Posted On 2015/05/15 By In Business, Economics, News, Research With 1199 Views

China’s rising Middle Class – Opportunities the World has never seen before

While now slowing from its once-lofty levels, China’s economic growth has been breathtaking to watch over the past few decades. As the size of the economy has grown so too has the size of China’s middle class.

However, the increase in household wealth is only getting going. Over the next few decades hundreds of millions of Chinese families are likely to join their ranks, propelling huge increases in consumption across a wide variety of sectors.

That’s the view presented by ANZ greater China economists Li-Gang Liu and Louis Lam in a research note out today with the researchers saying consumption “in discretionary goods and services will see fast growth” while “sectors like automobiles, telecommunications, real estate, education, recreation and medicines and medical services will likely witness exponential growth“.

Here’s their view on what will act as the catalyst to propel this expected surge in household consumption, with emphasis added.

“Our projections show that by 2030, China’s middle class by broad definition will reach about 93% of the urban population. Considering both income growth and urbanisation, 326m new middle class will emerge in China’s urban areas from 2014 to 2030. The total middle class population will reach 854m in China’s urban areas. In particular, the household income level of the affluent middle class population will likely reach Taiwan’s current median household income level. The rise of China’s middle class will help lift consumption share in GDP to around 50% by 2030 from 36% in 2014″.

The chart shows the expected changes in the composition of Chinese household wealth from 2015 through to 2030. The scale is in millions.

2574 China's rising Middle Class - Opportunities 02

Liu and Lam point to double-digit growth in retail sales over the 2015 Lunar New Year, along with overseas tourism spending of $US164.8 billion in 2014, up a whopping 28% on 2013, as evidence of the continued rise of Chinese household wealth.

They use sales of brand-name, foreign-made, and high-quality products to further reinforce this view.

“China has already become the largest market for some global luxury brands. For example, premium carmaker BMW AG’s China sales surged 16.6% to 456,732 units in 2014, making China its largest market. Daimler, the German carmaker for Mercedes, also recorded sales of 281,588 units in China during 2014, making China its second largest market behind the US. Aside from luxury cars, sales of other luxury goods, such as cosmetics, watches, high-end fashion, are also rising rapidly. Reportedly, China has already become the world’s largest luxury consumer market”.

They also forecast that by 2030 per capita disposable income in urban areas will be in excess of $US30,000 in purchasing power parity terms, up from less than $US10,000 at present.

2574 China's rising Middle Class - Opportunities 01

With China’s urban population expected to swell to 854 million over the next 15 years, should their projections turn out to be correct, the opportunities it will create domestically and abroad will be like nothing the world has seen before.


Learn more in our Global Ready China Seminars


Sources:

Article: Business Insider

While now slowing from its once-lofty levels, China’s economic growth has been breathtaking to watch over the past few decades. As the size of the economy has grown so too has the size of China’s middle class. However, the increase in household wealth is only getting going. Over the next few decades hundreds of millions of Chinese families are likely to join their ranks, propelling huge increases in consumption across a wide variety of sectors. That’s the view presented by ANZ greater China economists Li-Gang Liu and Louis Lam in a research note out today with the researchers saying consumption “in discretionary goods and services will see fast growth” while “sectors like automobiles, telecommunications, real estate, education, recreation and medicines and medical services will likely witness exponential growth“. Here’s their view on what will act as the catalyst to propel this expected surge in household consumption, with emphasis added. “Our projections show that by 2030, China’s middle class by broad definition will reach about 93% of the urban population. Considering both income growth and urbanisation, 326m new middle class will emerge in China’s urban areas from 2014 to 2030. The total middle class population will reach 854m in China’s urban areas. In particular, the household income level of the affluent middle class population will likely reach Taiwan’s current median household income level. The rise of China’s middle class will help lift consumption share in GDP to around 50% by 2030 from 36% in 2014″. The chart shows the expected changes in the composition of Chinese household wealth from 2015 through to 2030. The scale is in millions. Liu and Lam point to double-digit growth in retail sales over the 2015 Lunar New Year, along with overseas tourism spending of $US164.8 billion in 2014, up a whopping 28% on 2013, as evidence of the continued rise of Chinese household wealth. They use sales of brand-name, foreign-made, and high-quality products to further reinforce this view. “China has already become the largest market for some global luxury brands. For example, premium carmaker BMW AG’s China sales surged 16.6% to 456,732 units in 2014, making China its largest market. Daimler, the German carmaker for Mercedes, also recorded sales of 281,588 units in China during 2014, making China its second largest market behind the US. Aside from luxury cars, sales of other luxury goods, such as cosmetics, watches, high-end fashion, are also rising rapidly. Reportedly, China has already become the world’s largest luxury consumer market”. They also forecast that by 2030 per capita disposable income in urban areas will be in excess of $US30,000 in purchasing power parity terms, up from less than $US10,000 at present. With China’s urban population expected to swell to 854 million over the next 15 years, should their projections turn out to be correct, the opportunities it will create domestically and abroad will be like nothing the world has seen before. Learn more in our Global Ready China Seminars Sources: Article: Business Insider

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About

Stefan

Stefan (from Austria, Europe) has been living, studying and working in China since 2010. Stefan has worked on several research, publication and consulting projects focusing on the China Travel Market. He holds three Masters degrees and is an expert on China Outbound Tourism, Marketing and Social Media in China. Stefan works with BMG on the Global Ready China Seminars as well as the Global Ready China News and related projects. He also has teaching engagements in the areas of eMarketing and Tourism Strategy.

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