China’s growth will bring close to 100 million households earning at least 60,000 yuan per year (about $9,000) into the middle- and affluent-class (MAC) segments from 2010 to 2020–roughly the same number of MAC-equivalent households as in the United States today. The increase in MAC households will double consumer spending power in nearly a quarter of China’s cities and counties over the next decade.
In 2005, a consumer company doing business in 70 locations (cities and counties) in China could reach 70% of consumers in the middle and affluent classes. To achieve the same coverage today, a company must be in nearly 240 locations. By 2020, that number will exceed 400. A dramatic shift in the geographic distribution of consumer spending power is under way in China. The middle classes are expanding out beyond the largest cities more rapidly and in greater numbers than any market has ever witnessed.
By 2020, half of the urban population will live in cities with over one million people. There will be 800 locations with real disposable incomes higher than in Shanghai today.
When prioritizing provinces, it is important to consider not just the total size of the targeted income segment but also its density, because provinces vary significantly in their concentrations of MAC consumers in various locations. Or a company might also take a finer-grained approach to clusters. More than 200 of China’s 650 official cities have at least one (often smaller) city located within 50 kilometers. That introduces the possibility of expanding to lower-tier cities without significant incremental cost. Small cities often look appealing because of high average incomes, but a city with a MAC population of 150,000 cannot compare with cities that have more than 1 million MAC consumers, even if the latter have lower average disposable incomes. Taking this approach to clusters, a company could identify a large “anchor” city surrounded by lower-tier cities that it could serve cost-effectively with the existing infrastructure. In addition, the nearby rural areas can be clustered with the anchor city as long as the rural consumers are within the company’s targeted set of consumers.
Brian Wang is a Futurist Thought Leader and a popular Science blogger with 1 million readers per month. His blog Nextbigfuture.com is ranked #1 Science News Blog. It covers many disruptive technology and trends including Space, Robotics, Artificial Intelligence, Medicine, Anti-aging Biotechnology, and Nanotechnology.
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