The Rise of the Chinese Consumer : Theory and Evidence

In this book Jonathan Garner and his colleagues at Credit Suisse First Boston, argue that by 2014 the Chinese consumer will likely have displaced the US consumer as the engine of growth in the global economy. Government policy is rebalancing demand within the Chinese economy from investment spending to consumption spending. Strong trend economic growth over the cycle, a rise in the consumption to GDP ratio and steady exchange rate appreciation will likely generate an 18% compound annual growth rate in the US dollar value of Chinese consumption spending over the next ten years and lead to a quadrupling in China’s share of global consumption spending. In order to identify the companies and brands which are best placed to succeed in China’s rapidly developing mass consumer market, Garner and his colleagues discuss the results of the first comprehensive survey of consumer attitudes and preferences to have been conducted in China, covering 2,700 persons in eight major Chinese cities. This survey provides valuable data for the business executive or academic seeking detailed local information on sectors including automobiles, beverages, electronic goods, financial services, food producers, food retail, food services, household & personal care, luxury goods, telecommunication equipment, tobacco, and transport and leisure travel. "China is likely to be the single most important influence on the fortunes of investors and corporates alike over the next five years, and yet little is known of what motivates and drives the Chinese consumer. By canvassing the people that matter and reflect the changing face of this massive country, Jonathan Garner has provided investors with a unique insight." —Philip Ehrmann, Head of Pacific & Emerging Markets, Gartmore Investment Management Plc. THE RISE OF THE CHINESE CONSUMER......Page 2 Contents......Page 10 Foreword......Page 14 Preface......Page 16 Acknowledgements......Page 18 Section 1 THEORY......Page 20 1 Top-Down Projections of Consumption Growth in China......Page 22 How big is China’s economy?......Page 23 The ‘revaluation effect’......Page 26 Economic growth and its effects on aggregate household consumption......Page 29 Base case for evolution of US$ value of China household consumption spending......Page 31 Implications for global consumer product companies of our base case......Page 34 Other scenarios......Page 35 References......Page 36 Drivers of long-run economic growth......Page 38 Constraints to long-run growth......Page 41 Evaluating China’s performance and prospects......Page 44 How has China’s recent growth been achieved and is this growth rate sustainable?......Page 48 Physical capital stock accumulation......Page 49 Poor return on investment......Page 52 Technological change......Page 57 Trade......Page 60 Environmental issues......Page 67 Institutional context......Page 69 References......Page 73 3 Near-Term Risks to Consumption Arising from China’s Efforts to Combat Overheating......Page 74 Consumption spending should hold up well......Page 77 4 China’s Demographic Trends and Their Implications for Household Consumption......Page 80 Population growth stops in ten years’ time......Page 81 Changing lifestyles......Page 83 Urbanisation, population migration and education......Page 86 Changes in income distribution......Page 91 Key conclusions from demographics on implications for consumption spending patterns......Page 96 Reference......Page 98 5 Social and Cultural Influences on Consumption......Page 100 Reference......Page 103 6 China’s Growth Potential for Key Product Categories......Page 104 Televisions......Page 105 Mobile handsets......Page 106 Fixed-line telephony......Page 109 Personal computers......Page 112 Radios......Page 115 Autos......Page 117 Air travel......Page 120 Section 2 EVIDENCE......Page 124 Survey introduction......Page 126 8 General: Lifestyle, Income and Leverage......Page 132 Implications for financial services providers......Page 150 9 Autos......Page 154 Implications for automotive producers......Page 164 10 Beverages......Page 168 Implications for alcoholic beverage producers......Page 173 Implications for nonalcoholic beverage producers......Page 179 11 Electronic Goods......Page 182 Implications for semiconductors and consumer electronics......Page 189 12 Food Producers......Page 194 Implications for food producers......Page 198 13 Food Retail......Page 204 Implications for food retailers......Page 207 14 Food Services......Page 212 Implications for food service companies......Page 214 15 Household and Personal Care......Page 220 Implications for household and personal care companies......Page 223 16 Luxury Goods......Page 228 Implications for luxury goods producers......Page 232 17 Telecom Equipment......Page 240 Implications for mobile phone handset producers......Page 245 18 Tobacco......Page 256 Implications for tobacco producers......Page 258 19 Transport and Travel......Page 264 Implications for airline and hotel/leisure operators......Page 270 Appendix A: PPP Convergence Model......Page 276 References......Page 277 Appendix B: Global Consumption Function......Page 280 Appendix C: Methodology of Product Category Projection......Page 284 Bibliography......Page 290 Index......Page 296

In this book Jonathan Garner and his colleagues at Credit Suisse First Boston, argue that by 2014 the Chinese consumer will likely have displaced the US consumer as the engine of growth in the global economy. Government policy is rebalancing demand within the Chinese economy from investment spending to consumption spending. Strong trend economic growth over the cycle, a rise in the consumption to GDP ratio and steady exchange rate appreciation will likely generate an 18% compound annual growth rate in the US dollar value of Chinese consumption spending over the next ten years and lead to a quadrupling in China's share of global consumption spending. In order to identify the companies and brands which are best placed to succeed in China's rapidly developing mass consumer market, Garner and his colleagues discuss the results of the first comprehensive survey of consumer attitudes and preferences to have been conducted in China, covering 2, 700 persons in eight major Chinese cities. This survey provides valuable data for the business executive or academic seeking detailed local information on sectors including automobiles, beverages, electronic goods, financial services, food producers, food retail, food services, household & personal care, luxury goods, telecommunication equipment, tobacco, and transport and leisure travel. "China is likely to be the single most important influence on the fortunes of investors and corporates alike over the next five years, and yet little is known of what motivates and drives the Chinese consumer. By canvassing the people that matter and reflect the changing face of this massive country, Jonathan Garner has provided investors with a unique insight." Philip Ehrmann, Head of Pacific & Emerging Markets, Gartmore Investment Management Plc.

This text on Chinese consumers discusses a number of topics including the Chinese economy, growth potential for key product categories, China consumer survey, drivers and constraints to China's long-term economic growth and general lifestyle and income leverage