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3 trends driving consumer confidence in China

Nielsen’s latest findings on confidence of Chinese consumer shows many are still have a strong desire to spend despite the country’s slowing economic growth.

In the fourth quarter of 2015, Chinese Consumer Confidence Index stood at 107, a rise of one point from the third quarter of 2015.

Chinese consumers also ranked among the most confident of the world’s biggest economies, beating the United Kingdom (101), United States (100) and Germany (98), which all showed quarter-on-quarter confidence declines.

Compared to 2014, in China, consumers’ willingness to spend was up two percentage points to 48%, the highest level over the past four years.

“As China is shifting from an investment-driven to consumption-driven economy, China’s economic development has entered a ‘new normal’,” said Kiki Fan, managing director of Nielsen China.

The study said Chinese people’s rising willingness to spend is partly due to their optimistic perceptions of local job prospects over the next 12 months, as most of respondents believed the job markets will be excellent (9%) or good (55%), and think their personal finances will also be excellent (5%) or good (58%).

Here are the three main trends:

People in tier 1 cities, towns and villages drive consumption
People in Tier 1 cities like Beijing, Shanghai and Guangzhou are at the leading edge of this rising consumption. The rising popularity of online retail is the main driving factor.

Rural inhabitants set to become empowered consumers. As more e-commerce companies are eyeing rural areas, in addition to government’s support, China’s urbanisation drive and “One Belt, One Road” initiative have unleashed demand and fueled growth of rural areas. Demand for FMCG products, catering, home appliances and so on from rural residents is set to grow in the near future, as people are looking for more quality life with their rising consumption power.

1970s female are the major drivers of the boom in online retail
The index increased quickly in female consumers, especially those born in 1970s. Forty-five percent of 1970s female respondents said they have made online purchases in Q4, and 42% of them expressed willingness to shop online in the future, both indexes slightly increased from Q3 (5% and 6%).

With buoyant willingness to spend, 59% of them said in 2016 they plan to invest more on children’s education, 54% will increase spending on phone charges and 51% will splurge on clothing. Long term, they said will spend more on entertainment, health/exercise, and life quality improvement categories like cosmetics.

Health care and medical mobile applications in great demand
With increasing concern on health, consumers started to concern more on health care, which jumped from 7th in 2012 to 4th in 2015 as consumers’ most concerned issues.

The study also finds that 18% respondents said they used medical and health related mobile applications in December, an increase of 175% in terms of utilisation rate compared to only 7% in January, surpassing the growth rate of all categories of mobile apps.

Fan said there will be a huge development potential for the online healthcare business in China, as those mobile apps in health care are expected to fill this gap by providing professional consultation and registration services to mobile phone users across the country.

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