While Covid might have thrown a curve ball at consumer spending over the short term in China, the pandemic’s impact isn’t going to be permanent. Indeed, hundreds of millions of Chinese consumers are going to be crucial for the next generation of global growth.
That was why it was worth listening to an hour of conversation on China’s consumer landscape between Jonathan Woetzel, McKinsey Global Institute Director and Senior Partner, Shanghai, and HSBC’s Herald van der Linde, Head of Equity Strategy Asia-Pacific, and Lina Yan, China Consumer Analyst.
They were talking last week as part of the ninth annual HSBC China Conference – a two-week programme that featured everything from semiconductors to supply chains, alongside briefings from businesspeople in sectors like green energy, electric vehicles and artificial intelligence.
Other topics on the wide-ranging agenda included backgrounders on the Common Prosperity plan; advice on how to navigate the world of ESG; and insights on what’s on the horizon for China’s equity markets.
The session on China’s consumers came on the same day as news that retail sales fell 11% in April versus a year earlier. The forecasts for future spending are a lot more bullish, however, as China’s middle class grows to more than 500 million people.
Behind the numbers, here are three of the themes that came up for discussion last week on China’s rapidly evolving consumer sector.
Singletons and the empty nesters
One trend that’s shaping the consumer landscape is changes in how people are choosing to live, with 15% of homes in China now classified as single-person households. Living arrangements like these should be good news for pet food firms and veterinary practices, for instance, because people living alone often spend more on animals as companions. The new generation of singletons is spawning a bewildering array of other services, including capsule-like gyms for solo workouts and karaoke cabins for solitary singers. Streaming platforms now offer virtual boyfriends and girlfriends for those looking for love and friendship too.
This scenario is going to be a fundamental change on much of the last 40 years in China, Woetzel says, when wealth has been more of a phenomenon for younger people. Older folk had few opportunities to get rich before the onset of the reform era and often missed out on the explosion in wealth creation that followed.
Now the older generation is getting a chance to grab a bigger piece of the pie, including the hundreds of millions of people who have purchased their own apartments since housing reforms in the late 1980s.
HSBC’s van der Linde makes the point that an aging society can be positive for growth, despite media narratives that often depict older people as some kind of burden. In fact, he’s been tracking the impact of demographic trends like these for some time, with interesting findings on China’s ‘empty nesters’, or couples whose children have grown up and moved elsewhere.
Empty nesters are typically middle-aged and they make up about a fifth of the richest families in China. Millions of them are looking to ‘trade up’ in their spending now that their children have left home, which is spilling over into stronger sales in sectors like health and wellness, entertainment and travel.
“They have paid off the house and the kids are gone. So they have more money to spend on new cars and longer holidays, or a better bottle of wine on an evening out,” van der Linde explained in a previous interview on the theme with WiC.
Read More at https://www.weekinchina.com/2022/05/whats-trending-for-spending/
Comments