The digital economy is transforming consumption patterns and has become a key driver of economic growth.

China is currently in the age of the ‘Consumer Economy’ and being the world’s second largest economic giant, its trajectory shows no signs of slowing down. Significant reforms by government have laid the foundations for sustainable ongoing growth.

China’s consumer confidence is approaching all-time highs at 115 in the first quarter of 2019 compared to 113 in fourth quarter of 2018 according to the latest Nielsen Consumer Trend Index. Data from the National Bureau of Statistics showed the country's GDP grew by 6.4% in the fourth quarter of 2018, and annual growth in 2018 was 6.6%—beating the target of 6.5%.

China is one of the most digitally connected markets in the world; the average Chinese consumer spends close to 10 hours per day consuming media, mostly via their mobile phone. The digital economy is transforming consumption patterns and has become a key driver of economic growth. Online retail sales in China totalled about $1.33 trillion (just over RMB 9 trillion) in 2018, an increase of 23.9% compared to 2017, according to the National Bureau of Statistics of China.

The consumption wave has been further buoyed by rising incomes, catapulting millions into the new middle class and leading to a marked rise in Chinese consumers’ purchasing power and average spending per person. The FMCG sector has benefited from this shift, growing by 15% in 2018 compared to 11% growth in 2017. Online platforms have recorded high sales growth which is now up by 40% and accounts for 31% of total FMCG sales in 2018. The introduction of tax deductions and expanded sales holidays have also helped to drive growth in online sales. Meanwhile, offline sales saw relatively stable growth in the past year (up 8%).

According to statistical reports on internet development in China, about 28% of internet users are post-90s generation, the highest proportion among all demographic groups. The post 90s (born between 1990-1999) generation is gradually becoming the main consumption force. They are highly digitally-savvy and their behaviours are deeply influenced by the internet. Digital connectivity has enabled Chinese consumers to access information like never before, leading them to be more discerning. In the past five years social e-commerce in China grew by 100.6% as per Nielsen’s recent report.

A recent Nielsen study, ‘Changing Consumer Prosperity’, showcased that 81% of Chinese consumers believe they are financially better off than they were five years ago, which is not surprising given the average disposable income* increased by 32% between 2014 and 2018. Buoyant consumer confidence is also translating to increased spending on premium products particularly from overseas e-retailers—49% of Chinese consumers have purchased premium items online from overseas e-retailers. This number is higher than any other market globally, with apparel, cosmetics and jewellery as some top of the list product categories consumers are most likely to shop.

Another emerging trend in China is the rise of purchasing power among middle-class women who are fuelling the consumption power house in China. Women consumers in China are more optimistic about future economic prospects (women’s consumer confidence is at 130) than their male counterparts as per Nielsen’s Consumer Trend Index in the first quarter of 2019. Women hold a brighter outlook on job prospects with 81% confirming positively, as compared to the national average of 79% in the same period. Similarly, a whopping number of women—78% scored high on their willingness to spend compared to an average score of 61% and women also voiced a high score on their sentiments towards personal finance at 92%, surpassing the national average of 70%. As the confidence level of the Chinese female cohort rises, it is giving way to growth in a number of sectors, particularly health and beauty.

This incremental rise of China as a consumption engine is heading towards steady economic progress and growth numbers. It is now the new norm for brands and retail players that ‘Winning in China’ means having the makings of global standard in products and services for the increasingly demanding Chinese consumer.

* Source: Economist Indicator Unit

Article originally published on Campaign Asia, republished with permission.


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