|Boost in Chinese household consumption by 2020.|
Thursday, 19th June 2014
Source : Nielsen
As China’s investment-driven economy continues to transform into one driven by personal consumption, the country could see a boost in household consumption from today’s 35 percent of GDP to between 45 and 50 percent by 2020 according to Mitch Barns, chief executive officer of Nielsen, a leading global provider of information and insights into what consumers watch and buy.
Barns spoke yesterday at the Boao Forum for Asia’s annual conference, taking place this week in Hainan Province.
"'The upper end of this range amounts to additional spending of approximately 26.9 trillion yuan over 2012 levels – over 18,500 yuan of additional consumption per capita, taking consumption per capita to well over twice 2012 levels,” said Barns at a panel discussion on key spending trends in China, one of the world’s most dynamic and fastest-growing markets. (All numbers are in 2012 constant yuan.)
A tough road, but a promising future
Nielsen information, in agreement with that of the World Bank, puts Chinese household final consumption today at about 35 percent of GDP, compared to the worldwide average of 60 percent. Meanwhile, the household savings rate as a percentage of disposable income almost doubled in China from about 16 percent in 1990 to more than 30 percent two decades later.
“Chinese consumers often cite the lack of a social safety net as the main reason why they need to save as much as they do,” said Barns.
According to Nielsen’s latest survey on Chinese consumers’ attitudes on consumption and savings, consumers in Tier 1 cities save most, with the savings rate as high as 60 percent. Those consumers aged between 40 and 60 save more than 70 percent. Incentives for saving include feeling safe (63%) and preparing for old age (57%), a family emergency (55%) or the loss of a job (55%).
Chinese consumers are also reluctant to borrow: Nielsen’s survey shows that only 13 percent of Chinese have ever held a loan (home [46%] and car [33%] purchases were the top incentives for taking out a loan). Nearly half of the respondents “don’t like the feeling” of carrying debt (48%); another 48 percent believe interest rates are too high.
Further, over a quarter of all respondents (27%) say the actual process of borrowing money is a significant barrier – repayment or application procedures are too complex. About the same number (25%) don’t believe they would qualify for a loan in the first place.
“A Chinese population more confident in its ability to satisfy its education, healthcare and pension needs, and that can take out and repay loans more easily, will be a Chinese population ready to expand its consumption,” said Barns.
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