The Urban Chinese Consumer

 

Why is urbanization important from a marketing perspective?

Urban consumers exhibit quite different buying behaviors than rural consumers.
Among others the average disposal income of urban Chinese consumers is several times higher than of rural Chinese consumers.

Urbanization and Population Growth in China
Fig. 1: Urbanization and population growth in China since 1950

Higher salaries in the cities

As of 2010 China's urbanization rate is still above 3% (in comparison: Europe = 0.1%; North America = 1.4%), which is one of the highest in the world. A forecast by the United Nations predicts that in 2015 there will be an equal number of people in China living in urban and rural areas. (see Fig. 1)

Widening urban-rural income gap in China
Fig. 2: Widening income gap between urban and rural areas in China.

Incentives for a better life such as work and higher salaries attracks many Chinese from rural areas into the big cities. Currently the average income in  the cities is more than twice of what people earn on average in the countryside, and the gap continues to widen. (see Fig. 2)

Urban upper middle class emerging rapidly

As of 2010 China's urbanization rate is still above 3% (in comparison: Europe = 0.1%; North America = 1.4%), which is one of the highest in the world. A forecast by the United Nations predicts that in 2015 there will be an equal number of people in China living in urban and rural areas. (see Fig. 1)

Number of urban Chinese households by income class
Fig. 3: Upper middle class households (monthly household income > RMB 5,000) are growing fast in urban areas. "UMC" = Upper Middle Class. "CAGR" = Compound Annual Growth Rate.

A high-earning upper middle class (UMC) is emerging rapidly in China's cities (see Fig. 3). Consumers belonging to this income class are willing to pay more for high-end products such as consumer electronics and personal care items and remain therefore (apart from the youth and the luxury segment) the prime target of foreign enterprises. By the end of 2015 this income group will account for roughly 50% of all consumer spending (see Fig. 4).

Urban consumption spending by income class
Fig. 4: By the end of 2015 upper middle class consumers (monthly household income > RMB 5,000) will account for half of the overall consumer spening in larger cities. "UMC" = Upper Middle Class. "CAGR" = Compound Annual Growth Rate.

A high-earning upper middle class (UMC) is emerging rapidly in China's cities (see Fig. 3). Consumers belonging to this income class are willing to pay more for high-end products such as consumer electronics and personal care items and remain therefore (apart from the youth and the luxury segment) the prime target of foreign enterprises.

China's major urban areas

According to the National Development and Reform Commission (NDRC) of the People's Republic of China there are currently (2005) ten major metropolitan areas that constitute about 10% of China's territory, 35% of its population and 53% of its GDP:

1) Pearl River Delta: 120 million population
Chinese name: 珠江三角洲 [ZhūJiāng Sānjiǎozhōu]
Cities/Metropolises: Guangzhou (including Foshan and Zhaoqing), Hongkong & Shenzhen, Dongguan & Huizhou, Macau & Zhuhai, and Jiangmen & Zhongshan

2) Yangtze River Delta: 88 million population
Chinese name: 长江三角洲 [ChángJiāng Sānjiǎozhōu]
Cities/Metropolises: Shanghai & Jiaxing & Suzhou, Wuxi & Changzhou, Hangzhou & Ningbo, Nanjing & Zhenjiang & Maanshan, and Jiangyin & Haimen & Jingjiang

3) Bohai Economic Rim: 48 million population
Chinese name: 环渤海经济圈 [Huán Bóhăi Jīngjìquān]
Cities/Metropolises: Beijing & Tianjin-Binhai, Shandong peninsula (including Jinan, Qingdao, Yantai, Weifang, Zibo, ...), Shenyang & Dalian and mid-cities, and Tangshan & Qinhuangdao

4) Cross-Strait Economic Zone: 40 million population
Chinese name: 海峡经济区 [Hǎixiá Jīngjìqū]
Cities/Metropolises: Xiamen & Fuzhou and mid-cities, and the Western coast of Taiwan (including Taipei & Taichung & Tainan & Kaoshiung)

5) Beibu Gulf Economic Rim: 34 million population
Chinese name: 环北部湾经济圈 [Huán Bĕibùwān jīngjìquān]
Cities/Metropolises: Nanning & Beihai & Yulin & Qinzhou & Chongzuo & Fangchenggang, and the Red River Delta in Vietnam (including Hanoi & Hai Phong & Thanh Hóa & Nam Dinh & Hai Duong)

6) Central Plain: 24 million population
Chinese name: 中原 [Zhōngyuán]
Cities/Metropolises: Kaifeng & Xinxiang & Zhengzhou & Luoyang

7) Harbin-Changshun Area (Dongbei cities or Northeastern cities): 22 million population
Chinese name: 哈尔滨长春地区 (东三省城市 or 东北城市) [Hāěrbīn Chángchūn Dìqū (Dōngsānshěng Chéngshì)]
Cities/Metropolises: Harbin & Qiqihar & Daqing, Changshun & Jilin City & Siping, and the Mudanjiang-Yanji Metropolis in North-Korea and Russia (including Rason (NK) and Vladivostok (R))

8) Sichuan Basin: 21 million population
Chinese name: 四川盆地 [Sìchuān Péndì]
Cities/Metropolises: Chongqing, Chengdu, Zigong & Luzhou, and mid-cities
{this metropolitan area is often wrongfully referred to as just "Chongqing - the biggest city of the world"}

9) Guanzhong: 20 million population
Chinese name: 关中 [Guānzhōng]
Cities/Metropolises: Xian, Xianyang & Baoji and mid-cities

10) Greater Changsha Metropolitan Area: 13 million population
Chinese name: 长株潭城市群 [Cháng-Zhū-Tán Chéngshìqún]
Cities/Metropolises: Changsha, Zhuzhou & Xiangtan and mid-cities
 
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