The eyes of the world are on the Chinese consumer. Cooling economic growth, a depreciating currency, and a gyrating stock market are making political and business leaders concerned that China’s economic dream may have finally ended, and tough times lie ahead.
Despite the gloomy news about the state of the economy, consumer confidence has remained surprisingly resilient over the past few years, as salaries have continued to rise and unemployment has stayed low. Chinese consumers remain upbeat about their futures.
However, beneath this statement lurks significant change. The days of broad based market growth are coming to an end as consumers become more selective about where they spend their money. Spend is shifting from products to services, and from mass to premium segments. Consumers are seeking a more balanced life, where health, family, and experiences take priority. In short, our research suggests that winning in the China market will become more challenging for consumer goods companies. For those that get it right, however, the reward will be substantial.
These are among the main findings of McKinsey’s survey of Chinese consumers, the latest in a series that began in 2005. For our 2016 Consumer Report, we conducted 10,000 in-person interviews with people, aged 18 to 65, in 44 cities representing China’s major regions and tiers.
The survey results also highlighted the astounding popularity of international travel among Chinese consumers and their exceptionally rapid adoption of trends such as mobile payments. In addition, the study confirmed the great variation in consumer behavior among China’s 22 city-clusters. Cluster differences have even increased in recent years, despite the increased flow of information between clusters online and growth in domestic travel.
Overall, what we are seeing is the modernization of the Chinese consumer. In this report, we will look more closely at that phenomenon through four lenses: consumers’ willingness to spend; what they are spending on; how they are spending; and where they are spending.