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Consumer trends in China – prominent spending patterns
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China displays a high consumption pattern in areas such as fashion, accessories, consumer electronics, and electric vehicles (EV), in proportion to its share of national GDP. Special attention is given to EVs, which is in part due to governmental support of the purchase of said vehicles through the granting of subsidies, payment plans, etc. China represents 40 percent of world spending on EVs, and the investment in these products continues to grow at a rate of more than 7 times faster than the average global rate. It is the undisputed leader in EV purchases.
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China is the main market for other products geared towards consumers with medium to high income and luxurious lifestyles – for example, luxury goods, premium beauty, personal care products, and high-end cars. Curiously enough, other value-added or high-end services are yet to be demanded by this category of Chinese consumers, such as wealth management and cruise services – China buys less than the global average, and its sector share of global GDP accounts for less than 10 percent of said average. This means that there is a potential market growth opportunity to be explored. Some of that potential is starting to be realized in the case of wealth management and financial services in recent years. This category has been growing at nine percent per year in China, three times faster than globally, and financial services have been referred by the Chinese central and local governments as one of the priority industries for the country’s development.
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Even as more of China’s population moves rapidly into higher-income brackets, consumption in some categories of “mass” consumer packaged goods (CPG) remains underweighted relative to China’s share of global GDP. As an example, this country’s GDP represents between 10 to 15 percent of the total consumption of packaged food, home care products, as well as mass beauty, personal care, and other health products. Despite this, many of these categories are growing substantially faster in China than in the rest of the world, so China continues to be an important engine of global growth. More and more foreign investors are seeking opportunities to invest in China by setting up their own Chinese companies like WFOE and JV attracted by China’s sustainable and fast growth in consumption.
Consumption continues to rise
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China now has the tools and infrastructure to not only be a consumer of foreign goods, but also be a promoter and seller of its own goods, something that is achievable with its e-commerce, logistics, and marketing capabilities, all of which now surpass those of the west. On a more macroeconomic level, despite China’s already large contribution to global consumption, there is still further room to grow.
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The household consumption rate is a great way of understanding consumer spending; in China, household consumption is roughly 38 percent of the nation’s GDP, which is lower than the 50 percent for the entirety of the Asia–Pacific region, 52 percent in the European Union, and finally 68 percent in the United States. This gap is explained by a higher savings rate in China than in those countries, something is seen as traditional in Chinese culture and even associated with spending in real estate by many households. This state of affairs may change in the foreseeable future, as the financial system becomes more sophisticated and new policy directions steer consumers toward alternative investment options and consumption. Although China has gained a lot of attention for its strong consumption ability, however, there is still a large room to grow in household consumption based on the data mentioned above. It’s always a good choice to set up your own Chinese enterprise such as WFOE and JV to take part in the household consumption rate increase trend as a conclusion.
Attracted by China's consumer trends in 2022? WowCommerce provides company incorporation services to help foreign investors set up their own Chinese entities in China, such as WFOE or JV. Kindly find our contacts below.
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