Industry experts have forecast an imminent shift in China’s primary regions of high expenditure and economic growth.
At present, cities along China’s eastern seaboard comprise approximately 35 per cent of China’s annual spending of Yn18tn (US$2.91tn) spending in retail outlets. This localised expenditure reflects how cities such as Shanghai and Guangdong have prospered since China's economic opening three decades ago.
However, the current shift has been put down to burgeoning income growth in China’s interior as companies shift manufacturing capacity away from the east in search of cheaper labour and new markets.
“It's in the first band of inland provinces, Jiangxi, Henan, Anhui, where you will see more significant growth in the consuming class,' Jeff Walters, managing director of Beijing-based Boston Consulting Group, told Reuters.
'If you look at the coming years, you have a lot of consumers whose incomes are rising, and they are just about to cross the threshold into those levels of income where households are going to become more comfortable spending more.'
Henan has been identified as a very visibly developing economic landscape, as rural pastures have been built upon and the province has become the country’s third largest in terms of population. A foreign direct investment saw it grow 11.6 per cent in 2011.
Both foreign and domestic companies have relocated substantial manufacturing capacity from the east to western and interior cities like Zhengzhou, taking advantage of lower labor costs and government tax incentives.
Experts predict that by 2020 there will be nearly twice as many urban middle class and affluent households, which has been defined as those making ¥75,000 (US$12,131) or more annually, in Henan than there are today in Shanghai.
Lower housing rates in areas such as Zhengzhou and Chongqing also mean residents have greater disposable income despite these region’s slightly lower wages.
As market researchers and companies become aware of these shifting trends, smaller, lower-tier cities are rising in importance, with companies increasing their presence in these areas and placing a greater focus on these markets than previous traditional larger cities.
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