The number of new Chinese millionaires being added to the country’s economy is declining rapidly, yet the growth rates of some lower-tier cities are outstripping those of the first tier, according to a new report.
China’s total number of millionaires grew by only 3 percent in 2012, the slowest rate seen in five years, according to recently published research by the Hurun Research Institute and GroupM Knowledge. The growth rate decrease has been stark, sitting at less than half of last year’s rate and less than a third of that of the previous year.
However, several lower-tier areas saw a much more rapid rise than the overall average: Tianjin clocked in the highest growth rate at 11.1 percent, Shandong saw 8.6 percent growth, and Henan 8.1 percent. Meanwhile, Beijing’s growth rate was 2.8 percent, while Shanghai’s was 5 percent.
Although lower-tier cities have a much lower starting base number than those of the major cities, the higher percentages show the rapidly growing importance of China’s second-tier cities to overall growth. A report by McKinsey earlier this year focused on rising incomes among China’s middle- and upper-middle classes, predicting that second-, third-, and fourth-tier cities will take up a 20 percent higher share of China’s middle class than they do today.
The lowered overall rate is likely connected to China’s slowing economy, which saw its GDP growth decline to 7.7 percent in the first quarter of 2013, and 7.5 percent in the second.
When it comes to the growth of millionaires, the report offers several key takeaways for marketers targeting this elite demographic. A slower rise in first-tier cities and faster growth in lower tiers means a continued divide among these locations between consumers with new and established wealth, which will result in differing consumption patterns. Beijing is still the place to be if you’re trying to find the highest concentration of millionaires in the country, with a total of 184,000.
As usual, China’s millionaires are relatively young, with an average age of 38, and probably in relation to this, quite tech-savvy. Not surprisingly, 82 percent use the internet every day, and 91 percent shop online with an average yearly spending amount of RMB33,000, while 21 percent spend over RMB100,000. For social media, WeChat is preferred over microblogging, with the rate of use increasing rapidly as indicated in the chart below. The growing role of technology bodes well for retailers who face logistical challenges in brick-and-mortar expansion to the 200-plus cities in China experiencing rapid income growth.