Middle class sitting in the driver's seat for consumption

Consumers wield influence with brands, reports Shi Jing in Shanghai

China's emerging middle class is growing up, preparing to make its presence known in terms of the nation's economic growth.

According to the Discover China's Emerging Middle Class survey released by ZenithOptimedia, China's emerging urban middle class totaled 125 million in 2012, and the number is expected to reach 356 million by 2020.

It's a group with great potential to boost the country's consumption, and in the long term, the economy.

"The Chinese middle class is not necessarily the richest, as a large number of young people are put into this category, but they definitely promise more wealth with a bigger purchasing power in the near future," said Steven Chang, CEO of ZenithOptimedia Greater China.

The report is based on the findings of a survey of about 17,700 respondents in 150 cities, the largest study of its kind so far.

Definitions of China's middle class vary among the different research firms and institutions. But as Gerry Boyle, chairman of ZenithOptimedia Asia Pacific explained, middle-class families in the West have about 30 percent of their income left over after all their basic expenditures have been made, with the lion's share of that leftover income devoted to healthcare and their children's education.

According to a recent Pew Research Center survey, people across a wide range of income levels, including those making less than $30,000 and more than $100,000 a year, identify as being middle class in the United States.

ZenithOptimedia believes that the Chinese middle class includes those with an annual household income of at least 72,000 yuan ($11,815) in tier-one and tier-two cities, and 48,000 yuan in tier- three and -four cities.

Among the respondents, 57 percent reported an average annual household income of 179,000 yuan, with most of these possessing higher academic degrees. About 70 percent of this wealthy group was above 35 years old.

Huang Haibo is a well-known actor who has had frequent appearances on the TV series We Get Married. Playing a civil servant on the show, Huang learned that a person earning a monthly salary of 8,000 yuan or an annual income of around 120,000 yuan, roughly the income of a civil servant, is qualified to be called middle class.

"Working as an actor in China helps me to live quite well. To be honest, I think my income is way beyond the entry level of the middle class," Huang said at a news conference held by ZenithOptimedia.

In addition to having a comfortable income, members of China's middle class also own their own cars or at least have the intention of purchasing one soon. That is reflected in ZenithOptimedia's survey, in which 71 percent of the respondents said they own a car, while 50 percent plan to buy one within the next six months.

In tier-four cities, 75 percent of those identifying as middle class are more anxious to buy a car than a luxury watch.

In addition, the Chinese middle class seems drawn to modern technology, such as the Internet, smartphones or tablets.

Daily use of the Internet among the Chinese middle class is 34 percent higher than the general public, the survey said. Time spent on digital media also was reportedly higher than was devoted to TV, said ZenithOptimedia CEO Chang.

"But the advertisers have not invested enough regarding the new habits of the emerging middle class. About 45 percent of their time is devoted to the Internet, but money invested to that end only takes up about 16 percent," Chang said.

"The middle class spent about 10 percent of their time on online video, but only 1.5 percent of advertising money is targeting this part. It means that advertisers or brands still have much room of improvement," he said.

The study comes at a time when the central government is addressing the importance of consumption, which is said to be the major driving force for the country's economic growth.

By 2020, China's household domestic consumption is expected to account for half of the nation's total output, according to the National Bureau of Statistics.

The middle class is said to be spearheading that consumption. Not only does this group have a better understanding of brands, but ZenithOptimedia said its members are enthusiastic consumers. The luxury watches they buy each year are worth an estimated 49 billion yuan. They reportedly consume 2.7 billion cups of coffee and buy 5.1 million cars a year. And the amount they spend on travel will soon reach 300 billion yuan annually.

Andrew Leong, head of strategic resources for ZenithOptimedia Greater China, believes it is a dream many aspire to. About one-tenth of China's population belongs to the middle class, but many are working hard to reach that kind of lifestyle soon.

Zhu Xiangyang, chief content officer for China's leading online video provider Youku, said it is adjusting its content to reflect the taste of the middle class, with its growing influence and higher purchasing power.

"Although the middle class is a relatively new concept in China, it has already grown into a dream that a lot of people look up to. We have seen that quite a large number of people are working hard to attain that goal," he said.

Apart from the income, middle class is more of lifestyle or a sense of what you have, Boyle concluded. "Middle-class people usually desire more in their lives, and they are very ambitious."