Study finds Chinese consumers cautiously optimistic, middle-class and affluent consumers from smaller cities will spend more across the board, while those in bigger cities will spend at higher prices in fewer categories;

After dipping last year, Chinese consumer sentiment has improved and in smaller cities has even bounced back. The article, titled "Chinese Consumers: Increasingly Optimistic but Also Realistic," is being released today. It offers insights into the way Chinese consumers plan to spend as the country's economy stabilizes.
 
BCG's Center for Consumer and Customer Insight (CCCI) surveyed 1,000 people in 12 cities and found that consumers feel more optimistic and secure, while also accepting that economic growth is leveling off.

"Last year was the first time in recent history that more Chinese consumers wanted to cut spending than to increase it. This year, the balance has shifted back. The number of consumers who plan to spend more money in the coming year exceeds the number who plan to spend less," said Youchi Kuo, an expert principal at BCG and a coauthor of the report.
 
The improvement in sentiment is driven by middle-class and affluent consumers (MACs) from smaller cities, where people intend to spend more money on more things.

"Last year, small-city MACs were feeling the hit of the Chinese government's anticorruption campaign, which caused cancellation of subsidies and reduced discretionary spending," said Jeff Walters, a BCG partner and report coauthor. "However, people have adjusted, and sentiment has returned to previous levels."
 
In bigger cities, sentiment continues to deteriorate, but the intention to spend is strong in certain categories. Big-city MACs have become more cautious and selective when it comes to where they spend. They are saving their money for big purchases such as cars, houses, and education, and they are valuing quality over quantity.

They are willing to spend even more than before on high-priority categories but are no longer interested on trading up in nonessential categories like packaged food and beverages and entertainment. These categories may see slower growth in big cities. Opportunity remains for them, however, in smaller cities.
 
The article concludes that the road ahead will be bumpier than in the past, but growth opportunities still exist in some consumer segments. To capture them, companies will need to act swiftly in response to the changing dynamics across small and big cities.   
 
A copy of the article can be downloaded HERE.

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