Across The Border | Eager to spend millennials are new engines of China’s economy
Higher income growth in smaller cities and a young demographic willing to spend have helped to boost domestic consumption, with beer, dairy and home appliances companies tipped to be the biggest winners
China’s consumption expenditure is set to receive a substantial boost from millennials who are willing to spend, with beer, dairy and home appliances sellers seen as the biggest winners from this trend, according to market observers.
“Consumers born after the 1980s have become the major buying force in China,” according to a Credit Suisse report written by analysts led by Charlie Chen. “They have a much higher willingness to spend versus the older generation, as evidenced by a Nielsen consumer confidence survey and high growth in credit card loan balances.”
Chen said the mainland consumer market growth is also supported by increasing consumption of higher priced products in tier three and tier four cities such as Yantai and Lanzhou and Shouguang and Zaoyang. Growth in personal income and consumer expenditure in these markets has been outpacing that of tier one and two cities such as Beijing, Shanghai, Shenzhen and Chengdu for a while. The gap between these markets has sharply widened since January.
“Taking 70 per cent of the Chinese retail market, the accelerating growth in lower-tier markets will become a major driver of China’s consumer spending,” Chen said.
The biggest winners from this trend, Chen predicts, will be the staples companies, because the Chinese staples market is dominated by local firms and they will enjoy the full benefit of the trend in moving towards more expensive premium products.
“Dairy, beer and home appliances are best positioned to leverage this trend because of the strong consumer need for premium products, strong product research and development capability of a few dominating players and easing competition because of leading players strategically shifting away from price wars,” Chen said.
