Product, service upgrades to keep consumption engine roaring
DALIAN -- China's potential for consumption remains immense and should be further tapped as consumer demands evolve with improving living standards, according to observers at the 2024 Summer Davos.
With a population exceeding 1.4 billion, China boasts a vast consumer market and a captivatingly diverse consumption landscape, said Jason Ding, managing partner of Bain & Company's Greater China offices.
Hannah Qiu, senior vice-president and China CEO of PayPal, echoed a similar sentiment. She noted that Chinese consumers have become increasingly discerning, seeking the best products at competitive prices for their daily necessities.
While certain consumer categories, such as essential supplies, have experienced slower growth, other sectors, including healthcare products and services, are witnessing a surge in demand, according to Ding.
China's per capita GDP has surpassed $12,000, a significant milestone that often heralds a pronounced acceleration in consumption upgrading, as demonstrated by international experience.
"One outstanding trend in China's consumption market is that the supply side has not fully met the consumers' upgraded demands, particularly in the service sector," said Zhu Min, vice-chairman of China Center for International Economic Exchanges, citing fields such as elderly care and medical services.
Pierluigi Antonelli, CEO of global healthcare company Fresenius Kabi, said they have seen clear, strong demands for their products in China, one of the company's top two global markets.
Since last year, China's service sector has seen a robust consumer spending wave. In 2023, the retail sales of services climbed 20 percent year-on-year, outpacing that of commodities by 14.2 percentage points. From January to May this year, the retail sales of services continued to outperform commodity consumer spending by rising 7.9 percent year-on-year.
The transformation of the consumption landscape is evident in Dalian, the northeastern coastal city of China, which is hosting the Summer Davos.
A prime example is Fisherman's Wharf, a picturesque area reminiscent of San Francisco. To meet the demands of visitors, a diverse range of establishments, including coffee shops and bookstores, have been introduced. During the recent May Day holiday, this popular tourist destination achieved a record-breaking daily footfall of over 30,000 visits.
"Our observation is that the visitors are increasingly willing to pay for unique and sophisticated items and experiences. This trend necessitates a continuous effort to upgrade and innovate their business offerings," said Zhang Hongwei, general manager of the development and operations department at the scenic spot's developer Haichang (Group) Co Ltd. The company's latest investment at the spot is a new stylish fair street put into operation in May.
With China's demographics undergoing significant changes, Zhu Min believes that the age group between 20 and 60 will emerge as the primary driver of consumption in the country's future society. However, the availability of suitable products and services for this demographic remains limited.
To address this issue, the Chinese government has been actively working to enhance the supply in the consumption market. A comprehensive policy package was recently unveiled, aiming to promote new consumption scenarios across various sectors, including tourism, elderly and child care, automobiles, and electronics.
The policy package calls for identifying and meeting the diverse needs of different groups, such as infants, children, pregnant women, and the elderly.
"With a super-large market and a strong supply chain, China's consumption engine, a core driver for tapping its domestic demands, will remain strong," Ding said.
