Happy 2017 and welcome back to those who enjoyed a holiday over the break. The past few weeks have seen countless China forecasts for the year ahead, including China Skinny’s own humble 2017 China marketing predictions. Like every year, many are predicting major slowdowns in China’s GDP growth, spending and everything that goes with it. Whilst some sectors in the Chinese economy have continued to show cracks, China’s consumers seemingly can’t get enough stuff, with retail spending keeping China’s economy on its enviable growth path.
In the first 11 months of 2016, consumers spent 10.4% more than the same period a year earlier. During this month’s three day New Year holiday spending surged 46.9% compared to 2016, with outbound travellers shelling out 40% more and going further afield to do it.
As we roll into 2017, we should pay homage to the consumers who are driving this growth – the Millennials. Under-35s’ consumption is rising a third faster than Chinese consumers overall. While older generations lament vanishing traditional values of frugality, China’s youth are celebrating the sense of freedom and independence it brings. They haven’t experienced the austere periods like those before them and lack the same instinctive necessity to save for tougher times. Instead, much of what they’ve known has consumerism at its core.
Millennials have long been the force of China’s consumption growth, but what is changing is how they are funding it.
Although the average official Chinese salary is rising fast, it is still low by Western standards. Even for those who have spent tens of thousands of dollars on an overseas education, less than a third earn more than ¥70,000 ($10,100) a year – that doesn’t go far in a society obsessed with shiny gadgets, premium food, Western athleisure and overseas travel. Nevertheless, Chinese youth with the bug for spending are a feeding it with debt like never before. Consumer credit has grown 300% in the last 6-years alone, with the average Millennial having debt 18.5 times their income.
Will soaring consumer debt lead to the fall of China’s consumer classes? Not likely. There is much less risk of that happening than for the debt-laden shoppers of the West. China’s one-child families are a reason for that. Many Millennials are the sole heir to parents and grandparents’ freehold properties worth millions, and are likely to marry an only child in a similar position. They are starting to come to the realisation that saving a salary of a little over $1,000 a month isn’t overly relevant; in fact, neither is some debt on top of that.
So in short, unless something radical happens across the Pacific, we think 2017 will continue to see healthy consumer spending growth in China – unfortunately some of it fuelled by debt – but not at a level that will cause a catastrophic collapse. We hope your fortunes in China will tap into this year’s growth – agencies like China Skinny are here to help you achieve that. Go to Page 2 to see this week’s China news and highlights.