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The Chinese Consumer - China - April 2017

“Consumers have become more conservative spenders from seeing the slowing economy and feeling more pressure both from work and financially. Meanwhile they are eager to live a healthier and more exciting lifestyle. This requires them to learn and become smarter shoppers – being able to gauge a product’s quality and value before paying so as to make the most out of their budget to enjoy an upgraded lifestyle – featuring a healthier diet and more experiential leisure activities to not only empower the body but also enlighten the mood.”
– Laurel Gu, Research Director

2017 is a year that will see stable economic growth thanks to a demand for upgraded consumption – for new options, better quality and greater convenience. The development of the consumer products and services market is expected to remain active over the next five years to 2021, with health and experience being the two major themes.

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Table of contents

  1. Overview

    • What you need to know
      • Covered in this Report
        • Demographic classification
          • Figure 1: Definition of low/mid/high MHI groups, by city tier
      • Executive Summary

          • China today
            • The economy
              • The people
                • The expenditure
                  • Figure 2: Changes in spending, average across sectors, 2017 vs 2016
                  • Figure 3: Consumer expenditure and growth rate, by sectors, 2016
                  • Figure 4: Changes in spending, January 2017
                  • Figure 5: Best- and worst-case forecast total consumer expenditure, 2011-21
                • The Consumer
                  • Life pursuits: a healthy lifestyle focusing on diet and holiday experience
                    • Figure 6: Life priorities – percentage of consumers claiming “will definitely do”, 2017 vs 2014
                    • Figure 7: Ways of spending for improving living quality, word cloud, January 2017
                  • Good value takes into account price, quality, function and endurance
                    • Figure 8: Definition for “good value for money”, word cloud, January 2017
                  • Consumers need better proof of product quality
                    • Figure 9: Definition of a high-quality product, 2017 vs 2014
                  • Brand and technology play bigger roles in the trading up process
                    • Figure 10: Features that are worth paying more for, 2017 vs 2013
                  • What we think
                  • China Today – The Economy

                    • A consumption-driven economy
                      • Figure 11: Annual GDP and growth rate, 2012-16
                      • Figure 12: GDP contributions, by industrial sector, 2012-16
                    • Online retailing continues to boom
                      • Figure 13: Retail sales of consumer goods, by online and offline channels, 2015 and 2016
                    • Overseas shopping reaches a remarkable size
                      • Figure 14: Total B2C cross-border online retail value and growth rate, 2012-16
                  • China Today – The People

                    • Relaxation of one-child policy drives immediately address workforce issues
                      • Figure 15: Total China population and growth rate, 2012-16
                    • Shrinking workforce pushes businesses to look for other ways to improve productivity
                      • Figure 16: China population structure, by age, 2012-20
                    • Many over-55s continue to work after retirement
                      • Slower income growth makes financial management more important
                        • Figure 17: Annual disposable income and growth rate, 2012-16
                    • Expenditure Overview

                      • Total Chinese consumer expenditures grew by 10.5% in 2016
                        • Figure 18: Consumer expenditure, by sector, 2016
                      • Increasing spending as investment for future
                        • Increasing spending for health and experience
                          • Figure 19: Consumer expenditure and growth rate, by sector, 2016
                        • Increasing spending but more prudently
                          • Figure 20: Changes in spending, average across sectors, 2017 vs 2016
                        • Holidays take over clothing as the spending priority in tier one to three cities
                          • Figure 21: Changes in spending, January 2017
                        • Outlook for 2021
                          • Figure 22: Best- and worst-case forecast total consumer expenditure, 2011-21
                        • Winning sectors in the next five years
                          • Transportation, Holidays and Leisure experience
                            • OTC and pharmaceuticals, in-home food and foodservice
                              • Figure 23: CAGR in consumer expenditure, by sector, 2016-21
                          • In-Home Food

                            • What you need to know
                              • What we think
                                • Stable growth in the deepening economic slowdown
                                  • Figure 24: Consumer expenditure in in-home food, 2011-16
                                • Better-for-you options with proof of high quality driving further growth
                                  • Figure 25: Best- and worst-case forecast for in-home food expenditure, at current prices, 2011-21
                                • Winners for 2017
                                  • Losers for 2017
                                    • Key consumer findings
                                      • Figure 26: Spending habit change in in-home food, 2016 vs 2017
                                    • Having an “imported” label does not guarantee sales
                                    • Foodservice (Eating Out and Takeaways)

                                      • What you need to know
                                        • What we think
                                          • Continuous development of food delivery system and demand for experiential consumption drive expenditure on foodservice
                                            • Figure 27: Consumer foodservice expenditure in China, 2011-16
                                          • Favourable policies and foodservice operators’ going healthy drive future growth
                                            • Figure 28: Best- and worst-case forecast for foodservice expenditure, at current prices, 2011-21
                                          • Winners for 2017
                                            • Losers for 2017
                                              • Key consumer findings
                                                • People are spending more on foodservice, especially young females
                                                  • Figure 29: Spending habit change in foodservice, 2016 vs 2017
                                                • Restaurants with a clear focus stand out as most popular
                                                  • Good in-store ambience is critical in deciding a dining venue
                                                    • A healthy diet: balanced nutrition and fresh ingredients are most valued, while awareness of superfoods remains low
                                                    • Non-Alcoholic Drinks

                                                      • What you need to know
                                                        • What we think
                                                          • Premiumisation as more real and specific
                                                            • Figure 30: Consumer non-alcoholic drinks expenditure in China, 2011-16
                                                          • Light and functional beverages will continue to be winners
                                                            • Figure 31: Best- and worst-case forecast for non-alcoholic drinks, at current prices, 2011-21
                                                          • Winners for 2017
                                                            • Losers for 2017
                                                              • Key consumer findings
                                                                • Spending habit stays the same as last year
                                                                  • Figure 32: Spending habit change in non-alcoholic drinks, 2016 vs 2017
                                                                • Consumers are more cautious with the sweetener
                                                                  • Extra health benefits are highly valued
                                                                  • Alcoholic Drinks – In Home and Out of Home

                                                                    • Key points
                                                                      • What we think
                                                                        • Recovering since 2015
                                                                          • Imported products drive in-home alcoholic drinks spending
                                                                            • Figure 33: Consumer expenditure on alcoholic drinks in home, 2011-16
                                                                          • Wine and beer help drive on-trade expenditure
                                                                            • Figure 34: Consumer expenditure on alcoholic drinks out of home, 2011-16
                                                                          • Future growth drivers: desire for high-quality products and a trendy lifestyle
                                                                            • In-home
                                                                              • Figure 35: Best- and worst-case forecast of expenditure of alcoholic drinks in home, at current prices, 2011-21
                                                                            • Out of home
                                                                              • Figure 36: Best- and worst-case forecast value sales of the alcoholic drinks out of home, at current prices, 2011-21
                                                                            • Winners for 2017
                                                                              • Losers for 2017
                                                                                • Key consumer findings
                                                                                  • Cutting spending on alcoholic drinks
                                                                                    • Figure 37: Spending habit change in alcoholic drinks, 2016 vs 2017
                                                                                  • Western spirits need to find a way to grow
                                                                                    • Online plays a big role in selling and marketing alcoholic drinks
                                                                                    • Beauty and Personal Care

                                                                                      • What you need to know
                                                                                        • What we think
                                                                                          • Small segments boom while daily products rely on premiumisation
                                                                                            • Figure 38: Consumer expenditure in beauty and personal care, 2011-16
                                                                                          • Segmented functional benefits lead future trend
                                                                                            • Figure 39: Best- and worst-case forecast for beauty and personal care expenditure, at current prices, 2011-21
                                                                                          • Winners for 2017
                                                                                            • Losers for 2017
                                                                                              • Key consumer findings
                                                                                                • Mixed reasons behind higher expenditure
                                                                                                  • Figure 40: Spending habit change in beauty products and toiletries, 2016 vs 2017
                                                                                                • Marketing the importance of self-rewarding and pampering
                                                                                                  • Sophisticated consumers raise the standard of quality
                                                                                                  • OTC and Pharmaceuticals

                                                                                                    • What you need to know
                                                                                                      • What we think
                                                                                                        • Ageing society and pursuit of healthier life drive expenditure
                                                                                                          • Figure 41: Consumer expenditure in OTC and pharmaceuticals, 2011-16
                                                                                                        • Changing purchase habit: from hospital to pharmacies or clinics
                                                                                                          • Figure 42: Best- and worst-case forecast for OTC and pharmaceuticals expenditure, at current prices, 2011-21
                                                                                                        • Winners for 2017
                                                                                                          • Losers for 2017
                                                                                                            • Key consumer findings
                                                                                                              • Not only seniors spend more on health
                                                                                                                • Figure 43: Spending habit change in healthcare and pharmaceutical products, 2016 vs 2017
                                                                                                                • Figure 44: Spending habit change in healthcare and pharmaceutical products, by age, December 2016
                                                                                                              • Illness prevention is foundation of better living quality
                                                                                                                • More resources to cultivate rational consumers
                                                                                                                • Clothing and Accessories

                                                                                                                  • What you need to know
                                                                                                                    • What we think
                                                                                                                      • Personalisation, diversification and demand for higher quality drive clothing and accessory expenditure
                                                                                                                        • Figure 45: Consumer expenditure in clothing and accessories, 2011-16
                                                                                                                      • Trading up and individualisation to drive future growth
                                                                                                                        • Figure 46: Best- and worst-case forecast for clothing and accessories expenditure, at current prices, 2011-21
                                                                                                                      • Winners for 2017
                                                                                                                        • Losers for 2017
                                                                                                                          • Key consumer findings
                                                                                                                            • Clothing and accessory spending remains robust
                                                                                                                              • Figure 47: Spending habit change in clothing and accessories, 2016 vs 2017
                                                                                                                            • Need, function and value outweigh cheap price
                                                                                                                              • Consumers want contemporary, individualistic yet classic clothing
                                                                                                                              • Technology and Communication

                                                                                                                                • What you need to know
                                                                                                                                  • What we think
                                                                                                                                    • Growth dragged down by a saturated mobile phone market
                                                                                                                                      • Figure 48: Consumer expenditure in technology and communications, 2011-16
                                                                                                                                    • Moderate growth over the next five years
                                                                                                                                      • Figure 49: Best- and worst-case forecast for technology and communication expenditure, at current prices, 2011-21
                                                                                                                                    • Winners for 2017
                                                                                                                                      • Losers for 2017
                                                                                                                                        • Key consumer findings
                                                                                                                                          • The potential of female consumers should not be overlooked
                                                                                                                                            • Lack of breakthrough innovations to drive spending amongst Mintropolitans
                                                                                                                                              • Figure 50: Spending habit change in technology and communications, 2016 vs 2017
                                                                                                                                            • Technology products ranked as the top spending to improve quality of life
                                                                                                                                              • Non-Mintropolitans show higher potential to upgrade smartphones
                                                                                                                                                • Product quality is key to fostering favourability towards technology brands
                                                                                                                                                  • Family-related features, a market opportunity for wearable devices
                                                                                                                                                  • Household Care

                                                                                                                                                    • What you need to know
                                                                                                                                                      • What we think
                                                                                                                                                        • Household care expenditure increases slowly
                                                                                                                                                          • Figure 51: Consumer expenditure in household care, 2011-16
                                                                                                                                                        • Future opportunities: adapting to the evolving lifestyles
                                                                                                                                                          • Figure 52: Best- and worst-case forecast for household care expenditure, at current prices, 2011-21
                                                                                                                                                        • Winners for 2017
                                                                                                                                                          • Losers for 2017
                                                                                                                                                            • Key consumer findings
                                                                                                                                                              • 25-29-year-old women and tier two and three cities are growth drivers
                                                                                                                                                                • Figure 53: Spending habit change in household care, 2016 vs 2017
                                                                                                                                                              • Gentle cleaning, more frequently is the trend
                                                                                                                                                                • Greater demand for products that cater to emotional wellbeing
                                                                                                                                                                • Home

                                                                                                                                                                  • What you need to know
                                                                                                                                                                    • What we think
                                                                                                                                                                      • Urbanisation and pursuit of quality living drive home expenditure
                                                                                                                                                                        • Figure 54: Consumer expenditure in home, 2011-16
                                                                                                                                                                      • Future needs: a natural, clean and smart home
                                                                                                                                                                        • Figure 55: Best- and worst-case forecast for home expenditure, at current prices, 2011-21
                                                                                                                                                                      • Winners for 2017
                                                                                                                                                                        • Losers for 2017
                                                                                                                                                                          • Key consumer findings
                                                                                                                                                                            • Home spending remains stable
                                                                                                                                                                              • Figure 56: Spending habit change in home, 2016 vs 2017
                                                                                                                                                                            • Buying home appliances is amongst the key indicators of better living quality
                                                                                                                                                                              • High earners and families with kids tend to own more niche smart home devices
                                                                                                                                                                              • Transport

                                                                                                                                                                                • What you need to know
                                                                                                                                                                                  • What we think
                                                                                                                                                                                    • Consumer expenditure on transport close to RMB 2 trillion
                                                                                                                                                                                      • Figure 57: Transport expenditure in China, 2011-16
                                                                                                                                                                                    • Newcomers seeking chances to reshape the industry
                                                                                                                                                                                      • Figure 58: Best- and worst-case forecast for transport expenditure, at current prices, 2011-21
                                                                                                                                                                                    • Winners for 2017
                                                                                                                                                                                      • Losers for 2017
                                                                                                                                                                                        • Key consumer findings
                                                                                                                                                                                          • The bigger, the better
                                                                                                                                                                                            • Making more confident decisions
                                                                                                                                                                                              • Car buyers refuse to sacrifice experience for budget
                                                                                                                                                                                                • Experienced maintainers are leaving 4S stores
                                                                                                                                                                                                • Leisure and Entertainment

                                                                                                                                                                                                  • What you need to know
                                                                                                                                                                                                    • What we think
                                                                                                                                                                                                      • Thriving steadily due to the pursuit of experimental activities
                                                                                                                                                                                                        • Figure 59: Consumer expenditure in leisure and entertainment, 2011-16
                                                                                                                                                                                                      • Fitness drives future growth
                                                                                                                                                                                                        • Figure 60: Best- and worst-case forecast for leisure and entertainment expenditure, at current prices, 2011-21
                                                                                                                                                                                                      • Winners for 2017
                                                                                                                                                                                                        • Losers for 2017
                                                                                                                                                                                                          • Key consumer findings
                                                                                                                                                                                                            • The leisure and entertainment sector will continue seeing healthy growth
                                                                                                                                                                                                              • Figure 61: Spending habit change in leisure and entertainment, 2016 vs 2017
                                                                                                                                                                                                            • Going to gym is likely to become part of daily routine
                                                                                                                                                                                                              • Higher standard for online games: an excellent viewing and listening experience and an exciting storyline
                                                                                                                                                                                                                • A particular penchant for family-focused recreations
                                                                                                                                                                                                                  • Parents are more interested in VR technology
                                                                                                                                                                                                                  • Holiday

                                                                                                                                                                                                                    • What you need to know
                                                                                                                                                                                                                      • What we think
                                                                                                                                                                                                                        • Steadily growing but requiring higher level of differentiation
                                                                                                                                                                                                                          • Figure 62: Consumer expenditure in holiday, 2011-16
                                                                                                                                                                                                                        • Short-haul travels drive future growth
                                                                                                                                                                                                                          • Figure 63: Best- and worst-case forecast for holiday expenditure, at current prices, 2011-21
                                                                                                                                                                                                                        • Winners for 2017
                                                                                                                                                                                                                          • Losers for 2017
                                                                                                                                                                                                                            • Key consumer findings
                                                                                                                                                                                                                              • 30-39s and females aged 25-29 are enthusiastic holiday spenders
                                                                                                                                                                                                                                • Figure 64: Spending habit change in holiday, 2016 vs 2017
                                                                                                                                                                                                                              • Cruise travel is getting popular because it is fun, safe and value for money
                                                                                                                                                                                                                                • Enjoying natural scenery is more appealing than shopping
                                                                                                                                                                                                                                  • Relationship enhancement is an attractive marketing claim
                                                                                                                                                                                                                                    • Focusing on providing “local” tastes
                                                                                                                                                                                                                                    • Personal Finance and Housing

                                                                                                                                                                                                                                      • What you need to know
                                                                                                                                                                                                                                        • What we think
                                                                                                                                                                                                                                          • The fastest-growing sector in 2016
                                                                                                                                                                                                                                            • Figure 65: Personal finance and housing expenditure in China, 2011-16
                                                                                                                                                                                                                                          • Evolving to fulfil consumers' growing financial services demand
                                                                                                                                                                                                                                            • Figure 66: Best- and worst-case forecast for personal finance and housing expenditure, at current prices, 2011-21
                                                                                                                                                                                                                                          • Winners for 2017
                                                                                                                                                                                                                                            • Losers for 2017
                                                                                                                                                                                                                                              • Key consumer findings
                                                                                                                                                                                                                                                • Convenience is key, discount is a trigger in payment preferences
                                                                                                                                                                                                                                                  • Females taking more wealth management responsibilities
                                                                                                                                                                                                                                                    • Consumer experience means more than good customer service attitude
                                                                                                                                                                                                                                                    • Miscellaneous

                                                                                                                                                                                                                                                      • What you need to know
                                                                                                                                                                                                                                                        • What we think
                                                                                                                                                                                                                                                          • Growth in many sectors had slowed due to market maturity
                                                                                                                                                                                                                                                            • Figure 67: Consumer expenditure in miscellaneous, 2011-16
                                                                                                                                                                                                                                                          • Future demand for higher quality will buoy category spending
                                                                                                                                                                                                                                                            • Figure 68: Best- and worst-case forecast for miscellaneous, at current prices, 2011-21
                                                                                                                                                                                                                                                          • Winners for 2017
                                                                                                                                                                                                                                                            • Losers for 2017
                                                                                                                                                                                                                                                              • Key consumer findings
                                                                                                                                                                                                                                                                • Adapting to China’s “New Normal”
                                                                                                                                                                                                                                                                  • China’s consumers becoming more pet-friendly
                                                                                                                                                                                                                                                                  • The Consumer – What You Need to Know

                                                                                                                                                                                                                                                                    • Holiday experience becomes a key life pursuit
                                                                                                                                                                                                                                                                      • Spending priorities associated with what brings higher living quality
                                                                                                                                                                                                                                                                        • Value is determined by price, quality, function and endurance
                                                                                                                                                                                                                                                                          • Facts speak louder than brand when judging the “quality”
                                                                                                                                                                                                                                                                            • Higher willingness to pay premium for well-known brands and technology
                                                                                                                                                                                                                                                                            • Life Pursuits

                                                                                                                                                                                                                                                                              • Healthy lifestyle remains as the top priority
                                                                                                                                                                                                                                                                                • Figure 69: Goals for next year (2017), January 2017
                                                                                                                                                                                                                                                                              • The time to market new holiday destinations
                                                                                                                                                                                                                                                                                • Figure 70: Goals for next year – percentage of consumers claiming “will definitely do”, 2017 vs 2014
                                                                                                                                                                                                                                                                              • Striving for a balance between finance and personal life
                                                                                                                                                                                                                                                                                • Figure 71: Percentage of consumers claiming “will definitely get my household finances in order”, by age, 2017 vs 2014
                                                                                                                                                                                                                                                                              • More people want to give back to society
                                                                                                                                                                                                                                                                                • Figure 72: Goals for next year – percentage of consumers claiming “will definitely do”, by age, January 2017
                                                                                                                                                                                                                                                                              • Young generation pays most attention to appearance
                                                                                                                                                                                                                                                                                • Females are more ambitious
                                                                                                                                                                                                                                                                                  • Figure 73: Goals for next year – percentage of consumers claiming “will definitely do”, by gender, January 2017
                                                                                                                                                                                                                                                                              • What Drives Life Quality?

                                                                                                                                                                                                                                                                                • Products vs experiences
                                                                                                                                                                                                                                                                                  • Figure 74: Ways of spending for improving living quality, top 10 items mentioned, January 2017
                                                                                                                                                                                                                                                                                • Travelling: most commonly acknowledged way of improving living quality
                                                                                                                                                                                                                                                                                  • Figure 75: Ways of spending for improving living quality, word cloud, January 2017
                                                                                                                                                                                                                                                                                • Demographic highlights
                                                                                                                                                                                                                                                                                  • Progressing through beauty, technology, fashion and holidays as people age
                                                                                                                                                                                                                                                                                    • Figure 76: Selected ways of spending for improving living quality, by age, January 2017
                                                                                                                                                                                                                                                                                • Definition for “Good Value for Money”

                                                                                                                                                                                                                                                                                  • No more about just a low price
                                                                                                                                                                                                                                                                                    • Figure 77: Definition for “good value for money”, word cloud, January 2017
                                                                                                                                                                                                                                                                                  • Various ways of assessing the price
                                                                                                                                                                                                                                                                                    • Figure 78: Definition for “good value for money” (Open-ended), January 2017
                                                                                                                                                                                                                                                                                  • Demographic highlights
                                                                                                                                                                                                                                                                                    • Males value durability
                                                                                                                                                                                                                                                                                      • Young people value good product appearance
                                                                                                                                                                                                                                                                                      • What Does a “High-Quality Product” Mean?

                                                                                                                                                                                                                                                                                        • Objective facts speak louder than the brand
                                                                                                                                                                                                                                                                                            • Figure 79: Definition of high-quality product, 2017 vs 2014
                                                                                                                                                                                                                                                                                          • Overseas origin further declines in significance
                                                                                                                                                                                                                                                                                            • Men and women make decisions differently
                                                                                                                                                                                                                                                                                              • Older consumers read facts; younger ones buy in endorsements
                                                                                                                                                                                                                                                                                                • Figure 80: Definition of high-quality product, by age, Jan 2017
                                                                                                                                                                                                                                                                                            • What are Worth Paying More for?

                                                                                                                                                                                                                                                                                              • Biggest increase in willingness to pay for cutting-edge technology
                                                                                                                                                                                                                                                                                                • Figure 81: Features that are worth paying more for, 2017 vs 2013
                                                                                                                                                                                                                                                                                              • “Well-known brand” has an evolving role
                                                                                                                                                                                                                                                                                                • Figure 82: Definition for high-quality product, by consumers who think it’s worth paying more for well-known brands vs those who do not, January 2017
                                                                                                                                                                                                                                                                                            • Meet the Mintropolitans

                                                                                                                                                                                                                                                                                              • Upgrading through experiences
                                                                                                                                                                                                                                                                                                • Figure 83: Selected ways of spending for improving living quality, by consumer segmentation, Jan 2017
                                                                                                                                                                                                                                                                                              • More detail-oriented in product quality assessment
                                                                                                                                                                                                                                                                                                • Figure 84: Selected features that are associated with the definition for high-quality product, by consumer segmentation, Jan 2017
                                                                                                                                                                                                                                                                                              • Trading up for brand, technology and individuality
                                                                                                                                                                                                                                                                                                • Figure 85: Selected features that are worth paying more for, by consumer segmentation, Jan 2017
                                                                                                                                                                                                                                                                                            • Appendix – Consumer Expenditure

                                                                                                                                                                                                                                                                                                • Figure 86: Consumer expenditure, by sector, 2011-21
                                                                                                                                                                                                                                                                                            • Appendix – Methodology and Abbreviations

                                                                                                                                                                                                                                                                                              • Methodology
                                                                                                                                                                                                                                                                                                • Fan chart forecast
                                                                                                                                                                                                                                                                                                  • Abbreviations

                                                                                                                                                                                                                                                                                                  Companies Covered

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                                                                                                                                                                                                                                                                                                  The Chinese Consumer - China - April 2017

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