China’s total consumer goods retail sales are already showing a 16 percent increase over last year, with figures reaching 2.9 trillion yuan in just the first two months of 2011. As the sleeping dragon of Chinese consumerism wakes, retailers—especially luxury retailers—can expect to see continued increases in the future.
Chen Wenling, director of China’s Comprehensive Department under the Research Office of the State Council, breaks down Chinese consumption into five categories that will drive Chinese consumerism as the market evolves.
Chen’s first category is conspicuous consumption. This is likely the most familiar market for most Western retailers, consisting of the rich and rising middle class. Conspicuous consumers drive China’s increasing world market share in luxury goods, which currently stands at about 20 percent.
Urbanization-driven consumption is Chen’s second consumer category. Spending in this category is spurred by China’s rapid urbanization rate, which is likely to reach 60 percent by the end of 2030. Projected urbanization statistics estimate that about 200 million Chinese will move from rural areas to cities in that time, creating an urban Chinese population of between 800 million to 900 million.
The third category is social security-driven consumption. This refers to consumption that will increase with increased availability of education and medical care. Educated and healthy Chinese will have more opportunity to spend their income on consumer goods.
Progress-driven consumption, Chen’s fourth category, refers to consumption made possible by increased technology and infrastructure—for example, consumption in the travel and tourism industry is made possible through available and convenient transportation (high-speed trains, air travel, etc). As China continues its economic restructuring program and invests in technological improvements, Chinese will have greater access to consumer goods and services.
Chen’s final category focuses on the consumer potential of China’s poor. As China improves its poorest citizens’ quality of life, these Chinese will see an increase in income and in purchasing power. Chen predicts that this group will play a role in driving China’s domestic consumption.
While the development of these consumer drives is not necessarily in the government’s control, that doesn’t mean that the People’s Republic is laissez-faire about Chinese consumerism. Under China’s twelfth (and current) Five-Year Plan, expanding consumption is one of the government’s strategic goals for the nation.