By 2030, 58% of Chinese households are expected to be in or above the mass-affluent class, exceeding today’s 55% South Korean share according to McKinsey. Urban Chinese consumers’ spending profile converges with their counterparts’ spending profile in cities around the world.
The mass-affluent class is those with a disposable household monthly income of 18,000 yuan (US$2,518) or more.
Consumer markets in China are already highly integrated with the world and there is significant penetration by MNCs in China with an average penetration of 40% in 2017 across the ten large consumer categories, compared to just 26% in the United States. The penetration of MNCs in beauty and personal care is as high as 73%.
Chinese consumers are seeking more and better goods and services options. When incomes rise, consumers want more option, and the McKinsey survey found evidence of a large trend in trading up. McKinsey’s 2018 Global Consumer Sentiment Survey showed that 26 percent of Chinese were trading up overall, compared with 17 percent in ten other top economies.
In some cases, Chinese consumers are not happy with domestic brands alone due in part to perceived quality issues and lack of choices.
Cross-border e-commerce is a rapidly growing platform for Chinese consumers to buy products from overseas. Between 2015 to 2017, iResearch data shows that cross-border e-commerce retail imports nearly doubled to 111 billion yuan.
The McKinsey survey also pointed out that Chinese people are increasingly going abroad and spending more. The increasing flow of people from China— especially students and tourists— is an expanding business opportunity for businesses in destination countries.
China is already the world’s biggest source of outbound visitors. In the case of Singapore and Thailand, their investment can be equal to 7% to 9% of domestic private consumption according to McKinsey.
Chinese outbound students may also have a major impact on other economies. Australian education exports to China increased to 10 billion Australian dollars in 2017. And, that did not include extra living spending by Chinese students. Through adjusting to Chinese preferences and tailoring deals, companies can take advantage of these trends.