To Understand China's Consumer Class, Watch Their Travel Habits

Almost 39 Million Mainland Chinese Traveled Abroad In First Half Of 2012 With many of the world's largest brands looking to China's emerging consumer class, which now numbers around 130 million, worries that slower economic growth will crimp spending at a crucial time are tempered by statistics on outbound travel. According to figures released last month by China's Ministry of Public Security, 38.6 million mainland Chinese citizens ventured outside the country’s borders in the first half of this year, a nearly 20 percent rise over the same period last year and close to double the number in 2007. With this year’s surge, Chinese tourists are on track to take around 80 million overseas trips over the course of 2012. As the FT recently pointed out, two years ago, Shao Qiwei of the China National Tourism Association predicted 100 million overseas trips by Chinese tourists by 2015. Yet, given current growth rates, this number could come even sooner. According to the latest Reuters poll, China's economic growth will slow to around 8 percent in 2012, down from last year's 9.2 percent, with the country recording six straight quarters of lower growth. While this remains above Beijing's target of 7.5 percent, analysts are looking for signs that the much-needed Chinese consumer class will cut back. However, as the New York Times notes today, this has yet to become apparent, with retail sales rising 13.1 percent in July versus July 2011. Adjusting for inflation, this means July was the second-best month of 2012 in terms of consumers spending. This indicates one of the contradictions of the mainland China consumer market -- macro-level fluctuations don't always translate to lower individual consumer confidence. As Shanghai-based chief China strategist of the market intelligence consulting firm Mintel told the New York Times, “If consumers feel good about things, they’ll spend. If they don’t feel good, they’ll stop." Added French, “Travel is a good indicator, because people are traveling more, and they are consuming a lot when they travel abroad.” Chinese outbound travelers are certainly consuming a lot when traveling outside of the Chinese Mainland. Though Hong Kong has seen less of an influx of tourist-shoppers this year, this has partly been due to mainland Chinese tourists heading further afield. Last year, around 1.1 million Chinese travelers visited the US, according to Commerce Department figures, and that number is expected to nearly double within the next two years. According to the US Travel Association, this particular tourist demographic comes with shopping in mind -- Chinese visitors spend around US$6,000 each on trips to the United States, compared to the average $4,000 spent by travelers from all other countries. During the recently concluded London Olympic Games, Chinese tourists outspent all other individual travelers, dropping an average of £203.04 (US$316.36) per purchase. Paris -- a favorite destination for luxury tourist-shoppers -- saw a 21.6 percent increase in Chinese tourists in 2011 over one year prior. Since 2010, the number of Chinese visitors to Paris has risen 63 percent, making them the fastest-growing single group. If outbound travel (and spending) is a leading indicator of the confidence levels of China's emerging middle class, recent figures from Geneva's Digital Luxury Group should give tourist destinations and luxury brands cause for some comfort. As the group noted in its latest World Luxury Index China report, the Chinese travel market is currently worth some $232 billion, with the country's travelers taking 70 million overseas trips last year. As Jing Daily has previously pointed out, this number is expected to swell to over 80 million trips this year and 100 million by 2020. Though it will remain important this year to watch the spending habits of China's ultra-rich, particularly on luxury goods, rising confidence in a growing middle class -- and ever-increasing numbers of outbound tourists traveling further afield -- indicates that we shouldn't expect a spending "crash" from China's consumers this year. As Mintel's French told the New York Times: “The only thing we’re seeing slowdown in is some softening in the higher-end numbers for luxury goods. But the reason for that is because we have got unparalleled amounts of arbitrage going on from the Chinese going abroad and shopping.”

To Understand China's Consumer Class, Watch Their Travel Habits

How Bottega Veneta weaved China’s forever it bag

Upgrade to Pro

Sectors

Insights

Company

To Understand China's Consumer Class, Watch Their Travel Habits

How Bottega Veneta weaved China’s forever it bag