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The Chinese Consumer - China - April 2018

“Thanks to a more solid performance in China’s economy in 2017, consumer sentiment is starting to move away slightly from the prudence and caution seen in the same time last year. However, consumers are unlikely to change their habit of spending in a smart way. Value for money will continue to be a key consideration when people shop. This has less to do with low prices but is more about not leaving people with the feeling of being ripped off. Just as expensiveness and exclusivity no longer define aspirational brands, fancy but lazy marketing is no longer effective in winning customer favour compared to investing in better products and services.

Consumers are attaching more importance to personal satisfaction at work, and the need to protect their privacy. There is also a rise in national pride, reflected not only by a stronger confidence in and willingness to spend on Chinese brands, but also by calling out for bringing back traditional culture and heritage. These are providing new opportunities for brands to market themselves and engage today’s Chinese consumers.”

– Ruyi Xu, Director of Research

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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
            • Spending overview
              • Figure 2: Consumer expenditure by sector, 2017
              • Figure 3: CAGR in consumer expenditure, by sector, 2017-22
            • The consumer
              • Eating well becomes a spending priority again in tier one to three
                • Figure 4: Claimed change in consumer spending, by sector, January 2018
              • Family and health still the centre of people’s lives
                • Figure 5: Most important things in life, January 2018
              • More confidence in food safety and pollution, but not in work stress and privacy
                • Figure 6: Most concerned things, 2013 vs 2018
              • Being an aspirational brand is no longer about price and exclusivity
                • Figure 7: Attributes associated with an aspirational brand, January 2018
              • Short-term gimmicks cannot fulfil the long term job
                • Figure 8: Attitudes towards different marketing activities, January 2018
              • Middle class values but not middle class labels
                • Figure 9: General attitudes towards lifestyles and values, January 2018
              • What we think
              • China Today – The Economy

                • 2017’s good growth gives a stable outlook for 2018
                  • Figure 10: China’s GDP and growth, 2013-17
                • CPI shows signs of climbing, but largely driven by Chinese New Year
                  • Figure 11: Consumer Price Index, China January 2015-Febuary 2018
                • Home price increases eased in 2017
                  • Figure 12: Average price of residential properties and growth rate, China, 2013-17
                • Employment stimulated by entrepreneurship and innovation
                  • Figure 13: Unemployment rate, China 2013-17
              • China Today – The People

                • Nearly 1.4 billion population
                  • Figure 14: China population, by urban and rural, 2013-22
                • 2017: declined birth rate, second-birth exceeded first-birth for the first time
                  • Figure 15: New births in China, by first birth and non-first birth, 2013-17
                  • Figure 16: Young parents’ willingness to have a second child, 2016-18
                • An aging population brings challenges and possibilities
                  • Figure 17: China population structure, by age 2013-22
                • Over 600 million post-70s, post-80s and post-90s in total
                  • Figure 18: China population of post-1950s to post-2000s in 2017
                • Income growth drives spending confidence
                  • Figure 19: Annual per capita disposable income and growth, China 2013-17
              • Expenditure Overview

                • Total consumer expenditure grew by 11.6% in 2017
                  • Figure 20: Total consumer expenditure in China, 2012-17
                  • Figure 21: Claimed change in consumer spending, averaged across sectors, 2017-18
                • The big stories have not changed much in 2017
                  • Figure 22: Consumer expenditure by sector, 2017
                • Eating well becomes more important in tier one to three cities
                  • Figure 23: Claimed change in consumer spending, by sector, January 2018
                • The five-year outlook
                  • Figure 24: Total consumer expenditure in China, 2012-22
                • Winners in the next five years: going out and about
                  • Figure 25: CAGR in consumer expenditure, by sector, 2017-22
              • In-home Food

                • What we think
                  • A better treat to the stomach and palate
                    • Figure 26: Consumer expenditure in in-home food, 2012-17
                  • Who’s winning?
                    • Who’s struggling?
                      • The five-year outlook
                        • Figure 27: Best- and worst-case forecast for consumer expenditure in in-home food, at current prices, 2012-22
                      • Key consumer findings
                        • A significant increase of people spending more in the past year
                          • Figure 28: Claimed spending changes in in-home food, 2016-18
                        • Who are spending more?
                          • Analyst’s pick of 2017 insights
                          • Food Service (Eating Out and Takeaway)

                            • What we think
                              • Busier and fun-seeking lifestyle drive expenditure on foodservice
                                • Figure 29: Consumer expenditure in foodservice, 2012-17
                              • Who’s winning?
                                • Specialty restaurants with a focused menu
                                  • Light meals and salads
                                    • Who’s struggling?
                                      • Coffee houses
                                        • The five-year outlook
                                          • Figure 30: Best- and worst-case forecast for consumer expenditure in foodservice, at current prices, 2012-22
                                        • Key consumer findings
                                          • People are spending more on eating out, especially young consumers
                                            • Figure 31: Claimed spending changes in eating out, 2016-18
                                          • Who are spending more?
                                            • Analyst’s pick of 2017 insights
                                              • Restaurant as ‘the third place’
                                                • Consumers are getting explorative with cuisine types
                                                  • Organic claim resonates with consumers best
                                                  • Non-alcoholic Drinks

                                                    • What we think
                                                      • Desire for natural hydration and light indulgence drives upgrading
                                                        • Figure 32: Consumer expenditure in non-alcoholic drinks, 2012-17
                                                      • Who’s wining?
                                                        • Who’s struggling?
                                                          • The five-year outlook
                                                            • Figure 33: Best- and worst-case forecast for consumer expenditure in non-alcoholic drinks, at current prices, 2012-22
                                                          • Key consumer findings
                                                            • More consumers tend to maintain current spending level
                                                              • Figure 34: Claimed spending changes in non-alcoholic drinks, 2016-18
                                                            • Who are spending more?
                                                              • Analyst’s pick of 2017 insights
                                                              • Alcoholic Drinks – In Home and Out of Home

                                                                • What we think
                                                                  • Trading up from quantity to quality
                                                                    • Figure 35: Consumer expenditure in alcoholic drinks (out of home), 2012-17
                                                                    • Figure 36: Consumer expenditure in alcoholic drinks (in home), 2012-17
                                                                  • Who’s winning?
                                                                    • Who’s struggling?
                                                                      • The five-year outlook
                                                                        • Figure 37: Best- and worst-case forecast for consumer expenditure in alcoholic drinks (out of home), at current prices, 2012-22
                                                                        • Figure 38: Best- and worst-case forecast for consumer expenditure in alcoholic drinks (in home), at current prices, 2012-22
                                                                      • Key consumer findings
                                                                        • Signs that consumers starting to find the right balance
                                                                          • Figure 39: Claimed spending changes in alcoholic drinks, 2016-18
                                                                        • Who are spending more?
                                                                          • Analyst’s pick of 2017 insights
                                                                          • Beauty and Personal Care

                                                                            • What we think
                                                                              • Continuous steady growth driven by elaborative care
                                                                                • Figure 40: Consumer expenditure in beauty and personal care, 2012-17
                                                                              • Who’s winning?
                                                                                • Who’s struggling?
                                                                                  • The five-year outlook
                                                                                    • Figure 41: Best- and worst-case forecast for consumer expenditure in beauty and personal care, at current prices, 2012-22
                                                                                  • Key consumer findings
                                                                                    • Demands energise more spending
                                                                                      • Figure 42: Claimed spending changes in beauty products and toiletries, 2016-18
                                                                                    • Who are spending more?
                                                                                      • Analyst’s pick of 2017 insights
                                                                                      • OTC and Pharmaceuticals

                                                                                        • What we think
                                                                                          • Convenience and standardization maintain steady growth
                                                                                            • Figure 43: Consumer expenditure in OTC and pharmaceuticals, 2012-17
                                                                                          • Who’s winning?
                                                                                            • Who’s struggling?
                                                                                              • The five-year outlook
                                                                                                • Figure 44: Best- and worst-case forecast for consumer expenditure in OTC and pharmaceuticals, at current prices, 2012-22
                                                                                              • Key consumer findings
                                                                                                • Fear of illness drives consumers to spend money beforehand for prevention
                                                                                                  • Figure 45: Claimed spending changes in healthcare and pharmaceutical products, 2016-18
                                                                                                • Who are spending more?
                                                                                                  • Analyst’s pick of 2017 insights
                                                                                                  • Clothing and Accessories

                                                                                                    • What we think
                                                                                                      • The fashion industry shifts from imitation to innovation
                                                                                                        • Figure 46: Consumer expenditure in clothing and accessories, 2012-17
                                                                                                      • Who’s winning?
                                                                                                        • Who’s struggling?
                                                                                                          • The five-year outlook
                                                                                                            • Figure 47: Best- and worst-case forecast for consumer expenditure in clothing and accessories, at current prices, 2012-22
                                                                                                          • Key consumer findings
                                                                                                            • Increasing enthusiasm for fashion consumption
                                                                                                              • Figure 48: Claimed spending changes in clothing and accessories, 2016-18
                                                                                                            • Who are spending more?
                                                                                                              • Figure 49: Claimed spending changes in clothing and accessories, by gender, 2017-18
                                                                                                            • Analyst’s pick of 2017 insights
                                                                                                            • Technology and Communication

                                                                                                              • What we think
                                                                                                                • Spending on smartphones and mobile internet contribute to steady growth
                                                                                                                  • Figure 50: Consumer expenditure in technology and communication, 2012-17
                                                                                                                • Who’s winning?
                                                                                                                  • Who’s struggling?
                                                                                                                    • The five-year outlook
                                                                                                                      • Figure 51: Best- and worst-case forecast for consumer expenditure in technology and communication, at current prices, 2012-22
                                                                                                                    • Key consumer findings
                                                                                                                      • Intention on spending maintains
                                                                                                                        • Figure 52: Claimed spending changes in technology and communications, 2016-18
                                                                                                                      • Who are spending more?
                                                                                                                        • Analyst’s pick of 2017 insights
                                                                                                                        • Household Care

                                                                                                                          • What we think
                                                                                                                            • Household care saw a slight pick-up in growth
                                                                                                                              • Figure 53: Consumer expenditure in household care, 2012-17
                                                                                                                            • Who’s winning?
                                                                                                                              • Facial tissue replaced toilet paper as the biggest segment of household paper
                                                                                                                                • Household care brands take on a lifestyle-oriented image
                                                                                                                                  • Who’s struggling?
                                                                                                                                    • Fabric softeners failed to become a laundry room essential
                                                                                                                                      • The five-year outlook
                                                                                                                                        • Figure 54: Best- and worst-case forecast for consumer expenditure in household care, at current prices, 2012-22
                                                                                                                                      • Key consumer findings
                                                                                                                                        • Household care being an unwavering category
                                                                                                                                          • Figure 55: Claimed spending changes in household care, 2016-18
                                                                                                                                        • Who are spending more?
                                                                                                                                          • Analyst’s pick of 2017 insights
                                                                                                                                            • Practical and function-driven Chinese household care shoppers
                                                                                                                                              • Positive attitudes towards housework
                                                                                                                                                • Anti-bacterial sought after across different household care categories
                                                                                                                                                • Home

                                                                                                                                                  • What we think
                                                                                                                                                    • Sluggish housing market dragged down growth in 2017
                                                                                                                                                      • Figure 56: Consumer expenditure in home, 2012-17
                                                                                                                                                    • Who’s winning?
                                                                                                                                                      • Who’s struggling?
                                                                                                                                                        • The five-year outlook
                                                                                                                                                          • Figure 57: Best- and worst-case forecast for consumer expenditure in home, at current prices, 2012-22
                                                                                                                                                        • Key consumer findings
                                                                                                                                                          • Not a high priority sector but will keep current growth momentum
                                                                                                                                                            • Figure 58: Claimed spending changes in-home, 2016-18
                                                                                                                                                          • Who are spending more?
                                                                                                                                                            • Analyst’s pick of 2017 insights
                                                                                                                                                            • Transportation

                                                                                                                                                              • What we think
                                                                                                                                                                • Transport is still one of the fastest growing sectors
                                                                                                                                                                  • Figure 59: Consumer expenditure in transport, 2012-17
                                                                                                                                                                • On the edge of revolution
                                                                                                                                                                  • Figure 60: Best- and worst-case forecast for transport expenditure, at current prices, 2012-22
                                                                                                                                                                • Who’s winning?
                                                                                                                                                                  • Who’s struggling?
                                                                                                                                                                    • Key consumer findings
                                                                                                                                                                      • 41% of surveyed consumers plan to spend more
                                                                                                                                                                        • Figure 61: Claimed spending changes in transport, 2018
                                                                                                                                                                      • Driven by young people living in tier two and three cities
                                                                                                                                                                        • Analyst’s pick of 2017 insights
                                                                                                                                                                        • Leisure and Entertainment

                                                                                                                                                                          • What we think
                                                                                                                                                                            • Growth driven by rising pressure at work and serious pursuit of fun
                                                                                                                                                                              • Figure 62: Consumer expenditure in leisure and entertainment, 2012-17
                                                                                                                                                                            • Who’s winning?
                                                                                                                                                                              • Who’s struggling?
                                                                                                                                                                                • The five-year outlook
                                                                                                                                                                                  • Figure 63: Best- and worst-case forecast for consumer expenditure in leisure and entertainment, at current prices, 2012-22
                                                                                                                                                                                • Key consumer findings
                                                                                                                                                                                  • Leisure spending intentions get stronger
                                                                                                                                                                                    • Figure 64: Claimed spending changes in leisure and entertainment, 2016-18
                                                                                                                                                                                  • Who are spending more?
                                                                                                                                                                                    • Analyst’s pick of 2017 insights
                                                                                                                                                                                    • Holidays

                                                                                                                                                                                      • What we think
                                                                                                                                                                                        • Strong growth maintains
                                                                                                                                                                                          • Figure 65: Consumer expenditure in holidays, 2012-17
                                                                                                                                                                                        • Who’s winning?
                                                                                                                                                                                          • Who’s struggling?
                                                                                                                                                                                            • The five-year outlook
                                                                                                                                                                                              • Figure 66: Best- and worst-case forecast for consumer expenditure in holidays, at current prices, 2012-22
                                                                                                                                                                                            • Key consumer findings
                                                                                                                                                                                              • Maintain a high level of willingness of spending
                                                                                                                                                                                                • Figure 67: Claimed spending changes in holidays, 2016-18
                                                                                                                                                                                              • Who is spending more?
                                                                                                                                                                                                • Analyst’s pick of 2017 insights
                                                                                                                                                                                                • Personal Finance and Housing

                                                                                                                                                                                                  • What we think
                                                                                                                                                                                                    • A slight decrease in growth rate
                                                                                                                                                                                                      • Figure 68: Consumer expenditure in personal finance and housing, 2012-17
                                                                                                                                                                                                    • A long term expanding market
                                                                                                                                                                                                      • Figure 69: Best- and worst-case forecast for personal finance and housing expenditure, at current prices, 2012-22
                                                                                                                                                                                                    • Who’s winning?
                                                                                                                                                                                                      • Who’s struggling?
                                                                                                                                                                                                        • Key consumer findings
                                                                                                                                                                                                          • Analyst’s pick of 2017 insights
                                                                                                                                                                                                          • Miscellaneous

                                                                                                                                                                                                            • What we think
                                                                                                                                                                                                              • High growth driven by education and medical services
                                                                                                                                                                                                                • Figure 70: Consumer expenditure in miscellaneous, 2012-17
                                                                                                                                                                                                              • Who’s winning?
                                                                                                                                                                                                                • Who’s struggling?
                                                                                                                                                                                                                  • The five-year outlook
                                                                                                                                                                                                                    • Figure 71: Best- and worst-case forecast for consumer expenditure in miscellaneous, at current prices, 2012-22
                                                                                                                                                                                                                  • Analyst’s pick of 2017 insights
                                                                                                                                                                                                                  • The Consumer – What You Need to Know

                                                                                                                                                                                                                    • Family and health remain life priorities
                                                                                                                                                                                                                      • Luxury and exclusivity are no longer definitions of as aspirational brand
                                                                                                                                                                                                                        • Smart services and customised solutions are best at winning consumer hearts
                                                                                                                                                                                                                          • The Western-originated Middle class label does not work in China
                                                                                                                                                                                                                          • Priorities in Life

                                                                                                                                                                                                                            • Family and health are still by far the most important
                                                                                                                                                                                                                              • Figure 72: Most important things in life, January 2018
                                                                                                                                                                                                                            • The growing importance of personal feelings: making money but also doing a job one enjoys
                                                                                                                                                                                                                              • Figure 73: % of mentions what’s most important, money and career-related, 2013 vs 2018
                                                                                                                                                                                                                              • Figure 74: Selected mentions of most important things in life, by generation, January 2018
                                                                                                                                                                                                                          • Concerns in Life

                                                                                                                                                                                                                            • Health threats remain the biggest worries…
                                                                                                                                                                                                                              • …but there is more confidence in dealing with food safety and pollution
                                                                                                                                                                                                                                • Figure 75: Most concerning things, 2013 vs 2018
                                                                                                                                                                                                                              • Concern over privacy doubled in five years’ time
                                                                                                                                                                                                                                • One in ten feel disheartened by the loss of Chinese culture
                                                                                                                                                                                                                                  • Figure 76: Most concerned things, January 2018
                                                                                                                                                                                                                                  • Figure 77: Pechoin’s cushion BB cream in collaboration with the Palace Museum, China, 2017
                                                                                                                                                                                                                              • What Makes a Brand Aspirational

                                                                                                                                                                                                                                • Being luxurious and difficult to buy are the least important
                                                                                                                                                                                                                                  • Figure 78: Attributes associated with an aspirational brand, January 2018
                                                                                                                                                                                                                                • Value for money is important, but not enough
                                                                                                                                                                                                                                  • Staying true to the brand is the best strategy
                                                                                                                                                                                                                                    • Big differences by age generations
                                                                                                                                                                                                                                      • Figure 79: Selected attributes associated with an aspirational brand, by age generation, January 2018
                                                                                                                                                                                                                                  • Attitudes towards Marketing Activities

                                                                                                                                                                                                                                    • Short-term buzz generators cannot do the long term job
                                                                                                                                                                                                                                      • Smart services and customised solutions are most wanted
                                                                                                                                                                                                                                        • Though not new, lifestyle-positioning is still winning favour
                                                                                                                                                                                                                                          • Figure 80: Attitudes towards different marketing activities, January 2018
                                                                                                                                                                                                                                        • Post-80s and post-90s defy some assumptions
                                                                                                                                                                                                                                          • Figure 81: Attitudes towards selected marketing activities, % mention on have favourable attitudes towards the brand, by age generation, January 2018
                                                                                                                                                                                                                                        • Men and women attracted by different types of spokespersons
                                                                                                                                                                                                                                          • Figure 82: Attitudes towards selected marketing activities, % mention on have favourable attitudes towards the brand, by age and gender, January 2018
                                                                                                                                                                                                                                      • Lifestyles and Values

                                                                                                                                                                                                                                        • Two thirds of consumers say they are happy with life now
                                                                                                                                                                                                                                          • Figure 83: General attitudes towards lifestyles and values, January 2018
                                                                                                                                                                                                                                          • Figure 84: Selected most concerned things, by consumer segment, January 2018
                                                                                                                                                                                                                                        • Middle class label does not help brands connect with their audience
                                                                                                                                                                                                                                          • Figure 85: General attitudes towards lifestyles and values, % of any agree, by consumer segment, January 2018
                                                                                                                                                                                                                                        • Post-80s want to show off their lifestyle the most
                                                                                                                                                                                                                                          • Figure 86: General attitudes towards lifestyles and values, % of any agree, by age generation, January 2018
                                                                                                                                                                                                                                      • Meet the Mintropolitans

                                                                                                                                                                                                                                        • Who are they now?
                                                                                                                                                                                                                                          • Figure 87: Definitions of Mintropolitans by Mintel, 2015-18
                                                                                                                                                                                                                                          • Figure 88: Incidence of Mintropolitans by city, January 2018
                                                                                                                                                                                                                                        • Where do they spend more?
                                                                                                                                                                                                                                          • Figure 89: Gap in sectors that have spent more in the last 12 months between MinTs and Non-MinTs (as benchmark), January 2018
                                                                                                                                                                                                                                        • Priorities and concerns
                                                                                                                                                                                                                                          • Figure 90: Gap in life priorities and most concerned things between MinTs and Non-MinTs (as benchmark), January 2018
                                                                                                                                                                                                                                        • What’s aspirational and how to connect them?
                                                                                                                                                                                                                                          • Figure 91: Gap in attributes that make a brand aspirational between MinTs and Non-MinTs (as benchmark), January 2018
                                                                                                                                                                                                                                        • About half of MinTs want to let others know about their lifestyle
                                                                                                                                                                                                                                          • Figure 92: Agreement on ‘I like letting others know what brands I am using’, by consumer classification, January 2018
                                                                                                                                                                                                                                        • Less showy MinTs are more resentful towards impetuous marketing activities
                                                                                                                                                                                                                                          • Figure 93: Attitudes towards selected marketing activities, by consumer segment, January 2018
                                                                                                                                                                                                                                      • Appendix – Consumer Expenditure Forecast

                                                                                                                                                                                                                                          • Figure 94: Consumer expenditure by sector, 2017-22
                                                                                                                                                                                                                                      • Appendix – Methodology and Abbreviations

                                                                                                                                                                                                                                        • Methodology
                                                                                                                                                                                                                                          • Fan chart forecast
                                                                                                                                                                                                                                            • Abbreviations

                                                                                                                                                                                                                                            The Chinese Consumer - China - April 2018

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