Ashok Sethi
Sep 7, 2018 · 4 min read

The Yin and Yang of the Chinese Consumers (an excerpt from the Introduction to my book — “Chinese Consumers — Exploring the World’s Largest Demographic” published by Palgrave Macmillan)

China is a large and heterogeneous market, which makes talking about Chinese consumers a task which is fraught with danger and risk of over-generalizations. Given the size and complexity of China, Newton’s law of Consumer trends applies to China. For every consumer trend that you see, there is an opposite, though not necessarily an equal, trend. Hence, if we notice that Chinese consumers are becoming more health-conscious — and that is absolutely a valid trend — we also need to acknowledge that Western junk food restaurants have been growing in the country at a phenomenal rate. The apparently opposing trends may apply to two different segments of the market — both of which are growing swiftly. In fact, they could even apply to the same consumers, who display different behaviors at different occasions and may explain the apparent contradiction by saying that they are often forced to eat junk food as normally they are too busy to cook, but as a rebound also try to engage in compensatory healthy habits by practicing yoga or go for jogging. Similarly, we may say that the Chinese consumer is getting Westernized — which is evident, at least in terms of adoption of Western food (not just junk food) or customs (all Chinese brides don the Western style, white wedding gown for the ceremony). Even religious festivals are embraced wholeheartedly — the largely atheists Chinese celebrate Christmas with great gusto and festivity. Valentine’s day elicits significant enthusiasm, in spite of the fact that the Chinese also have their own Valentine’s day (七夕节 or qixijie). The Chinese believe having two Valentine’s days allows you to celebrate the joy of romance twice in a year — possibly with two different partners. But we also need to point out that there is a resurgence of interest in traditional Chinese culture — including studying Confucian philosophy and Chinese art and design.

Nation on the Move

The reason for the apparent contradiction is that apart from being large and heterogeneous, China is also a nation on the move and is hence perpetually changing. The fact that different parts of it are changing at a different pace presents a collage of contrasting and captivating pictures. One part of it has progressed far ahead of the rest and it has given China much to be proud of. It has achieved an economic miracle by clocking an average annual growth rate of 9% every year for more than two decades. It has lifted 350 million people out of poverty and achieved almost all millennium development goals set by the United Nations Development Program (UNDP). But another part of the country is still languishing and has formidable challenges that it needs to address. The most significant aspect of China’s development perhaps is that while it has achieved growth, the effect of this growth is not uniform. The growth is much more visible in large cities and in the coastal areas — the large rural populace and the Western provinces are relatively untouched by this bountiful progress. Within the cities itself, there are yawning gaps between the haves and the have-nots causing tension and social strife. This dual picture presents opportunities for both luxury and premium products, as well as the low-priced basic necessities.

Numerator or Denominator

So while we all look at China with awe, celebrating its status as the second-largest economy in the world, we cannot but acknowledge that it is a long way from being a developed economy. If we temper its economy with the size of its population, we see that as it still ranks around 90th in the world, in terms of per capita gross domestic product (GDP). As an economist remarked some time ago, China looks great when its bulk (such as its population) is in the numerator but looks miserable if the same heft shifts to the denominator. In the media, we often see pictures of young, attractive, modern urban Chinese consumers gleefully carrying a basket full of goods in their hands. This is the picture that the Western companies like to see — they dream and hope that such consumers will lap up their products, possibly compensating for the Western consumers’ thriftiness after the financial crisis. But are these typical Chinese consumers? Or the typical consumers are the 600 million rural residents, with an average annual disposable income of US$1000? And then we realize that both pictures are true. China is now the largest luxury goods market in the world (if you add what the affluent Chinese buy outside of China in their frequent jaunts abroad). It is estimated that there are more than a million Chinese with a million dollars in their pockets. But when you look at 45% of the Chinese population which lives in rural areas, we see that even their entire annual income will not be adequate to buy them a Louis Vuitton bag.

In This Book

This book is a result of being a witness to the evolution of Chinese consumers from thrifty survivalists to global luxury powerhouses. The book looks at the trends which have been shaping the Chinese consumers and attempts to look ahead and imagine the shape of things to emerge

Here is a link to the details of the book:

https://link.springer.com/book/10.1007/978-981-10-8992-3

Ashok Sethi

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Ashok leads the Illuminera Institute in Shanghai, dedicated to thought leadership, training, consultancy and consumer insights based on behavioral economics