Executive Director Landor Associates
While rebalancing the economy (moving from investment to consumption as a growth engine) has long been the policy of the Chinese government, Chinese consumption remains among the world’s lowest at 37 percent of GDP (other large developed economies are around 55 percent).
However, recent government actions indicate the barriers to rebalancing are being dismantled and that consumption will grow to reach meaningful levels of 50-to-55 percent by 2025. This is good news for brand owners, as it means consumer spending will be encouraged by political and fiscal policy. For specific opportunities, track policies that are part of the rebalance, including:
Past policy has favored coastal and large tier one cities. Current policy, high-speed rail and relaxed residency registration rules, encourages growth of tier three cities in western China.
Conspicuous consumption continues to be frowned upon, but a growing middle class, with access to personal credit, raises demand for affordable, everyday luxuries.
Policies to stimulate consumption have emphasized culture and entertainment, conditioning consumers to seek novelty in everyday life. Consumers, especially younger ones, increasingly demand variety in what they are offered.