Market analysis: Chinese middle class

04Mar2013

Background: 300 million People

In China, the middle class is defined as households mainly concentrated in major cities, engaged in decent jobs with good
educational background and professional qualifications. They typically earn an annual income of more than 60,000 RMB, own at least one house and one private car, and enjoy an above average to average consumption level. According to statistics, there are over 300 million people in China that are qualified to be considered part of this above-defined middle-class. This demographic covers about 25% of the Chinese population – as large as the entire population of the United States. The number is predicted to reach 700 million within the next 10 years as the overall population grows to 1.45 billion. China’s middle class consists of entrepreneurs and white collar workers who are working for multinational or state-owned companies.

Market towards Middle Class

China middle class has already created a huge market not only for necessities ranging from household appliances to houses, but also for luxury goods including cars, jewelry, handbags, clothes, etc. With on- third disposable income, about 60,000 RMB a year on average, it can be concluded that the middle-class pushed consumption to a higher level in the Chinese domestic market over the past 10 years. Taking cars as an example, in 2008 sales of cars in the senior market reached 1.04 million, covering 17% of passenger cars. Even during the first half of 2009, with the ongoing financial crisis, the Chinese middle-class automobile purchase rate did not decrease. China middle class is a powerful group that can’t be ignored for companies looking to succeed in the Chinese market. Among all car brands, the Honda Accord and Toyota Camry earned good reputations with middle-class Chinese customers because they offer a good combination of driving quality and price. In addition, German cars like BMW, Mercedes-Benz, Porsche, Volkswagen, always maintain a fairly stable market share among the middle class. In terms of real estate, many middle-class Chinese families tend to purchase properties overseas as many of them are unsatisfied with simply owning a domestic home.

Middle-Class Lifestyle

With relatively affluent incomes, the middle-class pursues a more leisurely lifestyle than most Chinese citizens. According to an online survey, the more money they earn, the more time they spend on traveling. 81% of Chinese citizens who traveled last year earned more than 5000 yuan a month. 25% of those visitors chose foreign countries as destinations over domestic locations. As the survey recorded, middle class males prefer to go to Southeast Asia for vacation while females prefer Paris, New York, Milan and other fashion hubs and shopping hot spots. It is becoming the trend among the Chinese middle class to go beyond Chinese vacation destinations and instead travel outside of the country.

Chinese Consultancy from Daxue Consulting

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Picture: Chinese Middle Class