China

'High-speed households’ suggests a Chinese two-speed economy is coming

By RJ Whitehead

- Last updated on GMT

'High-speed households’ suggests a Chinese two-speed economy is coming
Despite the recent slowdown in China’s economic growth, a vibrant group of high-speed households there will rapidly increase their spending between 2015 and 2020, according to a major new survey.

These households, which are disproportionately found in urban areas and have the middle-class as their base, generate around US$1.7tn of China’s US$3.2tn total urban annual consumption. 

With rising incomes pushing more households into the middle-classes, the number of high-speed households will rise from 81m today to 142m in 2020, BCG, a consultancy, revealed in its summary of this tribe.

These high-speed households will power consumer spending in the years ahead​,” said Jeff Walters, a BCG partner and co-author of the article. 

The overall economy may be slowing, but these more affluent consumers are optimistic about the future and their ability to increase their spending​.”

Twice as likely to shop online than those below them

Rising incomes—and optimism that incomes will continue to rise—are driving this consumption growth. According to BCG, households with income growth exceeding 5% in the past year are twice as likely to spend more in the coming year as households with slower income growth.

Companies that want to reach out to high-speed households will need to broaden their distribution channels. Of today's 81m high-speed households, 46m are located in lower-tier cities. 

These are digitally savvy and active online shoppers, says BCG, belying the common belief that online shopping is for students and bargain seekers. 

Two-fifths of affluent households shop online frequently—at least once a week—compared with half as many of aspirant households. 

These high-speed households are optimistic, active online shoppers, and will power consumer spending in the years ahead​,” said Youchi Kuo, an expert principal at BCG.

Importers queueing to tap into taste for the international

Meanwhile, as e-commerce companies increasingly seek ways to tap into this and other wealthy segments, several recent deals seem to suggest that luxury foreign delicacies are gaining in popularity among upscale Chinese.

This trend also reflects growing consumer worries over a series of domestic food scandals, especially in light of a study by the China Food and Drug Administration from March that found 75% of consumers have no confidence in domestic food safety.

This week, JD.com, a Chinese online direct-seller, announced it will begin selling a range of authentic Australian milk, meats and fruits, as well as wine from Treasury Wine Estates. 

It is the latest of JD.com's online “country malls​”, which already include France, South Korea and Japan, to launch this year.

"Chinese consumers are increasingly enthusiastic about trying, buying and using products from all over the world​" said chief executive Richard Liu at the launch.

JD.com’s move following a similar one by online supermarket Yihaodian, which opened a Canadian seafood channel earlier this month.

The market leader in terms of foreign ranges is Alibaba, which last week announced it had added 11 more countries to its Tmall Global site, a platform dedicated to foreign brands, in which food is the most popular product category.

The transaction volume of imported goods purchased online could reach $245bn in five years, Alibaba believes.

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