This action might not be possible to undo. Are you sure you want to continue?
2009 ) 2 . the percentage of consumption / GDP of China is only 35% which is the lowest compared with other developed countries.4% 2.0% (Data source: CICC research report.0% 8. Tables below show that.2% 3.6% 3.9% 7.1% 5.0% 4.0% 2. Meanwhile.0% 6. Consumption of residence / GDP China Japan India France Canada Brazil UK USA Mexico 35% 55% 57% 58% 60% 65% 67% 71% 73% 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% Germany Brazil Japan France UK Canada USA Mexico India China 0.0% 1.0% 3.5% 4. the growth rate of consumption of China is 6.3% 6.3% 1. China still has extensive room for market growth.Extensive Room in Retail Sales Growth in China Development prospects of China retail market China’s personal consumption will increase in a rapid yet stable manner in the next 5-10 years.0% 5.9% from 1998-2006 which is the highest in the world.5% 3.9% 1.0% Growth rate of consumption in 1998-2006 0.
000 500 0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 472 9. China’s retail & consumer products industry has enjoyed high-speed development with an annual average growth rate of over 10%.Development Prospects in China’s Retail Industry China’s retail industry has reached a stable and high-speed development stage Since the beginning of the 21st century. which drives higher retail sales A bigger middle-class and an improving social security system boost consumer confidence higher and foster mid to long term consumption Moderate inflation will be beneficial to retail sales growth Government policies are directed towards increasing domestic consumption to replace investments as the top driver in economic growth 3 .5% 29.3% 12.586 40% 1.0%11. The following factors have contributed. China’s retail market will continue to share the benefits from the fast development of China’s economy and increasing personal consumption.831 30% 20% 10% 0% -10% -20% Total retail sales of consumer products (in billion dollars) Growth Rate Rapid Urbanization Increasing Middle-Class Population and Improving Social Security System Inflation Pressure Helps Retail Sales Growth Government Policies Encourage Increase in Consumption Urbanization has led to higher income for the urban population.8% 520 581 9.9% 718 811 25. to the growth of the retail industry in China: China Total Retail Sales of Consumer Products and Growth Rates 2.1% 634 13.9% 1. and are expected to continue to contribute.6% 1.0% 20.7% 10. In the future.221 977 15.500 1.000 1.
Increasing disposable income is beneficial to strengthen “marginal consumption” and increase the consumption of non daily necessities and luxury products. According to China’s current statistics. A majority of economists believe this rate shall be above 12% for the next 5-10 years. the annual average growth rate of China’s urban disposable income per capita is 13%.175 8.6%.000 12.Increasing Disposable Income and Rapid Urbanization Increasing Disposable Income According to the National Statistics Bureau Report. a 1% increase in urbanization shall increase the ultimate consumption by 1.748 11.5% 15.7% 9.000 0 100% 80% 60% 40% 20% 0% China Urbanization vs Worldwide China USA Average level Japan Developped regions Korea Developing regions 4 . urbanization shall lead to a fundamental change in China’s consumption volume and types.000 8.759 12.781 17.422 10. RMB China Urban Disposable Income per capita 2003-2009 17.0% 8.1% 13.4% 7.8% 20% 15% 10% 5% 0% -5% -10% -15% -20% 2003 2004 2005 2006 2007 2008 2009 20.000 4.000 16. In recent years China’s urbanization has increased rapidly and urban consumption has increased accordingly.2% 8.786 14.493 11. Rapid Urbanization Due to the huge differences in consumption ability between urban and rural populations.
necessity products such as brand name clothing.5 billion respectively. Improving the Social Security System From 2008-2010.9% 14. Total consumption of the urban population increased to RMB13.300/year in 2009 to RMB 17. cosmetics.000/ year in 2015. 75M China urban families will be categorized as middle class (annual household income RMB50. China’s consumption per capita is projected to increase from RMB14.0% 24.A Bigger Middle-Class and An Improving Social Security System Increasing Middle-Class Population From 2009 to 2015.8% Total volume of retail Jewelry Clothes Food Electrical Building Furniture appliance materials Source: National Development and Reform Commission.1 billion.3% 23. government fiscal investment in social securities was 249.2% 27.4% 26. Major consumption demand on daily products shall grow to other non.300 billion/ year (USD1. 290. The middle class population will become a major driver of future consumption.000-120. jewelry and other non-essential goods. The improving social security system shall benefit stable consumption and stimulate the long-term consumption.5% 6.6 billion and 318.940 billion) by 2015.000). Growth rate of the main retail industries in 2010 40% 35% 30% 25% 20% 15% 10% 5% 0% 35. 5 .
Inflation results in higher goods prices and will directly drive up the sales amount of retail enterprises.4% in 2010. 2010 inflation was 3.Inflation Pressure is Beneficial to Retail Sales Growth Retail sales have always had a strong correlation with CPI. it is difficult to pass all the change in costs to consumers because of the availability of substitutes and competition among retailers. Luxury goods are not subject to price control like necessities and can raise their prices even with inflation. China’s CPI grew to a 28 month high of 5. Retailers that have good distribution channels will have stronger bargaining power with suppliers and apply pressure to keep costs low. Generally. for general merchandise. 2011 expected CPI will be around 4%.6% in 2011 from 18.3%.1% in November 2010. retailers and consumers are affected as a result of inflation. The level of inflation will determine the how suppliers. Moderate inflation is usually the most beneficial to department stores operators. especially with the CPI 6 months lagging data. and retail sales growth will increase to 18. 6 .
Disposable Income – China has already implemented policies this year to raise the minimum wage in a dozen provinces by 12-29% with more to come in 2011. build a well-developed social safety network. China’s government is implementing unprecedented policy initiatives to raise Chinese residents’ disposable income. China’s government is committed to increasing the proportion of household income in the national income and wage / salary income in total income and will seek to reduce the proportion of national income that accrues to the government and large corporations while substantially and continuously increasing wages and salaries. less than one-tenth of $7. Consumer Finance – One of the major bottlenecks in boosting consumption in China lies in the underdeveloped consumer finance industry. which is currently at RMB 2. To boost domestic household consumption. Notably. There is also a plan to lift the threshold of income tax payment. 7 . result in substantial increases in domestic consumption as a percentage of GDP over the next 5 years. along with several favorable macro-trends. and to increase the salaries of civil servants.934 in the US.12th Five Year Plan – Boosts Internal Consumption and Improves Living Standards In the 12th Five Year Plan. and promote consumer finance. push the development of economic housing. with the investment to GDP ratio rising from 35% in 2000 to 48% in 2009 and the consumption to GDP ratio falling from 46% to 36% during the same period.000 per month. Over recent years China has indeed encountered an imbalance between consumption and investment. This presents significant room for this sector to grow to boost the consumption of many consumer discretionary products. the Chinese government’s aggressive and unprecedented measures should. consumer loans outstanding per capita in China by the end of 2009 only amounted to US$608.
Besides Macro Economic Conditions. Other Social Factors Are Also Favorable to the Retail Markets Changes in Population Structure and Consumption Patterns 20 and 30 years old will become the main consumers with a stronger desire for consumer goods 1) Most of them are an only child (from the “One Child Policy”) with higher consumption behaviors 20’s Consumption Characteristics 2) Over time the internet will make their consumption patterns in line with the changes from the rest of the world 3) Spending does not have to be limited by their own income. online shopping) 8 .g. Parents could provide them additional spending power 4) The next “baby boom” will drive another wave of consumption as these younger couples have their own child 30’s Consumption Characteristics Higher Demand for Consumer Goods 30’s+ new ways of shopping (e.
China’s Retail Markets are Highly Fragmented The highly fragmented retail markets in China provide a compelling opportunity for investors to create new market leaders China’s retail sector is very fragmented 9 .
This action might not be possible to undo. Are you sure you want to continue?
We've moved you to where you read on your other device.
Get the full title to continue reading from where you left off, or restart the preview.