Chinese consumer spending on goods and services perceived to be higher in quality or status is rapidly increasing, according to a report by market researcher Nielsen.
These goods and services are wide-ranging, including toothpaste, cars and banking.
The growth buying power of Chinese consumers’ current leaning towards premium products is a key driver of sales growth in China.
“In FMCG (fast-moving consumer goods) categories, the trading up trend started with small items like a yogurt drink, as consumers were willing to pay more for something beyond the ordinary,” vice president of Nielsen BASES, Nielsen Greater China, Lynn Xu said in Nielsen’s media release.
“Today, the trading up trend is so prevalent for FMCG products that it can be seen in nearly every category, from infant baby formula to liquid milk, from a bottle of skin moisturiser to a tube of toothpaste.”
The driving factor behind this shift in consumer spending is though to be that Chinese households’ income is quadrupling on average.
The Chinese government has stated that between 2000 and 2012, disposable annual income in China jumped from an average of 6,280 RMB ($1,022 USD) to 24,564 RMB ($3,999 USD), according to Nielsen.
In only the past three years, Chinese banks’ total assets have increased by 146 per cent.
“With more cash in their pockets, Chinese consumers have developed a more sophisticated taste for life,” said Xu. “Consumers’ increased awareness of product quality and safety is the primary trigger behind the premium trend. The strong premium momentum in infant milk formula, especially following the 2008 melamine scandal, is a good example.”