Chinese Consumer Confidence measured at 105 in the first quarter of 2016, a decrease of two points from the fourth quarter last year, according to the latest Nielsen Consumer Confidence Index survey.
The Nielsen Consumer Confidence Index measures perceptions of local job prospects, personal finances and immediate spending intentions. Consumer confidence levels above and below a baseline of 100 indicate degrees of optimism and pessimism, respectively.
However, despite the slight drop, China remains one of the world’s most confident countries, ranking 6th in the world. Globally. The report found that the two percentage fall was driven by pessimism around employment opportunities and personal finances. By contrast, Chinese consumers’ willingness to spend continues to raise, reaching52 from 49 of Q4 last year, to reach record high numbers in the beginning quarter of 2016.
Chinese rising willingness to spend is no surprise, for in the past three decades, Chinese consumers’ shopping habits have changed dramatically as incomes have risen and new products have entered local market.
“The rising willingness of Chinese consumers is no surprise. The past three decades have seen a dramatic shift in shopping behavior, as incomes have risen and new products have entered the local markets,” said Yan Xuan, president of Nielsen Greater China. “Chinese consumers have moved beyond being able to only afford the basics of life. Their discretionary spending has increased, leading to an increased appetite for everything from entertainment to luxuries.”
Although China’s consumer confidence declined in Q1, big swings are not expected because the country’s economic fundamentals remain strong and incomes are gradually improving.
Consumer Confidence soared in East China, and willingness to spend keeps climbing in West and South China
According to the report, Consumer Confidence in East China increased from 115 to 117, boosted by local consumers’ promising personal finance prospects. Consumers in East China are more optimistic regarding their personal finances, with 76% respondents saying they have good or very good expectations for their personal finances in the coming 12 months.
Thanks to their comparatively good economic situation and the confidence in the future income conditions, consumers from the East tend to increase spending on life-of-quality purchases such as dining out and tourism compared to consumers from elsewhere in China.
“Despite China’s economic slowdown, purchasing desire has not been affected but has kept increasing. The stronger demands for high quality products have pushed forward the trend of consumption upgrading in China,” said Xuan. “Accelerated Chinese urbanization, combined with the significant increase in’ incomes and spending capability have resulted in the rise of the quality-seeking consumer.”
Meanwhile, consumers’ willingness to spend has gone up significantly in China’s western and south regions. In South China, the index jumped to 54 from 48, and in West China it rose to 38 from 31. Interestingly, according to the research, western residents spend the most of their spare money on their children’s education, and people in the south save most.
“Despite the country’s rapid economic rise, China’s regions have developed at different speeds and consumer trends vary greatly among different groups and regions. Understanding the preferences and mindset of consumer groups is the key to successfully expanding a business in China,” said Yan Xuan.
CCI in Tier 4 city keeps stable
Willingness to spend remains strong across cities, especially in lower tier cities, which drives sales growth. But in tier 1 cities, expectation of rising real estate prices drive down people’s willingness to spend.
In towns and rural China, with the rising disposable income, people’s willingness to spend keeps increasing, which ultimate boosted people’s intension to travel, although the number is still fewer compared to upper tier cities.
The results offer further evidence of a trend toward rising consumer spending power in the country’s less-developed rural areas.
Male has stronger willingness to spend and save more
Men’s willingness to spend hit 54 in the first quarter, higher than female consumers at 49. Men’s rising enthusiasm for spending is mainly derived from their promising expectations on employment prospects and personal financial situation.
Some 38% of the female respondents said they would stock up on goods taking advantage of sales, discounts or promotions. By contrast, only 32% of male respondents said they would do the same. Male consumers are also less likely to make impulsive purchases affected by the promotional activities, with 46% saying they only buy things they need. Only 39% of the women surveyed said they will do so.
The survey also found that male consumers tend to put more of their discretionary money into savings or family improvement while female consumers prefer new clothes and skin care and cosmetics, both online and offline.
There are other differences between men and women when it comes to online shopping behavior as well. Men prefer to buy electronic and gaming products (26.09%), while women spend more money on cosmetics and personal care products (26.96%). The survey also found that both male and female consumers spend the most discretionary spending money on clothing (70% vs 80.47), household goods (33.75% vs 36.88%) and food, beverage and health products (14.37% vs 12.91%).