, investment, foreign investment, foreign trade and expectations, we have seen a positive and stable trend. It has laid a solid foundation for China’s economy."

China’s per capita disposable income increased by 9 percent year-on-year in 2017, according to the National Bureau of Statistics. "The disposable income of residents has increased significantly, which effectively boosts consumption and plays a positive role in driving economic growth," said Zhao.

The report indicates that Chinese consumers are willing to spend more money on their hobbies, with 36 percent willing to pay a premium price for things which interest them. For example, those in a middle-income bracket spend an average of 600 yuan per year on cinema tickets, and females in this bracket spend an average of 40,000 yuan per year traveling outside of China.

Rationality in spending

Although consumers are willing to pay more for certain products, the report also shows that Chinese consumers have become more rational when it comes to spending overall. When making decisions on where to spend money, consumers now consider product quality over a brand name.

“Consumption upgrading means we not only enhance the product quality but also upgrade consumption concept. Amid a frenzy of consumption upgrading, consumers have been more mentally mature, more practical and rational, and no longer willing to spend for the consideration of face or famous brands. A new type of consumer culture is forming,” noted Zhao.

Nielsen’s data showed that between November 2017 and October 2018, consumers preferred to purchase premium personal care products. The growth rate of such products reached 28 points, much higher than products in other price tiers. As for daily necessities, consumers were more likely to buy quality goods at low prices where possible. The value market of these products amounted to 46.8 percent, higher than those in other price tiers.

At the same time, consumers also chose to reduce their total expense through membership or group purchasing. Nielsen found that 31 percent of consumers currently hold a membership to enjoy discounted prices, while 65 percent rely on group buying products to save money.

The continuously evolving e-commerce sector is another reason why Chinese consumers are making more rational decisions when it comes to spending money. The integration of online and offline social experience has become the new market trend, meaning consumers can compare a range of products on a number of e-commerce platforms. Social e-commerce, which allows users to interact and contribute to online buying and selling of products and services, witnessed an increase of 439.2 percent year-on-year, according to Nielsen’s data.

As the link between online and offline develops, consumers are becoming savvier as to what constitutes a good deal, where they can save money and what brands to trust. “New retail has been integrated with advanced technologies like big data, artificial intelligence and modern communications. It has become a driving force of China’s business transformation,” explained Zhao.