Altough Chinese consumers are showing strong confidence on China's economic prospects, they remain big savers and cautious spenders.
A recent study by the Economist Intelligence Unit found that many consumers certainly aspire to obtain property, cars and other symbols of rising affluence, but concerns about healthcare, education and retirement continue to restrain consumption.
The "A better life? The wants and worries of China’s consumers" is based on two wide-ranging surveys of urban and rural consumers (1,650 and 1,001 households, respectively aimed) at gauging their confidence and consumption priorities.
Across both of the survey samples, 91% of respondents said they are optimistic about the future. This confidence should translate into expenditures: among the relatively well-off urban dwellers surveyed, only 17% said they were reluctant to spend money.
Although urban survey respondents are relatively well-off financially, are well-educated and have good jobs, the study found their reported savings rates to be quite high. In tier 1 cities such as Shanghai and Beijing, 67% of respondents said they saved one-quarter or more of their household income, and 33% said they saved 35% or more. In less-developed tier 2, 3 and 4 cities, the figures were even higher.
Children’s education was the top reason for saving, followed by retirement and medical emergencies, rather than for purchase of consumer goods. In tier 1 cities, 75% of respondents said they had relied on their own earnings or on family and friends to finance the purchase of the home where they lived (all respondents were homeowners). In tier 4 cities, that figure rose to 83%. This thinking appears to be deeply ingrained. Although 61% of urban respondents plan to buy a new home, they do not plan to borrow much to finance it. Respondents in tier 1 cities seemed more willing than others to take on debt—47% said they would borrow between 30% and 50% of the price of a new home. But 23% said they would borrow nothing.
Not surprisingly, many more of the respondents plan to buy a car. At the same time, however, concern over air pollution is pronounced—54% cited it as the thing they would most like to change about the area in which they live, and 53% cited it as one of their greatest concerns about the future.
Another finding is that the relatively well-off urban survey respondents are playing a significant part in China’s booming property market—42% already own two or more properties, and 61% plan to buy a new home in future. While these consumers will undoubtedly continue to use property as an investment vehicle, they will also be looking to upgrade their own living conditions. Asked what they would like to change about their living conditions, slightly more than two-thirds of respondents said they wanted to make their homes more comfortable by having such things as better temperature control.
Healthcare is the number one concern of both urban and rural consumers, but for different reasons. Among rural respondents, 84% cited health as their greatest concern for the future, and they were most worried about the cost of healthcare: 61% cited cost as the biggest healthcare issue facing their household. Of the relatively well-off urban survey respondents, 60% said they were concerned about health in the future. But their concerns were the opposite of those in the countryside—49% cited the quality of doctors and hospitals as their biggest health-related challenge, with only one-third concerned about cost.
More than 40% of the rural survey respondents said their greatest desire for the next ten years was to see their children go to university. This ranked far ahead of a new home (22%) or any other desire. This finding reflects rural respondents' vision of the future: only 21% want to give up farming, but a staggering 95% said they did not expect their children to be farmers. Moreover, 72% said they planned to rely on their children financially in old age.