Decoding the Chinese consumer

Yan Xuan, president of Nielsen Greater China, insists it is important not to be alarmed at the latest data.

"What we have seen is a slight decrease but the overall ranking of Chinese consumer confidence is still very high compared with the global average," he says.

Although recent confidence may be ebbing, the Chinese consumer continues to show different characteristics to his or her Western counterpart; and some of that difference is explained by the Chinese being relatively new to consumption.

In its modern history, China has only been a consumer society by any Western definition since the mid-1990s.

Yuval Atsmon, a principal in management consultant McKinsey & Co's Shanghai office and co-author of its recent report Meet the 2020 Chinese Consumer, says a lot of behavior is a result of China being a freshly born consumer society.

"People who are in their 40s and 50s now have not grown up with consumption unlike people in the West. They are not used to being able to afford a car or a computer. There is a lot of discovery going on," he says.

Other developing nations are new to Western-style consumption but do not show the same patterns of behavior as the Chinese.

In Boston Consulting Group's recent annual consumer sentiment survey, 53 percent of Chinese consumers say they plan to trade up, compared to just 29 percent of people in India. Only 18 percent in the US and 13 percent in the EU planned to do the same.

In the same survey Chinese consumers were the most optimistic in the world, 83 percent believing their children would have a better life than themselves, more again than India where 65 percent felt similarly. Just 21 percent in the US and 13 percent in Germany had such a confident outlook.

Carol Liao, partner and managing director of Boston Consulting Group, says the desire to buy better products and services marks the Chinese out from the rest. [Photo/for China Daily]

Carol Liao, partner and managing director of Boston Consulting Group, based in Hong Kong, says this optimism and the desire to buy better products and services marks the Chinese out from the rest.

"That sense of optimism comes out very strongly in our survey and it is a consistent pattern year after year. China is always the No 1 country when it comes to trading up and looking forward to the future."

With Chinese consumers weighed down with shopping bags increasingly visible on London's Oxford Street and New York's Fifth Avenue, one could be left too easily with the impression the Chinese are consumption crazy.

But this is not reflected in the overall statistics. The Chinese are still a nation of savers.

Retail sales have lagged the pace of growth of the economy, according to official data, by 16.9 percent a year over the past decade, partly as a result of wages not rising in line with GDP growth and also greater affluence leading to a greater proportion of saving.

As a result, consumption spending in China is only about 35 percent of GDP, about half of that in the US.

"Don't expect this savings culture to change radically. You might expect to see signs of that changing in the most advanced cities in China such as Beijing and Shanghai but so far we have not," says Atsmon at Mc-Kinsey.