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China Consumer Trend Index Remained at 115 points in Q2 2019
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China Consumer Trend Index Remained at 115 points in Q2 2019

China’s Consumer Trend Index remained at a high level of 115 points in the second quarter this year, similar to that of the last quarter, according to the latest report prepared by global performance management company Nielsen. 

Data from the National Bureau of Statistics showed that GDP in the second quarter surged by 6.2% year-on-year, which was much better than market expectations. In summary, the national economy operated within a reasonable range, and continued the overall trend of stable growth. It laid a solid foundation for the increase of China’s Consumer Trend Index.

Justin Sargent, President of Nielsen China, said: “As the supply-side structural reform advances and the implementation of the policy to ensure ‘six stabilities’ is accelerated, the economic structure has been continuously optimized, and the endogenous power of the economy has been enhanced. It highlights the resilience and vitality of the Chinese economy and effectively facilitates the long-term stable development.”

Nielsen’s Consumer Trend Index measures perceptions of local job prospects, personal finance and willingness to spend. Consumer Trend levels above and below a baseline of 100 indicates degrees of optimism and pessimism, respectively.

CTI remained at a high level, as personal finance and the willingness to spend saw significant growth

Nielsen’s research showed all three components of Consumer Trend Index developed steadily. Specifically, personal finance climbed to 71 points from 70 in the last quarter, a historical high. The willingness to spend remained at the same level as the last quarter(61). The job prospects stood at 77 points.

Sargent said: “The government has implemented measures to further cut tax and lower fees, reduced the cost of corporate taxes and fees, and enhanced the vitality of enterprises. In the meantime, the tax reform has led to a simultaneous increase in household income, which drove social consumption growth.”

CTI in different regions are stable. The index in the eastern region remained at a high level of 124 points. That in both the northern and southern regions achieved steady growth in the past three quarters. According to Nielsen data, CTI in the north increased to 113 points in Q2 from 109 points of the same period last year. CTI in the southern areas reached 118 points in the second quarter, up two points from the previous quarter. Job prospects (72) and personal finance (71) in the northern region in the past six months were generally good. Personal finance and consumer’s willingness to spend in the southern region increased significantly, jumping 7 points and 5 points respectively from the previous quarter, to 71 points and 66 points.

By city tiers, CTI of the first-, second- and third- tier cities have witnessed steady growth in the past four quarters, and the growth rate in the past six months has become more significant. Among them, CTI of second- and third-tier cities continued to take a lead. They stood at 118 points and 120 points respectively, up by 1 point and 3 points. CTI in the first- and fourth-tier cities were both 114 points. The index in the rural area remained stable at 113 points.

Nielsen’s research found that personal finance and the willingness to consume led to the growth of the CTI of the first-, second- and third- tier cities. In the third-tier cities, personal finance and consumer willingness had the conspicuous performance, jumping six points and two respectively to 78 points and 70 points. Personal finance of the first-tier cities increased by four points from the previous quarter to 78 points, and the willingness to consume remained stable at 65 points. As for the second-tier cities, personal finance also achieved a slight increase, up one point to 78 points, while the willingness to consume was 68 points, an increase of two points from the previous quarter.

“In the first half of this year, the indicators of employment, prices, income and other indicators performed well. Among them, prices were basically stable, and the market supply and demand were basically balanced, which boosted residents’ willingness to consume. As consumption concept and pattern changes, the consumption structure of residents has further improved, and the potential of demand for service has been gradually released. In the meanwhile, three short holidays contributed much to the overall consumption in the second quarter, and played a positive role in ensuring the steady trend,” Sargent said.

As the awareness for local products rises, there has been a boon for Chinese brands

Nielsen’s study showed 68% of Chinese consumers preferred homegrown brands, as ethnic sentiment has been rising. Even though 62% of buyers would purchase international brands, domestic brands remained the first choice. 

Driven by rationality, cost performance remains one of the most important reasons for consumers to choose domestic brands, while they are more influenced by quality than price. According to Nielsen data, 61% of consumers believed that cost performance played a significant role in driving them to buy domestic brands. In the coming year, 33% of consumers said they will seek for high-quality products. Twenty-six percent of consumers said they would choose cheaper products that can meet basic features.

National symbolism and consumer recognition of the brands are key drivers for the rise of local goods. Domestic brands’ clearer and firmer brand attitude has won the hearts of consumers. Nielsen’s research found male consumers and buyers living in the first- and second- tier cities are more emotionally driven. Nielsen data showed that 34% of the consumers are more willing to support and buy domestic brands, of which men (36%) are higher than women (34%), and consumers in the first- and second-tier cities (52%) higher than the fourth-tier and rural areas (29%). In addition, 15% of consumers buy domestic brands because they recognize the brand spirit.

In the meantime, consumers in the first- and second- tier cities have stronger willingness to buy domestic brands, which is buoyed by cultural self-confidence. According to the Nielsen report, 29% of the surveyed consumers are more willing to buy domestic brands and products. Among them, 67% choose domestic brands because they are obsessed with traditional aesthetics (being passionate about Chinese traditional culture and symbols, and relevant elements). Sixty percent of them make the decision due to culture penetration (Chinese goods and Chinese style become their way of life). In addition, 47% buy homegrown brands because of self-recognition, and they focus more on their own thoughts.

However, consumers in the first- and second- tier cities have different preferences for domestically produced food and beverage, clothing, and personal digital devices. The health concept, the design, quality and technology are welcomed. The Nielsen report showed that in the past six months, 73% of the consumers were more willing to purchase food and beverage of domestic brands, while 60% of them chose homegrown brands for personal care products. Fifty-five percent of them chose cloths, shoes and hats made by domestic brands. In terms of consumer electronics, 68% of consumers were willing to buy domestic brands, while only 32% of them preferred international ones.

In terms of food and beverage, the health concept of domestic brands is welcomed, and consumers favor the brands much. Nielsen data showed that 39% of the buyers in the first- and second- tier cities choose local food and beverage that are green and healthy. The proportion of people considering multinational companies’ brands and requiring “green and healthy” stands at 30%. Besides, 55% of consumers choose local health care brands that are trustworthy, higher than those who buy international brands (53 percent).

As for clothing, in the social age when appearance matters, product design and reputation play a significant role in affecting the decisions among consumers in the first- and second- tier cities. According to the data compiled by Nielsen, 31% of the buyers in the first- and second-tier markets pay more attention to high quality, which is higher than the 24 percent of the overall group. Twenty-nine percent of them prefer brands with decent design, which is higher than the overall 24%. Up to 32% of the surveyed consumers care the brands’ good reputation.

In respect of 3C products, everyone is glued to their phones, and nearly 30% of the consumers in the first- and second-tier cities choose domestic brands for their products’ texture and technology. The Nielsen report showed that 55% of the respondents are more concerned about the quality of products, which is higher than the average of 47%. Twenty-seven percent of the consumers prefer brands with a high-end design, while 29% of them will choose brands with more scientific and technological elements.

Domestic brands in automotive, 3C, healthcare product sectors may have more opportunities in the upcoming year. Nielsen data showed that in the coming year, 51% of consumers will be more willing to buy locally manufactured cars. And 36 percent of the respondents said they will choose to buy products with better quality at relatively high prices, while 18% of them said they will be willing to spend more on products that can reflect their social status. In terms of 3C products, 43% of the surveyed said they will choose domestic brands, and 44% of the consumers will choose digital product brands with better quality and higher price. As for healthcare products, 39% of the consumers said they will buy domestic health care products, and 33% will choose the products with better quality and higher price.

Domestic brands intend to drive marketing efficiency amid the rise of Chinese brands. Strategically, they market not only through recalling the consumers’ memory, but also by crossover collaboration and innovation to expand word-of-mouth effect. Nielsen’s research found that 49 percent of consumers believed domestic products that overstepped their traditional business and developed other sectors are very attractive to them. Sixty-one percent of the surveyed have a strong interest in product and service innovation, and 37% choose domestic brands because of celebrity endorsement. In addition, international brands should incorporate Chinese elements into their products, as well as cultural inheritance. Sixty-five percent of the surveyed said MNC brands’ products incorporating Chinese elements are very attractive to them.

Sargent said: ” In the market driven by consumers’ demand, brand owners need to pay attention to product prices, quality and brand building, while they need to lay more emphasis on the changes in consumer demand. Only those products that meet consumers’ need can swiftly gain the consumers’ recognition and the market recognition.”