China’s middle class set to push spending growth

November 1st, 2008 - 11:52 am ICT by IANS  

Hong Kong, Nov 1 (Xinhua) China’s emerging middle class is set to generate significant spending growth in the coming years, as more and more people in both mega cities like Shanghai and Beijing as well as numerous satellite towns and second-tier cities want to buy “affordable luxuries”.Speaking at a recent business forum, Janet de Silva, chief executive officer of a Hong Kong-based marketing and branding firm, said China’s emerging middle class has been “a reality”, especially over the past five years, and the retail markets are already established and competitive in cities like Beijing and Shanghai.

On top of that, one of the key trends in 2008 is that more and more people in second-tier cities and satellite town were joining the league of emerging middle class in their spending spree, she added.

“I believe that the middle-class consumer market will do a lot to help stabilize what will be some offsets in China because of the slowdown in certain parts of manufacturing,” de Silva said, referring to the export sectors.

She said consumer spending, though growing quickly, contributes only about 20 percent to China’s GDP growth at present, compared to 35 percent by export.

But surveys have shown that China’s emerging middle class, many of whom are skilled technicians and white-collar employees working with multinational firms, “strongly associate international brands with tastes and success”.

The middle class buyers were obviously expanding beyond the first-tier cities into the suburbs and the second-tier cities which are growing in number. Some ten satellite towns, each with a population of about one million, have been planned around Shanghai, she said.

Some of the multinationals, which employed many of the technicians and white-collar workers, were now manufacturing consumer products in China, she added.

Viveca Chan, whose marketing firm operates in Beijing, Shanghai and Hong Kong, said Chinese consumers were turning from shopping for “outward recognition to inner substance”.

But de Silva was also quick to warn that international retailers often run the risk of unrealistic expectations from the Chinese consumer market, which is developing rapidly but not everyone is there with right consumption pattern.

Some one billion people does not mean one billion shoppers, she said.

She pointed out that Hong Kong, a city with a population of about seven million offers a larger market than Chongqing, a city of over 20 million at present.

Chongqing, in southwestern China, would become “commercially viable” by 2015, whereas Shanghai is to expected overtake Hong Kong in the coming years.

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