I have been living in Beijing since May 2015, and have spent time looking into the Chinese Consumers segments. From my perspective, I find a number of discrepancies between what I used to know when I was in the U.S. and what I know now being in China.
Let me start with where growth is (based on recent reference materials):
I used to think that when you look for growth in China, you look for growth in the lower tier cities because of the State Council policies to develop the upcoming cities, and cities in the Western and inland provinces. However, as it stands today, growth occurs in the Tier-1 and Tier-2 cities, especially in the consumer sectors.
Here are some stats which highlight the trend:
- Chinese population having been moving from the countryside to cities, but predominantly to larger metropolitan areas (In 2013: Urban population is 53.7% of total population).
- The larger Tier 1 and Tier 2 cites have the faster population gains in 2008-2013 compared with 2000-2008, while Tier 3 and Tier 4 cities’ inflow have collapsed.
- Consumer spending in cities has climbed 152% from 2007 to 2014, almost half again as much as the 112% rise in rural area expenditures.
- Consumer spending in cities is ~77% of total consumer spending
- Urban household per capita disposable income ~30,000 RMB versus Rural ~10,000 RMB.
- Household consumption (2014): Total of 24.2 Trillion RMB, with Urban at 18.7 and Rural at 5.4.
- Inventory overhang of unsold houses concentrated on less-affluent smaller cities. In September 2015, household price changes Y/Y: T1 +13.9%, T2 -1.7%, T3 -4.1%.
- Government policy encourages urbanization (stable accommodation, steady job, paid into local social security, minimum continuous residency, raising minimum wages) for cities above 1 million population.
Tier 1 cities – Beijing, Shanghai, Guangzhou and Shenzhen
Tier 2 cities – Tianjin, Chongqing, Chengdu, Wuhan and Xiamen
Tier 3 cities – medium-sized cities of each province
Tier 4 cities – Less developed rural areas
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