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Consumers and the Economic Outlook - China - March 2014

Published By :

Mintel

Published Date : Apr 2014

Category :

Lifestyle

No. of Pages : 202 Pages


Saving remains an important financial priority for consumers and the idea of spending the money to enjoy life now without thinking about tomorrow is still uncomfortable for many. This means that while consumers are confident about making more purchases, they are still spending within what they can afford and according to their priorities. It is therefore important for businesses to understand where consumers are more likely to allocate their spare money and the differences in their attitudes towards managing their finances.
Table of Content

Introduction
Definition
Figure 1: Definition of different generations in this report, December 2013
Report structure
Methodology
Figure 2: Interviewing cities for this research, China
Abbreviations

Executive Summary
Economic conditions and consumer finances
China’s economic growth slows down for more steadier growth
Figure 3: GDP growth rate, China 2003-13
Unemployment and CPI are under control…
Figure 4: Consumer Price Index, China Jan 2011-Jan 2014
but things are not really easy for young adults
Consumer spending remains strong
While income continues to grow, saving is still the number-one priority
Figure 5: Changes in annual saving and income level, China 2003-13
The gap between urban and rural consumers is narrowing
Consumers’ current financial status
Nearly two-thirds of consumers have money left for savings or luxuries
Figure 6: Current financial situation, December 2013
Young adults aged under 25 are more likely to just get by
Home owners without mortgage are the most well off
Confidence about improving future financial status
Three quarters feel very confident or somewhat confident
20-34-year-olds are overall more confident than 35s and over
Figure 7: Confidence in improving financial situation over next 12 months, December 2013
Confidence is higher among potential home buyers
Factors impacting consumers’ willingness to spend
Consumers are more concerned about immediate things with a direct impact on their lives
Figure 8: Factors affecting willingness to spend, December 2013
Different focus for high and low earners
Lifestage brings changes
Discretionary spending priorities for consumers
Discretionary spending growth is likely to be sustained…
Figure 9: Discretionary spending priorities, December 2013
but the trend is shifting towards experiential luxury
Saving remains important, especially for adults aged 20-34 and those not married
Investing in children’s education comes first for parents
Opportunities for businesses to look at consumer gift spending
Consumers’ financial priorities over the next 12 months
Saving for the future remains the most important priority
Figure 10: Financial priorities, December 2013
Females in their 40s are most likely to think about indulgence spending
Consumer attitudes towards financial management and financial wellbeing
A strong consensus that increasing income is more important than controlling spending
Sentiment for spending to enjoy life hindered by uncertainty about future
Younger consumers are finding it difficult to land on their feet
Giving up big purchases for a less pressured life means more by words than actions
Key issue – How does consumer confidence affect spending?
Impact on different market sectors
Figure 11: Differences in spending increase by consumer confidence, December 2013
Change of confidence has a bigger impact on spending increase than spending cuts
Figure 12: Impact of consumer confidence on spending increases and spending cuts, December 2013
Where would consumers spend more to treat themselves?
Figure 13: Matrix of market sectors with different spending increase reasons, February 2013
Key issue – What are the key consumer segments to be aware of?
Figure 14: Target groups, December 2013
Comfortable
Anxious
Settlers
Figure 15: Confidence in improving financial situation over next 12 months, by target groups, December 2013
Aspirers
Key issue – How does consumer sentiment vary by city?
Figure 16: Consumer confidence about improving financial situation over the next 12 months, by tier-one cities, December 2013
Figure 17: Current financial status and confidence about future financial situation, by city, December 2013
Key issue – Are younger adults thinking differently about their financial wellbeing?
What we think

Economic Conditions and Consumer Finances
Key points
China’s economy is set for steadier growth
Figure 18: GDP growth rate, China 2003-13
Unemployment remains flat
Figure 19: Urban unemployment rate, China 2003-13
The job market becomes increasingly competitive for graduates
Figure 20: Number of graduating students, China 2003-14
Consumer Price Index eased to about one-third of its peak in 2011
Figure 21: Consumer Price Index, China, Jan 2011-Jan 2014
Property prices continue to climb, putting pressure on potential home buyers
Consumer spending shows a buoyant outlook for 2014
Figure 22: National retail and catering sales during Chinese New Year, China 2009-14
Income growth fuels consumption, but saving remains a priority
Figure 23: Changes in annual saving and income level, China 2003-13
The gap between urban and rural consumers is narrowing
Figure 24: Consumer spending per capita, rural vs. urban China, 2003-12

The Consumer – Current Financial Status
Key points
Figure 25: Current financial situation, December 2013
About two thirds have money left for savings or luxury spending
Figure 26: Current financial situation, China, UK and US, 2013
Married couples have healthier finance
Figure 27: Current financial situation, by marital status, December 2013
Predictably, high earners and home owners have deeper pockets
Figure 28: Current financial situation, by income and home ownership, December 2013

The Consumer – Confidence in Improving Future Finances
Key points
Figure 29: Confidence in improving financial situation over next 12 months, December 2013
Three in four consumers feel very confident or somewhat confident
The 85s generation shows the strongest confidence about future
Directionally 35-49-year-olds are more conservative
Households with children feel more confident
Potential home buyers are more optimistic than those on mortgage
Figure 30: Confidence in improving financial situation over next 12 months, by home ownership, December 2013

The Consumer – Factors Impacting the Willingness to Spend
Key points
Figure 31: Factors affecting willingness to spend, December 2013
Income growth is the single most important driver
High and low income groups impacted by different things
Figure 32: Impact of financial investments, cost of living and employment on willingness to spend, by household income, December 2013
Lifestage plays a role
Figure 33: Impact of economy, social welfare and big item spending on willingness to spend, by age demographics, December 2013

The Consumer – Discretionary Spending Priorities
Key points
Figure 34: Discretionary spending priorities, December 2013
Discretionary spending is likely to sustain its growth…
Holiday becomes a widely popular spending
More focus on leisure experiences than possessing luxuries
Figure 35: Percentage of consumers planning to increase spending on selected items over the next 12 months, by household income, December 2013
Kid’s education comes first for parents
Figure 36: Discretionary spending on ‘education for myself/my kid(s)’, by age of children and city tier, December 2013
For those young without children, saving is the number one priority
Figure 37: Percentage of consumers planning to increase savings and financial investments over the next 12 months, by age, December 2013

The 90s generation is most willing to spend more on electronic devices
Figure 38: Planned discretionary spending on ‘electronic/digital devices’, by age, December 2013
Gifting is still an important spending occasion for consumers
Figure 39: Planned discretionary spending on ‘gifting for others on special occasions’, by age, December 2013
Figure 40: WeChat’s red pocket scheme on its app, China 2014
Property owners are more likely to spend on cars
Figure 41: Planned discretionary spending on ‘buying a new car/upgrading the car’, by property ownership, December 2013

The Consumer – Financial Priorities in the Next 12 Months
Key points
Figure 42: Financial priorities, December 2013
Saving remains the top financial priority for all
Different saving focuses across the age groups
Figure 43: Top three savings priorities, by age, December 2013
Younger men bear more pressures to save
Figure 44: Importance of big ticket spending among consumers aged in their 20s, by gender, December 2013
Who is prioritising indulgence spending?
Figure 45: Importance of spending on self-indulgence, by property ownership and gender/age group, December 2013

The Consumer – Attitudes towards Financial Management and Financial Wellbeing
Key points
Figure 46: Attitudes towards managing financial management and financial wellbeing, December 2013
More focus on increasing income than controlling spending
Sentiment towards spending is hindered by uncertainty about the future
Figure 47: Agreement with statement “I worry about my financial situation when thinking about the future”, by current financial status, December 2013
Figure 48: Agreement with statements relating to financial pressure and difficulty in saving, by household income and property ownership, December 2013
Nearly half of young adults find it difficult to stand on their own feet
Figure 49: Agreement with statement “It is difficult to cover my total spending without financial support from others”, by age, December 2013
Are people giving up on properties and cars for a less pressured life?
Figure 50: Agreement with statement “It is worth giving up some big ticket purchases for a less pressured life”, by household income and property ownership, December 2013
Only 3 in 10 think it’s better to spend tomorrow’s money

Key Issue – How Does Consumer Confidence Affect Spending?
Key points
Sectors where spending is more sensitive to changes in confidence
Figure 51: Differences in spending increase by consumer confidence, December 2013
More dramatic shifts in spending increase than in spending cut
Figure 52: Impact of consumer confidence on spending increases and spending cuts, December 2013
Spending more due to price increase or personal treat?
Figure 53: Matrix of market sectors with different spending increase reasons, February 2013
New experiences and social elements are important when consumers spend to treat themselves
Making consumers feel they are getting a better deal
What does it mean?

Key Issue – What are the Key Consumer Segments to be Aware of?
Key points
Mapping out the different consumer clusters
Figure 54: Target groups, December 2013
Comfortable: both the power and willingness to spend
Spending, saving and investing are equally important
Figure 55: Current financial situation, by target groups, December 2013
Figure 56: Impact of financial investments on willingness to spend, by target groups, December 2013
Anxious: Lacking the confidence to improve
Figure 57: Confidence in improving financial situation over next 12 months, by target groups, December 2013
Helping them deal with uncertainty
Settlers: clear goals and priorities
Spending confidence is more subject to job security and the cost of living
Figure 58: Impact of cost of living and employment on willingness to spend, by target groups, December 2013
Saving is the focus, discretionary spending beyond priorities is unlikely
Figure 59: Percentage of consumers planning to increase savings and spending on education over the next 12 months, by target groups, December 2013
Aspirers: The Xiao Kang (‘moderately well-off’) who like to spend to enjoy life
Figure 60: Impact of property ownership and price on willingness to spend, by target groups, December 2013
Better to enjoy the money now
Figure 61: Attitudes towards financial concerns and discretionary spending, by target groups, December 2013
More spending-driven financial priorities
Figure 62: Selected financial priorities, by target groups, December 2013
The younger, up-and-coming “middle class”
What does it mean?

Key Issue – How does Consumer Sentiment Vary by City?
Key points
Tier-one cities: Things are not all the same
Consumer confidence in Shanghai significantly lower than other tier-one cities
Figure 63: Consumer confidence about improving financial situation over the next 12 months, by tier-one cities, December 2013
Chengdu consumers feel least financially pressured
Figure 64: Consumer attitudes towards financial pressure, by tier-one cities, December 2013
Figure 65: CAGR of GDP, employee salary and retail spending, by tier-one cities, 2008-12
Figure 66: Attitudes towards managing financial wellbeing, by tier-one cities, December 2013
Are tier-two/three consumers more optimistic?
Figure 67: Current financial status and confidence over next 12 months, by city tiers, December 2013
Figure 68: Current financial status and confidence about future financials, by city, December 2013
Fast income growth and lower pressure of living drives confidence
Figure 69: Income growth and measure of pressure of property prices, by city, 2008-12
but converting confidence into spending also needs a change in attitudes
Figure 70: Spending allocation on savings, investment and education, by city tiers, December 2013
Figure 71: Attitudes towards spending on self-indulgence and spending vs. saving, by city tiers, December 2013
What does it mean?

Key Issue – Are Younger Adults Thinking Differently about their Financial Wellbeing?
Key points
The 90s, 85s and 80s: generations of the little emperors
The 60s and 70s: Life from coupon days to a closer feeling of indulgence
Busting the myths about the younger generations
Younger generations are not as careless as people tend to think
Figure 72: Agreement with statement “it is better to enjoy the money you have now (eg having no money left at the end of the month, using credit card) than put it away into savings”, by age generation, December 2013
Younger generations also believe today’s frugality is important for ensuring a better future
Figure 73: Agreement with statement “it is worth sacrificing current quality of life (eg cutting down grocery spending, not buying luxury goods) to ensure a wealthier future”, by age generation, December 2013
Figure 74: Selected consumer shopping behaviour, by age, February 2013
Fulfilling social needs is a priority in their discretionary spending, especially for generation 90s
Figure 75: Percentage of consumers planning to increase spending on selected discretionary items over the next 12 months, by age generation, December 2013
What does it mean?

Appendix – Data Analysis of Consumer Confidence and Discretionary Spending
Figure 76: Impact of consumer confidence on spending increase and spending cut, December 2013

Appendix – Reasons for Consumers to Spend More
Figure 77: Reasons for spending more, February 2013

Appendix – Current Financial Situation
Figure 78: Current financial situation, December 2013
Figure 79: Current financial situation, by demographics, December 2013

Appendix – Confidence Over Next 12 Months
Figure 80: Confidence over next 12 months, December 2013
Figure 81: Confidence over next 12 months, by demographics, December 2013

Appendix – Factors Impacting the Willingness to Spend
Figure 82: Factors affecting willingness to spend, December 2013
Figure 83: Most popular factors affecting willingness to spend, by demographics, December 2013
Figure 84: Next most popular factors affecting willingness to spend, by demographics, December 2013
Figure 85: Other factors affecting willingness to spend, by demographics, December 2013
Figure 86: Factors affecting willingness to spend, by confidence over next 12 months, December 2013

Appendix – Discretionary Spending Priorities
Figure 87: Spending allocation, December 2013
Figure 88: Spending allocation – Savings, by demographics, December 2013
Figure 89: Spending allocation – Financial products/investment, by demographics, December 2013
Figure 90: Spending allocation – Holidays, by demographics, December 2013
Figure 91: Spending allocation – Education for myself or my kid(s), by demographics, December 2013
Figure 92: Spending allocation – Housewares/household appliances, by demographics, December 2013
Figure 93: Spending allocation – Electronic/digital devices, by demographics, December 2013
Figure 94: Spending allocation – Buying a new car/upgrading the car, by demographics, December 2013
Figure 95: Spending allocation – Going out for an expensive meal, by demographics, December 2013
Figure 96: Spending allocation – Luxury products, by demographics, December 2013
Figure 97: Spending allocation – Out-of-home entertainment activities, by demographics, December 2013
Figure 98: Spending allocation – Beauty treatment/personal care, by demographics, December 2013
Figure 99: Spending allocation – Exercise/sports, by demographics, December 2013
Figure 100: Spending allocation – Gifting for others on special occasions, by demographics, December 2013
Figure 101: Spending allocation, by confidence over next 12 months, December 2013

Appendix – Financial Priorities in the Next 12 Months
Figure 102: Financial priorities, December 2013
Figure 103: Financial priorities – Saving for a rainy days/emergencies, by demographics, December 2013
Figure 104: Financial priorities – Saving for large items, excluding for property, by demographics, December 2013
Figure 105: Financial priorities – Saving for the long term, by demographics, December 2013
Figure 106: Financial priorities – Saving for my own or a family member’s education, by demographics, December 2013
Figure 107: Financial priorities – Making sure i don’t fall behind on bills and other financial commitments, by demographics, December 2013
Figure 108: Financial priorities – Paying off my mortgage/saving for buying property, by demographics, December 2013
Figure 109: Financial priorities – Paying off credit card debt in time, by demographics, December 2013
Figure 110: Financial priorities – Spending money on self-indulgence, by demographics, December 2013
Figure 111: Financial priorities, by confidence over next 12 months, December 2013

Appendix – Attitudes towards Financial Management and Financial Wellbeing
Figure 112: Attitudes towards financial management and financial wellbeing, December 2013
Figure 113: Agreement with the statement ‘I think the change of china economy will have an impact on my life’, by demographics, December 2013
Figure 114: Agreement with the statement ‘It is better to enjoy the money you have now than put it away into savings’, by demographics, December 2013
Figure 115: Agreement with the statement ‘It is difficult to control my spending within my affordability’, by demographics, December 2013
Figure 116: Agreement with the statement ‘I worry about my financial situation when thinking about the future’, by demographics, December 2013
Figure 117: Agreement with the statement ‘It’s worth spending on self-indulgence’, by demographics, December 2013
Figure 118: Agreement with the statement ‘It is difficult to cover my total spending without financial support from others’, by demographics, December 2013
Figure 119: Agreement with the statement ‘China’s current economy makes me feel under big financial pressure’, by demographics, December 2013
Figure 120: Agreement with the statement ‘Higher living costs have made it more difficult to save’, by demographics, December 2013
Figure 121: Agreement with the statement ‘It is worth spending on enjoying life when we are still young’, by demographics, December 2013
Figure 122: Agreement with the statement ‘It is worth giving up some big ticket purchases for a less pressured life’, by demographics, December 2013
Figure 123: Agreement with the statement ‘It is worth sacrificing current quality of life to ensure a wealthier future’, by demographics, December 2013
Figure 124: Agreement with the statement ‘Increasing personal income is a better way to improve my financial situation than controlling my spending’, by demographics, December 2013
Figure 125: Attitudes towards financial management, by confidence over next 12 months, December 2013

Appendix – Target Group Analysis
Figure 126: Target groups, December 2013
Figure 127: Target groups, by demographics, December 2013
Figure 128: Confidence over next 12 months, by target groups, December 2013
Figure 129: Factors affecting willingness to spend, by target groups, December 2013
Figure 130: Spending allocation, by target groups, December 2013
Figure 131: Financial priorities, by target groups, December 2013
Figure 132: Attitudes towards financial management, by target groups, December 2013

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