For a business designed on success, it must maintain a keen eye on market trends. What are the consumer demographics? How much spending is each family expected to make? What products will they spend that money on? The companies focusing on China are well-aware of the work they must do, especially while still confronting the uncertainties surrounding the global COVID-19 pandemic.
But opportunity remains. A recent economic study by investment firm Morgan Stanley predicts that consumer spending in China will more than double in the next decade. But that spending will likely focus more on services rather than goods.
Focus on domestic economy, growth in urban areas
From an analyst report released in January, Morgan Stanley notes that consumer consumption in the country should attain $12.7 trillion by 2030, an amount that American consumers now spend. That growth hinges on four factors, including:
- Chinese government policy supporting the domestic economy. This will prove challenging for U.S. companies seeking to make in-roads in the market.
- A rise in household income. And the report declared that disposable income should double in China by 2030.
- Continued growth among the country’s urban areas, confirming that companies should continue to maintain extra attention on population centers.
- Additional technological advancement. A sign that companies must continue to seek opportunities in digital markets in luring the creative, young and tech-savvy crowd.
- Shifts in demographics. The report noted shifts include increases in two key categories. The 35 to 45 age group will climb to 25.3 million (roughly the population of Australia), while the 55 and older category will grow to nearly 124 million (close to Japan’s current population).
The Morgan Stanley report declared that Chinese consumers will set the market tone rather than follow “Western consumption trends.” That direction is likely based on cultural values such as family and a focus on education. According to the report, households in China primarily save money for retirement, education and health care.
Such analysis should prove helpful for any U.S. company looking to do business in China. Understanding the market remains essential.