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What's making an impact on China today?

2017 has already seen China develop into a consumption based industry, much of the increase from demand for upgraded consumption in the form of quality, convenience and lifestyle.

Upgraded lifestyles have many living healthier, eating better, experiencing new leisure activities and hobbies.

Total consumer expenditure in 2017 has already topped 2016 figure of RMB 33,511 billion, growing at a rate of 10.5% since 2015. In fact consumption has overtaken GDP, at 6.7% in 2016, reflects the increasing importance of domestic consumption in the economy's development.

Personal finance and housing remains the biggest spending sector in China. In the first six months of 2017, China’s home appliance industry saw revenue jump 16% yoy while profit came in at RMB 50.5 billion, up 9.6% albeit slower than revenue growth, according to the China Household Electrical Appliance Association.

Sectors such as transportation (15%), holidays (125), leisure and entertainment (12%), as well as OTC drugs (10.2%) all found doing business in China thriving.

Mainstream has taken a higher precedence

Until 2010, companies doing business in China that serve that serve mainstream and affluent customers have either had to content with a smaller pool or move to value products. Companies that service the value customers had 180 million households to play with. However by 2020, we can expect to see 167 million households (400 million people) move into the mainstream category, occupying 51% of the urban population.

Sports sector set to double

China’s sports sector, worth 1.5 trillion yuan in 2016, is forecasted to double in value by 2020, and could be worth up to 5 trillion yuan by 2025.

Spending on sport-related entertainment goods and services grew 17.1% in the first half of 2017, outpacing 10.4% growth in broad consumer spending during the period, according to National Bureau of Statistics data released in June 2017. Total spending by Chinese consumers in the first half totalled USD 17.2 trillion dollars, the statistics bureau said.

With the Winter Olympics set to be hosted in 2020 in Beijing, and Xi Jinping's intention to bid for the World Cup, as long as Beijing continues to be a catalyst, we can expect to see sports spending increase in breadth and depth.

Home is where the margin is

Consumers’ desire to fill their home with high-quality products and furnishings in order to better reflect their quality of living poses opportunities for smart home facilities, including appliances that can be controlled from mobile devices.

Also, the replacement industry is also primed to account for 92% of appliance spending, with only 8% from new urban households. This means that consumers will want to spend on the latest and greatest. The change in growth driver has prompted China’s leading appliance manufacturers to focus less on quantity and more on functions, design and brand reputation

China Millennials driving world travel growth

Burgeoning wanderlust among young Chinese is becoming a key driver of global travel growth and helping reshape the domestic economy.

"China, led by younger adults, has become vital to the global travel market's growth. As China's travel market takes off, all eyes should be on the country's roughly 400 million millennials, who will drive spending on airfare, hotels, theme parks, casinos and cruises.”

Chinese will take almost 70 percent more trips overseas in 2020 compared to 2015, fuelling growth in tourism and aiding transportation and infrastructure, analysts said in a report published in September 2017. In 2015, Chinese made 128 million trips abroad, government data show, with adults ages 18-34 accounting for about 60 percent of outbound travelers that year.

Beijing again has a bigger role in stepping up policies that will drive growth in the travel industry. Authorities plan to double annual investment in the sector in the five years through 2020, when they aim to spend RMB 2 trillion (USD 304 billion) on infrastructure like mountain resorts and seaside getaways.

Change in consumer discretionary buying behaviour

Rising discretionary, pretty much across all demographics, has the implication of consumers being more selective when spending. In this environment, Consumers then have a tendency to prioritise some of their spending towards things that can improve their quality of life.

In a connected world, consumers also change the way they shop, becoming less likely to compare price and across all product options available, but siding towards making an assessment there and then, or choosing between their shortlist. Brands hence have to be more transparent and convincing, adding to the push towards DTC (direct-to-consumer)

Brand image and awareness plays an important role here. Brand name alone will not be enough to sway the customer. A distinctive brand identity, and quality of their packages, will be needed to appeal to the more savvy consumers who are less price-sensitive, and more individualistic in their behaviours and ideas.

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