China: Reaching the Consumers

Consumer Profile

The Chinese population is estimated at 1.43 billion in 2022 according to UN data, with a relatively small share of young people under 25 due to the one-child policy (1.702 fertility rate in 2022). China has an average population density of 153 inhabitants / km2, with population growth of around 0.4% per year. The ratio of men to women is broadly balanced with the 15-64 age group accounting for 70% of the total population in 2022. The base of Chinese consumers is made up of relatively young people (between 20 and 35 years old): generally educated, they tend to save less spend more on leisure than their parents make increasing purchases online, prioritise more quality over low prices. The areas of higher consumption are concentrated in major cities such as Beijing, Shanghai, Shenzhen and other Chinese urban areas with high per capita income and high purchasing power. According to the latest data, the employment rate of the 2021 Chinese college graduates remained stable at 84,8%, with the private sector being the biggest recruiter for graduates. China’s People’s Daily newspaper reports that there are more than 8.34 million people who graduated from a higher education or university, up from 8.2 million in 2018. The agricultural sector employs about 24.7% of the labour force while the industrial sectors employs 28.2% of the population. Finally, the tertiary sector is the most represented category and employs 47% of the workforce in China.

Purchasing Power

The Gross Domestic Product per capita in China was recorded at $18,210 in 2022, when adjusted by purchasing power parity (PPP). The Chinese market is varied in its composition. Some parts of the country have experienced increases in confidence and spending (particularly in coastal areas such as Shanghai), while others have experienced lower growth or even negative growth. Regional differences are the result of increased demand for labour in China's coastal cities, which has disproportionately pushed the urbanization of the eastern provinces. China’s coastal provinces often boast higher per capita income levels than inland provinces even after taking into account the rural-urban income gap. The middle class represents about 400 million people in 2022, that is, 30% of the total population. According to the National Bureau of Statistics, a middle class household in China earns a monthly income of RMB 2,000 (US$295) to RMB 5,000 (US$740). According to McKinsey, 76% of China’s urban population will enter the middle income bracket by 2022. However, there is a net difference between lower-middle class and upper-middle class. In China, 75% of the middle class falls into the low-income category, earning $10 to $20 a day, while the upper-middle class can rely on $20 to $50 a day.
Today, almost 60% of Chinese people live on 2-10 dollars a day and more than 82 million Chinese still live on less than 1 dollar a day. The Gini coefficient, which measures the level of inequality, decreased slightly in 2019 vs 2018 to 46.5. Gender income inequality was 20.8% lower for women of equal work, placing China in the 103rd place (out of 149 countries) - ILO.

Consumer Behaviour

China is going through a consumption revolution: whereas in the past function and price were important factors in the buying decision buying behaviour has become more complex and Chinese consumers are taking increasing criteria into account when making a purchase. Brand awareness is becoming increasingly important and marketing is starting to play a key role in attracting Chinese consumers with advertising and research techniques. Chinese consumers believe that price is an indicator of the quality of a product, with price and sales services second. Certain aspects such as reimbursement guarantees of a product are less important. In general, the Chinese inquires a lot before purchasing, the main source of information being word of mouth. Chinese consumers are curious about what is on offer, especially with respect to foreign products.

With the improvement of living standards people are increasingly focusing on high quality products (luxury goods manufacturers and service providers are experiencing significant growth in China), making China the largest market for luxury brands. Despite mounting global social and economic challenges, China’s luxury goods market finished 2021 with strong double-digit growth overall, with some brands exceeding a 70% increase. Chinese consumers have continued to shop mostly in the mainland, given limited international travel options. This has led to a 48% increase of China’s domestic sales of personal luxury goods in 2020, and another 36% in 2021 totalling nearly RMB 471 billion, a near doubling in just 2 years (Bain & Company’s annual China Luxury Report 2021). Despite the Covid-19 crisis, consumer confidence is recovering and demand for luxury products from Chinese buyers is expected to increase by as much as 30% in 2021.

The collective feeling is important in Chinese society the group taking precedence over the individual. Thus, the standards, preferences and norms of the group to which an individual belongs have a huge influence on buying habits. For this reason, advertising is often directed towards group recruitment rather than individuals. Today, the elite of the one-child generation aspire to a pleasant life and are not reserved in their spending - including education, luxury goods, travel, leisure and consumer goods - especially in big cities. For more and more Chinese consumption is often targeted at high-end products of major brands, as shown by the strong growth in sales of luxury cars. Similarly, once a product is adopted by the reference group, the craze it generates spreads rapidly and widely. Nevertheless, there is a development of independence and individuality in consumer behaviour in China. In 2022 there is around 983 million social media users in China (DataReportal, 2022). The same year, online retail should generate 1.5 trillion USD, representing a quarter of China’s total retail sales volume, and more than the retail sales of the ten next largest markets in the world combined. Dematerialised and online payments are set to grow. Collaborative platforms like Tujia, Xiaozhu and AirBnb are present and used in China.

Consumer Recourse to Credit

Historically, China is a country with a very high savings rate one of the largest in the world. In recent years, Chinese consumers are getting into debt quickly. Data from China's central bank show that consumer loans are up 50% since 2016, when the government encouraged loans to households. The IMF believes that the debt ratio of Chinese households could double over the 2016-2022 period compared to the previous decade. Real estate loans represent the majority of new loans to Chinese households in terms of value, with auto loans growing even faster in percentage terms. Credit card debt is also growing rapidly: according to Deutsche Bank, short-term consumer credit is growing by 35% a year and could soon reach 40% a year

Growing Sectors

Renewable energies, health, e-commerce, food and beverages, education, consumer goods, automotive, construction products and services, high-tech products.

Consumers Associations

Association of Chinese Consumers

Population in Figures

Total Population:

1,402,112,000

Urban Population:

61.4%

Rural Population:

38.6%

Density of Population:

149 Inhab./km²

Men (in %)

51.7%

Women (in %)

48.7%

Natural increase:

0.31%

Medium Age:

33.0

Ethnic Origins:

According to Chinese authorities, more than 92% of the population are of Han Chinese origin, with Zhuang, Uighur, Hui, Yi, Tibetan, Miao, Mandchous, Mongol, Buyi, Korean and other ethnic origins forming about 8% of the population. (National Bureau of Statistics of China).

Population of main cities

Source: Citypopulation.de; Worldometer, Latest available data - Latest available data.

Age of the Population

Source: United Nations, Population division, World Population Prospects, - Latest available data.

Household Composition

Source: UN data, - Latest available data.

Consumption Expenditure

Media in Which to Advertise

Television

95% of the Chinese population watch television. Advertising on television is therefore an effective means of reaching a maximum number of users. Overall, TV is estimated to make up for 31.4% of advertising spending in 2017, but as Chinese consumers embraced smartphones and the internet, traditional TV advertising has suffered. Advertising expenditure on traditional TV dropped by 5.2% in 2017, however there was a growth in content marketing and product placements (Ad Age India). 

Main Televisions
Anhui TV (AHTV)
Central Television of China (CCTV)
Beijing TV (BTV)
Sichuan TV
Hunan TV
Shanghai Media Group (SMG)
Hubei TV (HBTV)

Press

Newspapers and magazines are a major advertising medium in China. It is estimated that 2017 has been the first in China’s history when newspaper advertising revenues were lower than those of internet advertising.

Main Newspapers
China Daily Group
Liberty Times Group
People Daily Group
Pekin Times

Mail

Advertising by mail enables reaching a targeted consumer. For the moment, this advertising medium is in a development stage.

In Transportation Venues

The screens in public places in China like malls, restaurants, offices etc. have become an effective medium for advertising. The means of public transportation are also equipped with their own advertising screens which is a great source of reaching out to commuting consumers.
The type of advertising varies according to the city. The number of companies active on a national level is very limited.

Radio

Chinese radio stations are organised according to the four-layer structure of government: national/provincial/municipal/local. Across these layers there are over 600 radio stations in China. With a market share of 54,1%, the radio stations at municipal and local level (towns & counties) are the most popular. Provincial stations hold 35,9% of the market share, and central (national) radio stations hold 10% (source ZIGT Media). It is one of the least expensive advertising mediums which can reach users of different types, especially a younger audience, with good education and a relatively high income. In fact, it is estimated that over half of radio listeners are between 25-34 years old.

Main Radios
China Radio International (CRI)
China National Radio (CNR)
Broadcasting Corporation of China
Beijing Broadcasting Network
Radio Guangdong
Shanghai Media Group

Web

According to official Chinese figures, the country had 731 million internet users at the end of 2016, more than half of its population. In China, the world's second-largest advertising market, 57% of advertising expenditure in 2017 went toward the web. Advertising by mobile phone and online advertising are increasing rapidly. China is increasingly using social media to promote brands and introduce products. Mobile is still going strong and mobile internet is expected to become the main engine propelling internet advertising spending in the future. About 95% of Chinese internet users went online through mobile devices at the end of 2016, according to official data from the Chinese government.

Market Leaders:
Web2Asia China Marketing
Nurun
Focus Media

Main Advertising Agencies

Wieden+Kennedy
Techworks Asia
Dentsu
Saatchi&Saatchi

Main Principles of Advertising Regulations

Beverages/Alcohol

Advertising content for alcoholic drinks must specify health licenses and cannot use medical jargons or words which can be mixed with pharmaceutical products.
Alcohol advertising restrictions are included in article 23 of the 2015 Advertising Law.

Cigarettes

According to article 22 of the 2015 Advertising Law, tobacco advertising is prohibited in mass media, public places, means of public transport, and outdoors. Other forms of tobacco advertising are permitted, including through sponsored events and organizations, promotional discounts, and retailer incentive programs. Sending any  form of  tobacco advertisement to minors is prohibited. It is also prohibited to publicize the name, trademark, packaging, decoration, and other similar aspects of tobacco products through advertisement.

Pharmaceuticals/Drugs

Advertisements for pharmaceutical products, medical devices or instruments cannot contain non scientific information, statements or promises on the effectiveness, a cure note or a rate of effectiveness, comparison with other medicines or medical devices, use the name or the image of a medical research unit, university organization, medical unit or doctor. A "purchase and use under doctor's prescription" note must be shown when necessary. Special pharmaceutical products such as anesthesia, narcotics, psychotropic, toxic and radioactive drugs cannot appear in the advertisements.

Other Rules

Advertisements should "be good for the mental and physical health of the people" and "conform to the professional code of ethics and safeguard the dignity and interests of the State." Specific regulations include the prohibition on the use of national symbols and governmental images, as well as content that is obscene, superstitious, discriminatory and/or dangerous for social stability. The advertising industry in China is heavily regulated, and the Government still exercises ultimate control over content. In 2015 China adopted a new Advertising Law.

Use of Foreign Languages in Advertisement

Majority of the advertisements are in Mandarin.

Organizations Regulating Advertising

Trade and Industry State Administration (SAIC)
State Administration of Press, Publication, Radio, Film and Television of the People’s Republic of China (SAPPRFT)