Chinese Golden Youth Boosts Entertainment & Tourism
The children resulting from China's one-child policy are now relatively affluent young adults. They have a strong spending desire, notably benefiting the entertainment and travel sectors.
China's one-child policy was announced in 1979. The "little princes and princesses" born between 1985 and 1995 are now in their twenties or have just turned 30 and account for around 16 percent of the country's total population. "Compared to other age groups, they are better educated, hold more sustainable earning power and have a stronger desire to spend on upgrades," said Kevin Yin, the Hong-Kong based Regional Head of Consumer Research at Credit Suisse. More than half of them hold at least a college degree, which should ensure them a sustainable future earning power. These young adults should contribute to more than a third of the country's total consumption in the next five years, compared with a seventh in 2014. "We believe this relatively affluent young group is replenishing China's future middle class as the lower-income older generation phases out," Yin added. Over the past 15 years, the number of adults' part of China's middle class has soared to 109 million, a figure now exceeding that of the US (92 million), and is likely to continue its steady rise. The proportion of Chinese adults with wealth holdings above 10,000 US dollars is forecast to exceed 50 percent by 2020.
A Pampered Generation Relishing Entertainment
Young Chinese adults are well pampered by their parents and grandparents. Many of them strive toward a comfortable lifestyle and have a strong desire to spend. They not only spend hours surfing the Internet – nearly two-thirds of them spend more than three hours per day surfing the Internet on their smartphones – they also shop online. These young Chinese relish entertainment and other enjoyable activities such as movies, travel, gaming, and dining out. They barely save and spend most of their incomes on entertainment.
Chinese Box Office Clearly Benefits
The Chinese movie industry has clearly benefited from the government's strategy on culture development, but foremost from young adults' strong demand for entertainment. The country's box office totaled 4.8 billion dollars in 2014, according to data released by the Shanghai-based cinema consultancy Artisan Gateway. China had around 5,400 cinemas with 24,000 screens at the end of last year, with an average of more than 15 new screens added every day across the country. "This trend will continue. The Chinese box office is on track to overtake that of the US within two years," said David Hao, a research analyst at Credit Suisse. Those aged below 30 years account for more than half of the country's total movie audience, with two thirds of this age group going to the movies once or twice a month and nearly a third going three to six times per month. Watching movies actually ranks a first among young adults when they are asked which entertainment medium they like, way ahead of listing to music, staying at home ("zhai"), reading, participating in sports, traveling, partying and shopping.
Avid Tourists Preferring Independent Travel
When you think of Chinese tourists, many of us picture a busload of older tourists walking behind a guide waving a flag. This stereotypical image is, however, totally obsolete. Last year, more than two-thirds of the Chinese travelling abroad were less than 31 years old. A large majority of them prefer independent travel and book hotels through websites rather than travel agencies. These young tourists also spend more on shopping than those aged above 35 and more than 90 percent of them share their travel pictures or experiences through social media channels. Rising incomes, greater entitlement to paid leave, easing visa policies, higher education levels and smaller families are just some of the factors behind the on-going travel boom. "A decade ago, travel expenditure accounted for 5 percent of disposable income in China, whereas it now is at 10 to 15 percent. We expect this spending portion to increase further to 15 to 20 percent in the next decade, a level comparable to its more developed neighboring countries Korea and Japan," explained Sophie Chiu, a research analyst at Credit Suisse. "Young travellers are more spontaneous, unique and social, trying out new destinations rather than going to major holiday spots and also try out non-standard lodging such as Airbnb," Chiu added. The most popular holiday destinations among young Chinese tourists are currently Hong Kong, South Korea, Singapore, Thailand, though a rising number also travel to island destinations such as Sri Lanka, Saipan, Maldives as well as countries in Africa or the Middle East. Total Chinese travel expenditure may as a result reach as much as 280 billion dollars by 2020, up from 150 billion dollars today.
Likely to Buy Apparel and Sportswear They "Just Like"
When shopping, three quarters of the young Chinese state that they buy an object because they just like it, with price, recommendations made by friends and quality cited far less often as the reason. The importance of the brand is only actually cited by 19 percent of the respondents, according to a study carried out by the Peking University Marketing & Media Research Center 2015 among Chinese residents born in the 1990s. "We think one key reason for this to age group to rank brand image low is the affordability level, given they are mainly college students and young graduates," said Yin. "They will have a stronger desire to upgrade their spending toward higher quality items and more premium brands, as they age and earn more," Yin added. But when asked about their purchasing intentions, branded products rank high among China's 18 to 29 year-olds: 81 percent responded that they plan to buy branded apparel and 95 percent branded sportswear rather than unbranded similar products during the following year in Credit Suisse's annual Emerging Market Consumer Survey. This preference for brands is higher than in the other emerging markets surveyed – Brazil, India, Indonesia, Mexico, Russia, Saudi Arabia, Turkey and South Africa.
Rapidly Changing Consumption Habits
The habits of Chinese consumers' have radically changed over the past decades and are still changing. The generation born between 1985 and 1995 is very likely to be the growth driver of the country's consumer sector in the years to come. In the long term, this will clearly benefit very diverse sectors ranging from e-commerce, sportswear, travel, seasonings, car rentals, catering and personal care to beverages...