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China is estimated to be the largest consumer economy today as measured in purchasing power parity (PPP) terms. Over the next decade, it may add more consumption than any other country, and is expected to generate more than one-quarter of all global consumption growth, according to our baseline scenario. Among the drivers of this growth are seven key consumer segments identified in previous research by the McKinsey Global Institute (MGI).
But across Asia, consumption is not just rising. It’s also growing into a more complex phenomenon as demographic and social changes collide with significant technological advances. A recent report from MGI notes that across the continent, consumption is segmenting and diversifying, while new pockets of growth are emerging.
This article provides a more specific lens on emerging patterns among China’s consumers, who are at the forefront of technology adoption, demographic shifts, and new behaviors. Their evolution has the potential to reshape the entire global consumer market.
1. China’s rising consuming class is an engine of global growth in many discretionary categories
The growth of China’s middle class has been well documented, but its sheer scale continues to be relevant—and remarkable. In 2000, around 1.2 billion Chinese people did not have sufficient income to spend $11 a day in PPP terms. That is the point at which they are considered to be members of the consuming class, who are able to afford some discretionary goods and services on top of the basic necessities. By 2030, we expect about the same number of people to not only join the consuming class but to climb up the income pyramid within it (Exhibit 1).
Consumers in the upper-middle brackets are likely to drive the lion’s share of growth in China over the next decade. By 2030, 60 percent of urban consumption is projected to be driven by upper- middle-income consumers (with annual household incomes ranging from 160,000 renminbi to 345,000 renminbi in real 2020 terms), compared with 35 percent today in our baseline scenario. Another 20 percent of consumption could come from the segment above them, as the “affluent” (with annual household incomes of 345,000 renminbi or more) double their current 10 percent share.
China is steadily becoming a crucial market for categories geared toward consumers with higher incomes....