As an expert in financial services insights and strategic advice, RFi Group has chosen to take a sharp focus on Chinese financial sentiment, including spending, borrowing and investment intentions. By examining this critical topic and focusing on the fastchanging behavior of wealthy urban consumers, this report provides deep insight for those aligning their fortunes with China.
The RFi Urban Chinese Financial Sentiment Index provides a leading indicator of consumer financial behavior and provides a unique view of the opportunity for financial institutions within the growing Chinese middle class.
Much of the world’s media has focused on slowing Chinese GDP growth, citing collapsing investment, credit restrictions, property bubbles and falling exports. However behind the hype around impending doom lies the Chinese consumer – a demographic force, massive in both scale and potential – set to be the long term engine of growth.
There are undoubtedly risks around China’s future growth trajectory, stemming from the property market and high levels of non-household debt. However, this report argues that the increased spending backed by growing income and confidence of the Chinese consumer will likely provide the impetus for solid medium to long term growth.
The key underlying factors behind sustained consumption growth include:
- Large and growing number of higher income urban consumers
- An increasingly prominent younger generation who spend more and save less
- Social security support and stimulus from government
- Potential for credit driven consumption growth
Sources and methodology
Unless otherwise sourced, all data is derived from RFi Group primary research. Primary research was conducted with 12,000 Chinese urban consumers between May 2013 and December 2015. Surveys were conducted online with consumers in Beijing, Guangzhou, Tianjin, Shanghai and Shenzen. Surveys were conducted approximately 6 months apart with an overrepresentation of wealthy consumers; 1,000 mass market (investible assets RMB.500,000, outside of their family home).
Where comparisons are made with other markets, those markets follow the same primary research methodology.
- Optimists outweigh pessimists as the RFi Urban Chinese Financial Sentiment rebounded in the second half of 2015
- The majority of consumers reported minimal impact on their net-worth from the collapse in stock prices
- Inflation was the most concerning domestic issue for Chinese consumers, while far fewer were concerned about unemployment
- 30% of Chinese consumers intend to spend more in the next 12 months
- A key indicator of lower risk aversion, the intention to save more, is down over the last three years
- The slowdown in Chinese industrial production and investment is being countered by the services sector and consumers.
- Aside from steady retail sales, other indicators include passenger car sales up 7.3% year on year in 2015 and movie ticket sales up 48% on the previous year
- There is massive potential left for private consumption to contribute to the Chinese economy, as it currently makes up only around 38% of total domestic demand. This compares to the US and Japan, where consumption makes up 68% and 61% of the economy, respectively
- Wealth in China is heavily skewed towards younger people – the average age of Chinese millionaires is 38
- Younger Chinese consumers want to spend more. Over the next 12 months 37% of Gen Y intend to spend more, compared to 25% of Baby Boomers
- Over two thirds of Chinese consumers aged 18 to 24 have drawn on savings to fund lifestyle spending
- One in five Gen Y consumers chose changing their current lifestyle as their number one financial goal
- Nearly half of Mass Affluent Chinese consumers remain optimistic about employment prospects in the next 12 months
- Mass Affluent and High Net-Worth Individuals (those with investible assets over RMB 600K) accounted for 3% of the
- population in 2015, or 29.1m individuals. This compares to 33.5m in the USA, 10.5m in the UK and 6.7m in India