July 08, 2016

China's middle class emerging as the world's consumption engine will be over half of all online shopping by 2018

Before the late 1990s China barely had a middle class. In 2000, 5 million households made between $11,500 and $43,000 (annual income of 75,000-280,000 yuan) a year in current dollars; today 225 million do. By 2020 the ranks of the Chinese middle class may well outnumber Europeans (50 million more households should become middle class). This stunning development has boosted growth around the world and transformed China. 80% of the chinese middle class own property.

Though China’s population as a whole is ageing, the middle class is getting younger. Nearly half of all people living in cities are under 35: they are eight times more likely than country-dwellers to be university graduates; and most are treasured and entitled only children, with no memory of a time when their country was poor.

Last year Chinese people took 120 million trips abroad, a fourfold rise in a decade. Only 4 percent of the Chinese population hold a passport, compared to 35 percent of Americans — but that 4 percent spends almost $200 billion overseas annually, more than any other nation, according to Goldman Sachs. China's urban middle class dominates tourism spending, and Goldman Sachs expects 12 percent of the population to hold a passport within a decade. This will likely mean a tripling of Chinese tourists and 5-10 times the overseas spending.

The Chinese government may be ruthless towards its critics, but at least it lets its people make money. So long as they keep out of politics, they can say and do pretty much what they want.

Scratch the surface, however, and China’s middle class is far from content. Its members are prosperous, but they feel insecure. They worry about who will look after them when they grow old; most couples have only one child, and the public safety-net is rudimentary. They fret that, if they fall ill, hospital bills may wipe out their wealth. If they own a home, as 80% of them do, they fear losing it; property rights in China can be overturned at the whim of a greedy official. They worry about their savings, too; banks offer derisory interest rates and alternative investments are regulated badly or not at all. No Ponzi scheme in history ensnared more investors than the one that collapsed in China in January.

Bloomberg has an article about What China's Middle Classes Really Earn — and Spend

Online shopping in China accounts for 16 percent, or $672 billion, of all spending — and about half of that takes place on mobile, according to a study by eMarketer, a market research company.

In 2013, China accounted for 35 percent of the world's total online shopping. By 2018, it is estimated that China's spending will exceed the rest of the world's combined, and will account for one in every five yuan spent in China.

McKinsey has forecast that China's upper middle class (130,000 yuan to 280,000 yuan per year) will be the main driver of consumption by 2022. By 2022, the upper middle class will account for 54 percent of urban households and 56 percent of urban private consumption

SOURCES - Bloomberg, Economist, McKinsey

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