Tag Archives: Consumers

China’s Changing Consumers

McKinsey, the international management consultancy, says three findings stand out from its latest annual survey of China’s consumers:

  • Even in the face of rising inflation, Chinese consumers are more confident this year than in 2010 about their financial prospects. Note, though, that the survey field work was done between February and April when inflation was not seen as being as persistent as it has turned out to be and confidence in the global economy not affecting China’s growth greatly was still strong.
  • Among urban consumers, the number of first-time buyers—a group that has been a major driver of category growth in China—is declining. Note, though, that in less mature niche categories and with several big-ticket items, first-time buyers remain important.
  • Brand awareness is rising, but there is little sign that brand loyalty is following suit. More and more consumers choose among a growing number of favorite brands, typically three to five in any category. Note, thus, that faith in brands does not necessarily translate to brand loyalty.

The good news for retailers is that consumers embrace thousands of new products, services and brands with ease. The less good news is that this ready acceptance can leave retailers breathless trying to keep up.

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Will Chinese Consumers Spend Or Keep Saving?

One consequence of the global recession is that global economic imbalances have narrowed (perhaps the only thing to have gone by the text book in this recession). But with U.S. consumers buying less, Chinese producers need to find new markets, including at home. Rachel Ziemba of RGE Monitor, guest posting on Brad Setser’s Follow The Money, looks at whether the Chinese will be spenders or keep saving.

Whether the Chinese stimulus is able to boost private consumption ahead will be critical to global and Chinese demand. So far Chinese consumption has held up and even grown slightly from a weak base –as illustrated by retail and auto sales. Yet one reason that the Chinese economic reacceleration is fragile is because it is uncertain where the new production in China’s factories will be consumed. Chinese domestic demand still seems weak and overpowered by some structural incentives to save.

Her cross-linking suggests she thinks it will take some time for those structural disincentives to be eliminated, and that in the meantime, because the cost of capital in China remains well below global costs, there is a risk that steps Beijing has taken to stimulate the economy could end up in asset bubbles rather than in Chinese consumers’ pockets to boost domestic demand.

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