Chinese Consumers Keep Spending – Good News For Economy

More People Shopping Amid Positive Signs From Economic Stimulus Plan

Businesses and Politicians alike hope China's stimulus measures kick-start the economy and drive consumer spending as consumers in developed economies hunker down. Illustration © The Economist

Businesses and Politicians alike hope China's stimulus measures kick-start the economy and drive consumer spending as consumers in developed economies hunker down. Illustration © The Economist

The Wall Street Journal just posted an informative story about increased spending amongst Chinese consumers, as savings rates drop in younger consumer segments and more first-time car buyers take advantage of small-engine subsidies and overall lower prices on big-ticket items. These habits, of course, turn tradition upside down, as consumers in developed countries save more and hold off on purchasing new automobiles or real estate as the financial crisis continues. Although Chinese consumer confidence is tentative and somewhat fragile, consumers are responding to discounts and other moves by retailers to entice potential customers. Interestingly enough, the macro-level improvements in consumer confidence are boosting sales for companies who have not received any direct benefit from the economic stimulus:

Consumer-durables giant Procter & Gamble Co. says its sales in China are growing at the slowest rate in six years, but sales in other markets are shrinking. Sales of Louis Vuitton products remained “stable” and “strong” in 2008, the company said, in comparison with a 4% and 5% drop in sales revenue in the U.S. and Japan, respectively. Europe’s second largest-retailer, Metro AG, reported that 2008 sales in China rose 15% to $1.1 billion.

The crux of this article, however, is the contrast between Chinese and global consumers’ reactions to global economic uncertainty. While both consumer segments are rightfully concerned with the economy, Chinese buyers do not appear to have any intention to follow their parents’ model and save during tough times:

Three-quarters of China’s consumers plan to maintain or increase their spending next year, according to a study by the Boston Consulting Group — nearly double that of the U.S. and European Union. Consumers appear to be less nervous about their personal finances, with only 23% expecting the economy to worsen in 2009, compared with 32% in the U.S., 49% in Europe and 57% in Japan.

Chinese consumers are spending, in part, because they have greater confidence in the government, rooted in three decades of rising economic growth. “The younger generation [in China] doesn’t have bad memories. We did the survey in Brazil where the real economy is OK, but people still have bad memories [of economic upheaval]. So even though the real economy there is not that bad, more folks are trading down,” said Carol Liao, partner and managing director at Boston Consulting’s Greater China office.

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2 responses to “Chinese Consumers Keep Spending – Good News For Economy

  1. Pingback: Put Your Money Where The Art Is « ChinaLuxCultureBiz

  2. Pingback: Luxury Brands Look To Shoppers In China For Cushion In Crisis « ChinaLuxCultureBiz

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