As China’s older generation remains cautious and savings-focused when it comes to making a budget, those under the age of 35 are predicted to be the main drivers of consumer spending growth over the next five years.
According to a recent Boston Consulting Group study, Chinese spending is set to grow by 9 percent annually through 2020 despite the country’s current economic turbulence. Those aged 35 or younger are expected to see an annual 14 percent rise in spending, while spending by Chinese consumers age 36 or older is only estimated to grow by half this rate.
BCG states that this major difference in spending preferences is due in large part to the fact that those born in the 50s, 60s, and 70s lived through a time of intense political turbulence and economic instability, causing them to be more frugal and careful with their money. Meanwhile, the generation born in the 80s, 90s, and 2000s is “more motivated to spend," with an average of 40 percent higher spending in a range of product categories. For unmarried young people who live with their parents and have no children yet, lack of financial obligations may also play a role.
This young age group is also more willing to spend than its peers from other countries. A total of 42 percent of Chinese consumers between the ages of 18 and 25 disagree with the statement, “I feel I have enough things and feel less the need to buy new ones.” This was much higher than the rate for the same age group from the United States (36 percent), Japan (32 percent), and Brazil (26 percent).
This young group is likely to be buying more through online channels, as BCG also predicts that e-commerce spending will grow at a much faster rate than offline consumption. As the total number of online Chinese shoppers has tripled since 2010 to 410 million, spending on e-commerce is expected to grow 20 percent a year for the next five years, while offline is only predicted to grow by 6 percent.
In addition to age, wealth is also (unsurprisingly) a factor in who is set to drive consumer spending in China. Those with more disposable income—namely, the upper-middle-class and affluent population, will increase spending by 17 percent annually, while the “emerging middle and middle classes” will only consume 5 percent more a year.
While China’s youth be spending more freely than their older relatives, BCG also notes that they’re a discerning crowd given the fact that they’re more educated and cosmopolitan than their parents. Not only are they are eight times more likely to be college graduates, they also travel abroad at double the rate of the older generation. In addition, they are more “brand-conscious” than both the older segment and peers in the United States, meaning brands need to have a great deal of clout to gain a solid piece of their growing shopping budgets.