Report: Third-tier cities help maintain China's stable economy

Customers check out real estate models at a property firm in Langfang, Hebei province. [Photo provided to China Daily]

China's Consumer Trend Index (CTI) stood at a high level of 114 points in the third quarter of this year, according to the latest study by Nielsen, a global performance management company.

The performance of China's CTI is consistent with the overall stable situation of the country's economy. According to the National Bureau of Statistics, China's GDP growth rate was 6 percent in the third quarter. Overall, the national economic activity in the first three quarters remained within a reasonable range, and remained stable on the whole, which laid the foundation for CTI to operate at a high level.

Neilsen's Consumer Trend Index measures perceptions of local job prospects, personal finance and willingness to spend. The consumer trend levels measure above and below a baseline of 100 to indicate optimism and pessimism, respectively.

From the perspective of different tier cities, CTI of all levels of cities have shown a growing trend. Among them, CTI of first- and second-tier cities amounted to 114 points and 119 points, respectively, an increase of 7 and 8 from the same period last year.

However, the third-tier cities' CTI increased most significantly to 121 points, an increase of 10 from the third quarter of 2018.

In terms of the three factors that constitute China's CTI, job prospects, personal finance, and willingness to spend in third-tier cities were all at a high level in the third quarter. Among them, job prospects stood at 75 points, much higher than that of first-tier cities (64) and second-tier markets (70). Personal finance reached 80 points, higher than first-tier cities (77) and second-tier cities (78). The willingness to spend in third-tier cites stood at 66 points.

"The country has been actively promoting a policy that helps migrants from rural places who are employed in urban areas obtain permanent residence. It has also increased the supply of public resources in small and medium-sized cities, and guides the high-end industries in large cities. The moves have effectively enhanced the coordinated development of small and medium-sized cities and stimulated the vitality of lower-tier cities' markets," said Justin Sargent, president of Nielsen China.

In third-tier cities, consumers' household spending has gradually increased year-on-year. Nielsen's data showed that 58 percent of consumers in the third quarter said they increased their household spending, and they were more willing to spend money on improving basic conditions. For instance, 15 percent of consumers spent more on house improvement (5% in first- and second-tier cities), while 14 percent spent more on health care (8% in first- and second-tier cities).

In Sargent's view, influenced by the change of consumption concept and consumption upgrading, there's an increasing number of the demographic in third-tier cities who have the potential to consume. They are open-minded, pursuing trends and fashion, and want to live a good life. Their optimistic willingness to spend is undoubtedly a positive signal to the market. Only if brand owners take steps ahead of others, grasp and stimulate the growing demand for quality goods among consumers in third-tier cities, they can seize the market in a faster and more accurate way, and get a head start.