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Class Editori News

Young and minor cities are now the drivers of China's consumption

August 19, 2019

Abstract : Abstract: Millennials and singles have greater spending power than families, as well as different consumption habits. 

MILAN, Aug 14 (Class Editori) - The second edition of the China International Import Exhibition (Ciie) will be held in Shanghai from 5 to 10 November, which will see Italy and France as the guest nations. This year, with three thousand exhibitors on a surface of 300,000 square meters, this event will represent a moment of review for China after a year that has not proved to be positive in terms of foreign trade.

In anticipation of this important event, it is important to reflect on the item consumption in its broadest sense, and on the level of spending per capita of a country that however is an outlet market as well as unavoidable for exporting States and above all for Italy which, with its prestigious brands, puts a growing appeal on Chinese consumers as shown by the data emerging from the web pages of this platform about Moncler, Ferragamo, Ferrari and Cucinelli.

The limited growth of 1.3% in Chinese imports in the first seven months compared to the previous year represents a considerable figure. According to a survey published last month by the Ministry of Commerce, carried out on a representative sample of over a thousand people, 80% answered that they are still buying imported products and the categories are those that have always been recognized: food, products for children, clothing and watches, cosmetics, jewelry, furniture and design.

But within this macrocosm we must analyze some indispensable divisions to understand the China phenomenon. The distribution of consumers must be divided into four groups: families with at least one child; millenials, of which a consistent part still lives with parents, and singles; city of residence and number of tourists (which now accounts for almost 100 million per year) travelling abroad.

With regard to the first group, the problems of balancing family budgets remain, despite the fact that since January the rates of the individual income tax have been revised downwards. School and its related activities represent an increasing cost, together with the expenses for the summer holidays.

Until a few years ago, in cities like Shanghai, children were entrusted to their grandparents but now, with the need to create a certain mindset, all their free time is devoted to courses and trips, with the hope that the children can, after their studies, have high-profile job opportunities. The extracurricular activities have a monthly cost that varies from 1,000 to 1,300 euros and is equal to one third of the parents' salary. Consequently, the margins for diversifying purchases are not very large. Even during school, starting from kindergarten, the frenzy for tutoring activities is visible, with exorbitant fees during the whole school year.

From another research, commissioned by the Chinese Central Bank (PboC) it is highlighted that 80% of the interviewees expects to have a higher spending margin for the present and of this sample 44% are part of the family group having children.

A different group is represented by the millennials, who generally still live with their parents, and by singles. This group, at least until the period prior to any marriage and the consequent purchase of an house, is the target of all consumer goods or semi-durable companies: net wages from 1,000 to 2,770 euros, freedom, desire to show off, large smartphone and apps usage, represent those who wish to cross the borders of their country.

A car completes the status symbol. Crossing the city bypasses, especially in the morning, you can see a variety of cars in the queue at the helm of which there are very young people going to work, also bearing very high parking costs.

They make full use of corporate holidays outside those established by the official calendar (also because in those the costs rise) and the most sought destinations are Korea and Japan, European tours, the United States or new destinations like the Arctic, Africa, Micronesia, Cuba and the Seychelles, but also Italy, one of the growing destinations for Chinese tourists, where the average receipt is around 2,000 euros per person, according to a recent statistic.

Within this subdivision it is important to further analyze the places of residence. In this case the living costs are different and the incidence, for example, of the cost of the property, allows, at the same salary, to have a different quality of life.

The term new first-tier cities well represents cities such as Zhenzhou, Chengdu, Hangzhou, Wuhan and Kumming, cities where important companies operating in the automotive and electronics sectors are located, logistics hubs with infrastructural equipment, therefore become places of opportunity for the professional growth and life experience of young people.

In Chengdu, one of the most economically vibrant areas, but where buildings cost around 30% less than Shanghai, the differential - at the same pay - is spent on leisure and shopping. In Chengdu restaurants are open all night and it is common to see people eating outdoors, in the mild climate in a verdant and quiet environment, perhaps sipping tea or wine from the new world and playing mahjong.

These millions of people are now the audience of e-commerce companies, which count over half a billion users (only 400 million, even in this case young people, are using "ready to eat food" services). As for the products of made in Italy, the foundations can be created for a transversal development on the groups described above, thanks also to agreements, some already in force, with Alibaba, JD Com and Sunning.

*edited by Marco Leporati, managing director at Savino Del Bene in Shangai – transport and logistics company. Leporati has been living and working in China for over 25 years.

(Source:Class Editori)

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