OVERVIEW CHINA CONSUMPTION TRENDS - BBVA …€¦ · Recreation & Education Miscellaneous ... CHINA CONSUMPTION TRENDS │ 2017 Across top cities, ... Internet penetration rate in

CHINA CONSUMPTION TRENDS │ 2017

CHINA CONSUMPTION TRENDS

OVERVIEW

China Digital Banking Report 2017


2

Per capita consumption in Tier-1 cities is visibly high but several Tier-2 & Tier-3 cities record high growth. Rising preference for travel, staying connected, recreation, & buying durable goods

China has rapidly transitioned from a predominantly lower-middle class society to a middle, upper-middle and Affluent class society over past decade

Recent years have seen rising disposable incomes for high-income Chinese households, boosting demand for high value products – A visible shift from mass to premium

700 million plus internet users in China, bulk of them in urban areas, using 25 hours of internet per week. Beijing, Shanghai & Guangdong top in internet penetration, rapid growth across provinces

Rapid rise in use of smartphones for online shopping and payments over past 5 years. Online retail sales still forms a small part of China’s total E-commerce business, which is led by business to business (B2B) sector.


SOCIAL TRENDS CONSUMPTION EXPENDITURE PATTERNS ACROSS PROVINCE AND INCOME CLASSES


China’s demographics – large is beautiful

4 • Note : Millennials are those born in the 1980s & 1990s; Gen Z : Born after 2000s • Source: BBVA Research, China National Bureau of Statistics

415 mn Millennials

(30% of population)

79 mn College

graduates

US$ 606 bn Online retail market size

1.39 bn Population 54% urban

453 mn Households

1042 mn Smartphone subscribers

217 mn Gen Z

(18% of population)

1005 mn Working age population


China’s rapid transformation from a lower-middle to a middle, upper middle and Affluent class society

5 • Source: BBVA Research, China National Bureau of Statistics

0

10

20

30

40

50

60

70

80

90

100

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

Income-wise classification of China's Urban households (%)

Affluent Upper Middle Middle Lower Middle Poor


A steadily increasing disposable income, albeit at a moderating but robust pace, with wide urban-rural gap


0

2

4

6

8

10

12

14

16

18

0

5.000

10.000

15.000

20.000

25.000

30.000

2011 2012 2013 2014 2015 2016

China Disposable Income Per CapitaChina Disposable Income Annual Growth (RHS)

(RMB) (% YoY)

0

5.000

10.000

15.000

20.000

25.000

30.000

35.000

40.000

2012 2013 2014 2015 2016

China Urban Disposable Income Per CapitaChina Rural Disposable Income Per Capita

(RMB)


Recent years have seen a sharp pick up in disposable income of high-income Chinese households


0

10.000

20.000

30.000

40.000

50.000

60.000

70.000

199

1

199

3

199

5

199

7

199

9

200

1

200

3

200

5

200

7

200

9

201

1

201

3

201

5

Low Income Lower Middle IncomeMiddle Income Upper Middle IncomeHigh Income

Disposable Income Per Capita by Urban Household Income Level

(RMB)

5,0

6,0

7,0

8,0

9,0

10,0

11,0

12,0

13,0

2014 2015 2016

Low Income Lower Middle IncomeMiddle Income Upper Middle IncomeHigh Income

Growth of Disposable Income per Capita across Chinese IncomeClasses (Annual , %YoY)


City-wise differences in disposable incomes across China, with higher growth in lower income cities


5

7

9

11

13

15

17

19

0

10000

20000

30000

40000

50000

60000

70000

Chi

na

Han

gzho

u

Nin

gbo

Nan

jing

Xia

men

Bei

jing

Sha

ngha

i

She

nzhe

n

Gua

ngzh

ou

Jina

n

Hoh

hot

Qin

gdao

Fuzh

ou

Cha

ngsh

a

Che

ngdu

Dal

ian

She

nyan

g

Wuh

an

Hef

ei

Zhen

gzho

u

Nan

chan

g

Xia

n

Tian

jin

Lan

zhou

Cha

ngch

un

Har

bin

Shi

jiazh

uang

Tai

yuan

Yin

chua

n

Nan

ning

Hai

kou

Cho

ngqi

ng

City-Wise Avg Annual Disposable Income Per Capita in 2016 (RMB)10 Yr CAGR City-Wise Avg Annual disposable Income Per Capita (RHS)Polinómica (10 Yr CAGR City-Wise Avg Annual disposable Income Per Capita (RHS))

(RMB) (% CAGR)


Reassuringly, income inequality has broadly been on a declining trend over the past decade


0,45

0,45

0,46

0,46

0,47

0,47

0,48

0,48

0,49

0,49

0,50

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

China Gini Coefficient


Rural China leads consumption expenditure per capita growth, pace has moderated but still healthy


7,56,9 6,8

5,8 5,5 5,7

10

8,67,8

0

2

4

6

8

10

12

2014 2015 2016

Consumption expenditure per capita

China : YoY China : Urban : YoY China : Rural : YoY

(%YoY)(%YoY)(%YoY)(%YoY)


Province-wise consumption expenditure per capita


0

5000

10000

15000

20000

25000

30000

35000

40000

Sha

ngha

i

Bei

jing

Tian

jin

Zhej

iang

Gua

ngdo

ng

Jia

ngsu

Fuj

ian

Lia

onin

g

Inne

r Mon

golia

Cho

ngqi

ng

Sha

ndon

g

Hub

ei

Hun

an

Nin

gxia

Jilin

Sic

huan

Qin

ghai

Hai

nan

Hei

long

jiang

Sha

anxi

Heb

ei

Xin

jiang

Anh

ui

Jian

gxi

Hen

an

Sha

nxi

Gua

ngxi

Yun

nan

Gan

su

Gui

zhou

Tibe

t

Annual Province-Wise Consumption Expenditure Per Capita in 2016(RMB)


Per capita consumption in Tier-1 cities is visibly high but several Tier-2 & Tier-3 cities top in growth terms


9

10

11

12

13

14

15

16

17

0

5000

10000

15000

20000

25000

30000

35000

40000

45000

50000

City-Wise Avg Annual Consumption Expenditure Per Capita in 2016 (RMB)

10 Yr CAGR City-Wise Avg Annual Consumption Expenditure Per Capita

Polinómica (10 Yr CAGR City-Wise Avg Annual Consumption Expenditure Per Capita )

(RMB) (% CAGR)


Share of food in rural China’s per capita consumption basket is declining, offset by higher value purchases


0100020003000400050006000700080009000

1000011000

199

2

199

4

199

6

199

8

200

0

200

2

200

4

200

6

200

8

201

0

201

2

201

4

201

6

Food ClothingResidence Hhd facility & serviceMedicine Transport & TelecomRecreation & Education MiscellaneousAggregate

Rural annual per capita consumption expenditure(RMB)

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

199

2

199

4

199

6

199

8

200

0

200

2

200

4

200

6

200

8

201

0

201

2

201

4

201

6

Food ClothingResidence Hhd facility & serviceMedicine Transport & TelecomRecreation & Education Miscellaneous

Rural annual per capita consumption expenditure


Increasing wallet share of urban Chinese towards residence, travel, communication, recreation & food


0

5000

10000

15000

20000

25000

199

3

199

5

199

7

199

9

200

1

200

3

200

5

200

7

200

9

201

1

201

3

201

5

Food ClothingHousehold Facility Medicine Transport & Communication Recreation, Educational & Cultural ServiceResidence MiscAggregate

Urban annual per capita consumption expenditure(RMB) Urban annual per capita consumption expenditure


Urban Chinese prefer to travel, stay connected, buy protein rich food, durable goods & recreation


0

250

500

750

1000

1250

1500

1750

2000

2250

199

2

199

4

199

6

199

8

200

0

200

2

200

4

200

6

200

8

201

0

201

2

201

4

201

6

Food: Meat, Poultry & Related Food: Dining OutHS: Durable Consumer Goods Transport & Communication: TransportTransport & Communication: Communication RS: Recreation Service

Urban annual per capita consumption expenditure(RMB)


Automobile consumption has grown at a robust 24% CAGR over the past decade in urban China


0

5

10

15

20

25

30

35

40

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

Average Automobiles per 100 households in China


Auto consumption growth has been most rapid in less developed provinces over the past decade


0

5

10

15

20

25

30

35

40

45

50

0

10

20

30

40

50

60

Chi

na

Sha

ndon

g

Zhej

iang

Bei

jing

Yun

nan

Jian

gsu

Tia

njin

Heb

ei

Tibe

t

Inne

r Mon

golia

Gua

ngxi

Sha

nxi

Nin

gxia

Gua

ngdo

ng

Fujia

n

Xin

jiang

Sha

ngha

i

Hun

an

Qin

ghai

Hen

an

Sic

huan

Gui

zhou

Jian

gxi

Hai

nan

Anh

ui

Sha

anxi

Liao

ning Jilin

Cho

ngqi

ng

Gan

su

Hub

ei

Hei

long

jiang

Automobiles per 100 urban households (2015) CAGR of automobile consumption over past decade (RHS)

(CAGR %)


China’s internet usage


700 million plus internet users in China, bulk of them in urban areas, using 25 hours of internet per week

19 • Source: BBVA Research, China Internet Network Information Center

0

10

20

30

40

50

60

0

100

200

300

400

500

600

700

800

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

Rural Areas Urban Areas Growth of Internet Users (RHS)

(Person Million) (% YoY)Number of Internet Users in China across Rural & Urban Areas

0

5

10

15

20

25

30

Number of Hours of Internet use per week in China (RHS)

(Hours)


Guangdong province tops with the most number of internet users followed by Shangdong and Jiangsu


0

5

10

15

20

25

30

0

10

20

30

40

50

60

70

80

90

Gua

ngdo

ng

Sha

ndon

g

Jian

gsu

Hen

an

Heb

ei

Zhej

iang

Sic

huan

Hun

an

Hub

ei

Liao

ning

Anh

ui

Fujia

n

Gua

ngxi

Sha

nxi

Jian

gxi

Sha

anxi

Yun

nan

Hei

long

jiang

Sha

ngha

i

Bei

jing

Cho

ngqi

ng

Gui

zhou Jilin

Inne

r Mon

golia

Xin

jiang

Gan

su

Tia

njin

Hai

nan

Nin

gxia

Qin

ghai

Tibe

t

Province-wise number of internet users across China in 201610 Year CAGR Province-wise number of internet users in China (RHS)Polinómica (10 Year CAGR Province-wise number of internet users in China (RHS))

(Million (% CAGR)


Beijing, Shanghai & Guangdong top in internet penetration, rapid growth seen across most provinces


0

5

10

15

20

25

30

0

10

20

30

40

50

60

70

80

90

Province-wise internet penetration rate across China in 201610 Year CAGR Province-wise Internet Penetration rate in China (RHS)Polinómica (10 Year CAGR Province-wise Internet Penetration rate in China (RHS))

(%)(% CAGR)


Across top cities, internet penetration growing most rapidly Ningbo, Hangzhou, Chengdu, & Chongqing


0

5

10

15

20

25

0

10

20

30

40

50

60

70

80

90

Gua

ngzh

ou

Bei

jing

Sha

ngha

i

Cho

ngqi

ng

She

nzhe

n

Wuh

an

Han

gzho

u

Suz

hou

Che

ngdu

Nin

gbo

2007 2011 2016 CAGR over past decade (RHS)

Internet penetration rate in China across top 10 cities(%) (% CAGR)


The use of mobile phone to access internet has far outdone that of desktop and laptop in China


20

30

40

50

60

70

80

90

100

110

Jun-

07

Dec

-07

Jun-

08

Dec

-08

Jun-

09

Dec

-09

Jun-

10

Dec

-10

Jun-

11

Dec

-11

Jun-

12

Dec

-12

Jun-

13

Dec

-13

Jun-

14

Dec

-14

Jun-

15

Dec

-15

Jun-

16

Dec

-16

Desktop Laptop Mobile

Share of Chinese internet users using desktop, laptop or mobile to access internet(%)


Gender gap in internet usage has largely closed while 20-50 years age group are the main users of internet


0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Dec

-97

Dec

-98

Dec

-99

Dec

-00

Dec

-01

Dec

-02

Dec

-03

Dec

-04

Dec

-05

Dec

-06

Dec

-07

Dec

-08

Dec

-09

Dec

-10

Dec

-11

Dec

-12

Dec

-13

Dec

-14

Dec

-15

Dec

-16

Female Male

Internet User Structure in China by Gender(%)

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Dec

-08

Jun-

09

Dec

-09

Jun-

10

Dec

-10

Jun-

11

Dec

-11

Jun-

12

Dec

-12

Jun-

13

Dec

-13

Jun-

14

Dec

-14

Jun-

15

Dec

-15

Jun-

16

Dec

-16

Under 10 years 10 years to 19 years 20 years to 29 years30 years to 39 years 40 years to 49 years 50 years to 59 yearsAbove 60 years

Internet User Structure in China by Age(%)


Most using internet have atleast attained secondary education, while usage is even across income groups


0%10%20%30%40%50%60%70%80%90%

100%

Dec

-08

Jun-

09

Dec

-09

Jun-

10

Dec

-10

Jun-

11

Dec

-11

Jun-

12

Dec

-12

Jun-

13

Dec

-13

Jun-

14

Dec

-14

Jun-

15

Dec

-15

Jun-

16

Dec

-16

Primary School or Less Junior Middle SchoolSenior Middle School CollegeUndergraduate & Above

Internet User Structure in China by Education(%)

0%10%20%30%40%50%60%70%80%90%

100%

Dec

-08

Jun-

09

Dec

-09

Jun-

10

Dec

-10

Jun-

11

Dec

-11

Jun-

12

Dec

-12

Jun-

13

Dec

-13

Jun-

14

Dec

-14

Jun-

15

Dec

-15

Jun-

16

Dec

-16

Under 500 RMB 501 to 1000 RMB 1001 to 2000 RMB

2001 to 3000 RMB 3001 to 5000 RMB over 5000 RMB

Internet User Structure in China by Monthly Income (%)


Mobile phone ownership across Chinese households has risen to an average above 2 per household


150

160

170

180

190

200

210

220

230

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Average Mobile Phones per 100 households in China


Mobile phone ownership in urban Chinese households across provinces


190

200

210

220

230

240

250

260

Chi

na

Gua

ngxi

Fujia

n

Cho

ngqi

ng

Hun

an

Nin

gxia

Gui

zhou

Hai

nan

Jian

gsu

Yun

nan

Zhej

iang

Sic

huan

Hen

an

Sha

anxi

Gan

su

Jian

gxi

Hub

ei

Gua

ngdo

ng

Sha

ngha

i

Heb

ei

Sha

ndon

g

Bei

jing

Tia

njin

Sha

nxi

Jilin

Inne

r Mon

golia

Anh

ui

Tibe

t

Qin

ghai

Xin

jiang

Liao

ning

Hei

long

jiang

Mobile phones per 100 urban households


Mobile phone ownership in rural Chinese households across provinces


150

170

190

210

230

250

270

290

Nin

gxia

Gua

ngdo

ng

Qin

ghai

Gua

ngxi

Sha

anxi

Fujia

n

Gui

zhou

Gan

su

Hun

an Jilin

Yun

nan

Hai

nan

Jian

gxi

Hub

ei

Bei

jing

Heb

ei

Cho

ngqi

ng

Hen

an

Inne

r Mon

golia

Tia

njin

Jian

gsu

Sic

huan

Zhej

iang

Sha

ndon

g

Anh

ui

Hei

long

jiang

Sha

nxi

Liao

ning

Sha

ngha

i

Xin

jiang

Tibe

t

Mobile phones per 100 rural households


Ecommerce in China


China has seen rapid rise in use of smartphones for online shopping and payments over past 5 years

30 • Source: BBVA Research, Ministry of Commerce, China General Chamber of Commerce

0

50

100

150

200

250

300

350

400

450

500

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016Online Shopping Online PaymentOnline Bank (Excl payments) Online Securities TradingGroup Purchase Advance Booking for Journey

Number of users of internet based financial services in China(Person Million)

-10

0

10

20

30

40

50

60

70

2010 2011 2012 2013 2014 2015 2016Online Shopping Online PaymentOnline Bank (Excl payments) Online Securities TradingGroup Purchase Advance Booking for Journey

Purpose-wise usage rate of mobile phone in China(%)


Online shopping has far outdone offline shopping in China over the past five years


0

5

10

15

20

25

0100200300400500600700800900

1000

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

Hypermarket Supermarket

Convenient Store Discount Store

Agg Avg Annual Growth (RHS)

China Store Sales (RMB Bn) (% YoY)

0

2000

4000

6000

8000

10000

12000

14000

16000

0

1000

2000

3000

4000

5000

6000

200

5

200

6

200

7

200

8

200

9

201

0

201

1

201

2

201

3

201

4

201

5

2016

China Annual Online Retail Sales (RMB)

(RMB Bn) (RMB)


Chinese are shopping online to buy an increasingly diverse range of goods today than ever before


0102030405060708090

Clo

thin

g, S

hoes

Dai

ly U

se G

oods

Boo

k, A

udio

/ Vid

eo A

ppl

Com

pute

r, C

omm

nP

rodu

ct

HH

D A

pplia

nces

Virt

ual g

ame

card

s

Food

& H

ealth

Sui

tcas

e &

Bag

Cat

erin

g

Film

& T

icke

t

Cos

met

ic &

Mak

eup

Cul

tura

l & S

ports

Goo

ds

2010 2015

Category-wise online shopping as a share of online & offline shopping in China (%)


Online retail sales forms a small but growing part of China’s total E-commerce business, led by B2B


0

5000

10000

15000

20000

25000

2010 2011 2012 2013 2014 2015 2016

Business to Business Retail Sales Group Sales

China's Annual ECommerce Business Turnover by Type of Business (RMB Bn)


This report has been produced by Asia, MENA & Geostrategy Team

34

CONTACT DETAILS BBVA Research Ciudad BBVA 28046 Madrid (Spain) Tel. + 34 91 374 60 00 and + 34 91 537 70 00 Fax. +34 91 374 30 25 [email protected] www.bbvaresearch.com

BBVA Research Asia Level 95, International Commerce Centre, One Austin Road West, Kowloon Hong Kong Tel : +852 25823289 E-mail: [email protected]

Chief Economist, Asia, MENA & Geostrategy

Álvaro Ortiz Vidal-Abarca [email protected]

Le Xia

[email protected]

Sumedh Deorukhkar [email protected]

Tomasa Rodrigo

[email protected]


35

Group Chief Economist Jorge Sicilia

Cross Country Emerging Economies

Asia, Middle East & Geostrategy Álvaro Ortiz [email protected]

Asia Le Xia [email protected]

Turkey Alvaro Ortiz

Mexico Carlos Serrano [email protected]

Latam Coordination Juan Ruiz [email protected]

Argentina Gloria Sorensen [email protected]

Chile Jorge Selaive [email protected]

Colombia Juana Téllez [email protected]

Peru Hugo Perea [email protected]

Venezuela Oswaldo López [email protected]

Developed Economies

Rafael Doménech [email protected]

Spain Miguel Cardoso [email protected]

Europe Miguel Jiménez [email protected]

US Nathaniel Karp [email protected]

Global Areas

Financial Scenarios Sonsoles Castillo [email protected]

Economic Scenarios Julián Cubero [email protected]

Innovation & Processes Oscar de las Peñas [email protected]

Financial Systems & Regulation

Santiago Fernández de Lis [email protected]

Financial Systems Ana Rubio [email protected]

Financial Inclusion David Tuesta [email protected]

Regulation and Public Policies María Abascal [email protected]

Recovery and Resolution Policy José Carlos Pardo [email protected]

BBVA Research


Disclaimer

36

This document has been prepared by BBVA Research Department, it is provided for information purposes only and expresses data, opinions or estimations regarding the date of issue of the report, prepared by BBVA or obtained from or based on sources we consider to be reliable, and have not been independently verified by BBVA. Therefore, BBVA offers no warranty, either express or implicit, regarding its accuracy, integrity or correctness.

Estimations this document may contain have been undertaken according to generally accepted methodologies and should be considered as forecasts or projections. Results obtained in the past, either positive or negative, are no guarantee of future performance.

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OVERVIEW CHINA CONSUMPTION TRENDS - BBVA …€¦ · Recreation & Education Miscellaneous ... CHINA CONSUMPTION TRENDS │ 2017 Across top cities, ... Internet penetration rate in