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Five Trends Transforming China's Consumer Economy

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Even if China's GDP growth slows to 5.5%, personal consumption is projected to increase by about half to $6.5 trillion, by 2020. But growth is only a part of the story: demographic, social, and technological forces will transform China's consumer economy.

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Five Trends Transforming China's Consumer Economy

  1. 1. Over the next five years, spending on consumer services is projected to grow by 11% per year and account for 51% of growth in urban consumption. Number of upper-middle-class and affluent consumers outside of China’s top 100 cities. 45 98 2015 2020 Number of Chinese cities with more than 100,000 upper-middle-class and affluent consumers. 195 cities cities 373 2015 2020 Over the next five years, consumer e-commerce is projected to: Even if China’s GDP growth slows to 5.5%, personal consumption is projected to increase by about half, to $6.5 trillion, by 2020. But growth is only part of the story: demographic, social, and technological forces will transform China’s consumer economy. Five Trends Transforming China’s Consumer Economy Consumers aged 35 or younger today spend a greater share of their incomes than their elders and are projected to account for 65% of consumption growth from 2015 through 2020. The Emergence of a New Generation The Growing Power of E-Commerce The Continuing Importance of Small Cities Services Will Drive Growth Share of Chinese consumers saying they recently spent money on these services. Emerging-middle- and middle-class households = annual disposable income of $10,001 to $24,000. Upper-middle-class households = annual disposable income of $24,001 to $46,000. Affluent households = more than $46,000 in annual disposable income. LEGEND: Eating out 50% 73% Personal care and fitness 49%32% EntertainmentOutbound travel 53% 68%17% 45% Education 30% 37% Emerging-middle and middle class Upper-middle class and affluent Companies will have to venture beyond the biggest metro areas to capture China’s growth opportunities. More than 300 Chinese cities will have high concentrations of upper-income consumers. To capture the biggest growth opportunities in China, consumer product companies need to develop strategies designed to win over wealthier, younger, more tech-savvy consumers, who are spread across an expanse of cities. Source: This infographic is based on research conducted by BCG’s Center for Customer Insight. The Rise of the Upper-Middle Class With 410 million online shoppers in China, e-commerce now accounts for 15% of private consumption, up from 3% in 2010. These upper-middle-class and affluent households will account for 81% of China’s incremental consumption through 2020. Households earning more than $24,000 annually will increase their consumption by 17% per year through 2020. Number of Chinese households earning more than $24,000. 50 100 2015 2020 2005 2010 2015 2020 25% 36% 45% 53% Share of urban consumption by Chinese born after 1980. Compared with their elders, Chinese aged 35 and younger are eight times more likely to be college graduates, far more brand conscious twice as likely to have traveled overseas China’s Consumer Boom Will Continue Generate annual revenue growth of 20% per year, compared with 6% growth at physical retail outlets Grow from $600 billion in annual sales to $1.5 trillion Account for 24% of all consumer transactions Account for 42% of all growth in Chinese consumption million million million million Read BCG’s latest insights, analysis, and viewpoints at bcgperspectives.com © The Boston Consulting Group, Inc. 2016. All rights reserved. To find the latest BCG content and register to receive e-alerts on this topic or others, please visit bcgperspectives.com. Please direct questions to socialmedia@bcg.com.

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