Introduction
China’s unique consumer culture dates back to the late twentieth century when it was closely related to nationalism and acted as an aid to patriotism. According to Gerth, Chinese consumption trends in the 1920s were directed by the slogan ‘Chinese should consume China made products’ (4). The motive behind this trend was to encourage the consumption of Chinese products and nationalism was actually used to foster this belief (Gerth 4). Consumption at this early age can be assumed to having been directed by the government, which used to regulate the goods that were consumed by its citizens.
The onset of globalization shifted this trend from the ethnocentric tendency to consumerism where the Chinese citizens got access to various types of brands irrespective of their government’s preferences (Croll) 302. This trend has brought with it a unique form of consumer behavior characterized by a spendthrift habit that is different from the earlier existent saving behavior (Davis 77). This paper discusses the effects of the Chinese consumer behavior on the middle class citizens in China.
Consumption Behavior in Early China
According to Gerth, the consumer culture in china was being used to promote nationalism during the Mao and immediate post Mao regimes (4). At this time, the main aim of this initiative was to link consumption and nationalism by introducing the issue of national products and brands. Consumption of these national products was highly encouraged in addition to being viewed as patriotism. Shoppers who kept stock and sold the locally made products were well treated and publicized by the government. On the contrary, the ones who sold foreign commodities were regarded as unpatriotic.
The government’s attempts to establish a link between nationalism and consumer culture was clearly evident given that it supplied Chinese products, including fashion products and food additives in its museums and departmental stores, and encouraged local advertisements among other things. This movement tremendously influenced all aspects of China’s burgeoning consumer behavior and culture. This time also saw the branding of commodities as either “foreign” or “Chinese” with the consumption of the foreign branded products being discouraged in favor of the local ones. It was at this time that the ambitious desire of China to create its own national brand in nearly everything it produces emerged. It surfaced from this time that the consumer behavior was more of a nationalized one, in which the government dictated everything that was being consumed by the public.
With the advent of globalization and liberalization, the trend shifted from a nationalized consumer culture where the government dictates what is consumed by discouraging consumerism (Li 84). According to Li, unlike the nationalized consumer culture, consumerism allows the consumers to make a free choice on what they would like to purchase (4). In addition, it allows them to embrace thousands of new services, brands, and products with ease. The consumerism culture is adopted from the west where people tend to spend more than what they have with a hope of repaying it later. According to Wu, the Chinese consumers tend to consume less and save more, which is the complete opposite of their western counterparts (77). Unlike the western world citizens, Chinese spend less and save more.
It is approximated that the average Chinese saves nearly thirty percent of his personal household income (Gerth 54). This rate is somehow amazing, given the fact in other nations such as the United States, the average citizen would save about one to two percent of his household income. This saving culture emanates from the Chinese unstable political and economic history. Wu claims that the Chinese consumers spend little and save much because they want to protect themselves from poverty (84). Wu further suggests that the Chinese social safety net comprising of the healthcare coverage and the pension scheme is poor (84). This situation forces the Chinese consumer to pile up savings to protect themselves from medical problems and the poverty experienced by many after they retire.
Chinese Middle Class
Consumerism has transformed and is still in the process of changing China from a ‘made in china’ nation to a super consumer country. This transformation has greatly impacted on the Chinese middle class, which happens to have the largest number of consumers. The Chinese middle class refers to the category that consists of people with their own capital to invest in, but the actual definition of this category varies from one author to the other.
The Chinese middle class definition is rather vague as different people categorize themselves in this group using different criteria. Li defines this category as a group of citizens who creatively contribute to the creation of new lifestyles and commercial cultures (104). He further suggests that it is more appropriate if they were referred to as the middle income group, given the fact that their population drives the economy (104). The middle class concept was derived from the west and a significant number of the citizens in this class do not believe that they belong there.
Most people in the middle class level are driven by the goal of realizing their own value, and majority of them are expected to have at least a car, their own apartment and savings that are worth six times their incomes. The middle class category is also expected to travel a lot and have at least one vacation annually, and should afford to take part in leisure activities like watching movies or having dinner in a restaurant. According to the Chinese National Bureau of Statistics, the urban middle class should have an annual income of between sixty thousand and five hundred thousand Yuan (Gerth 148).
Apparently, there are several types of middle classes and they differ from province to province depending on income and other factors. For example, earning sixty thousand Yuan in the western province of Qinghai can qualify a person to be in the middle class category while in Beijing sixty thousand Yuan is a basic and cannot automatically qualify a person to this category. Apart from this, the middle class in majority of the big cities usually accumulate vast debts to pay for their residential apartments. In most instances, the middle class consumers are usually afraid of taking their time off work for illness since they fear that doing so will cost them their jobs. In addition, the middle class is fragile given that the social security system in place is not that perfect, this could be the reason why majority of the people refuse to be identified with this category.
The Chinese middle class cannot be compared to the middle class populations in the United States due to the high populations and limited arable land that makes them live in low economic standard levels. A more precise definition of the middle class is given by Croll who refers to them as a group of common people, the largest between the rich and the poor (101). Croll further suggests that they should have a monthly income of at least five thousand Yuan and have received a university education (101). In addition to this definition, the middle class also refers to a state of mind in which knowledge and economic status define the value of the people in this category and their attitude towards life is evident to the society. Croll further asserts that this category has grown tremendously since the end of the Mao era (101).
This category did not exist before given that the Mao era was aimed at creating a united China with no social or economic class. In this united China, the government provided everything to its citizens. Currently, the middle class category comprises of sixty four million Chinese citizens and is still growing every year expected to hit the six hundred million mark by 2020.
It is apparent that the Chinese society does not provide adequate chances for people to realize their dreams, and this is why most people in this category are not happy and do not believe in this projection.
Consumerism in China
China has always been known as a producer and an exporter of consumer goods. Of late it has shifted to be the world’s biggest consumer of nearly everything, from mobile phones to fast moving consumer goods such as beer. This trend has been widely encouraged by the increasing middle class population who form the majority of consumers countrywide. In addition the government has embraced consumerism and continues to encourage a culture of consumption among its citizens. Recently, the government took a major decision to stimulate consumer demand in China (Davis 77). This measure was motivated by the fact that most of China’s products had already saturated the western markets, leaving it with fewer unexploited ones.
Consequently, the Chinese industry had no other place to turn to but its own population for purposes of ensuring continued economic growth. Given the present worldwide financial crisis, other western world producers have turned to the Chinese population to help save their economies. These factors among others have created a unique consumer culture that is bound to affect the middle class consumption trends.
Recent reports indicate that Chinese exports to the United starts have been declining and have apparently gone down by twenty six percent in 2000 (Davis 78). This fact has forced the country’s policy makers to devise strategies to get the thrifty Chinese citizens and consumers to start spending. Consequently, the Chinese government announced a five hundred and ninety billion dollar stimulus package for this purpose and offered a thirteen percent rebate on electronics to its rural dwellers.
Despite the high saving rates, the Chinese consuming patterns have increased with economic booms, and a number of families have steadily acquired more gadgets as their household income increases. The rapid economic developments taking place in China have given rise to a striking cross-generational disparity and have created a generation that is less prudent in consumption compared to the earlier generations. This generation, which mainly comprises of youths under the age of thirty five, seems to have defied the saving culture that was instituted in the earlier generations in the Cultural Revolution. Another factor that has led to the emergence of this distinct class of spenders is China’s one-child policy. Under this policy, this new generation is raised up by several adults and therefore it enjoys a relatively large margin of spending (Davis 78). Having grown to a consumer age, this generation is constantly exploring the market for new global trends being influenced by foreign media and the internet.
Despite the fact that majority of the Chinese lead an impoverished lifestyle in the rural regions, this spendthrift generation form the rising affluent Chinese population all over the country. The consumption pattern is a bit unique among the Chinese given that they tend to associate the varying attributes to the products they consume, which come from different countries. For example, they tend to associate automobiles with European and American brands, and link home appliances to Korean and Japanese products.
In addition, Chinese consumers show a strong consideration and loyalty to locally made brands. They also have keen interest in exploring foreign products, especially if they are easily accessible to them and within their purchasing channels and localities. This means that the foreign companies venturing into the Chinese market have to form alliances with local companies, allocate resources into establishing distribution channels, and ensure their products and brands are accessible to their Chinese consumers (Davis 78).
Reports indicate that most of the Chinese consumers in nearly thirteen of the China’s cities follow a trade up consumer behavior (Davis 79). This trend is not only followed by the consumers in Western China, but also in hypermarkets, which offer products at competitive prices. Consumers falling within the age groups of eighteen to twenty nine years of age exhibit the highest tendency to trade up. This strong tendency is not due to a rise in purchasing power, but it is rather attributed to willingness and desire to improve one’s living standards.
Most Chinese trade up due to practical reasons, instead of perceived emotional satisfaction or exclusivity. In this nation, word of mouth recommendation for certain products carries more weight in comparison to advertising mediums. The new generations of Chinese consumers have set their sight on the high end of the Chinese market and have increasingly sought after the luxury market. The earlier generation viewed consumption of luxuries as a waste of money, which could rather have been saved somewhere. The rush for luxuries, which not only reflect a standard of excellence but also shows exclusivity and reputation, has marked this new generation of consumers’ desire for status. This category is unabashed to flaunt their new money on these luxurious items in order to achieve their desired status and reputation.
In addition, the corporate culture of gift giving for the aim of building good business relationships has increased spending on luxurious items. At the moment China is ranked the second largest luxury market after Japan in the whole world and is poised to be the largest luxury market in four years time (Li 157). Apart from the rise in luxury spending, the Chinese consumer seems to follow a given trend. First of all, most of the transactions are done on cash basis with credit cards and checks being used less frequently. Majority of the Chinese consumers lack bank accounts and often prefer to stash away their monies in closets or under blankets.
Despite the fact that disposable income is rising in China, most of the households are still obsessed with saving given the fact that the social safety net is flimsy. This means that majority of the citizens have to shoulder majority of their expenses like healthcare, retirement, and education (Li 157). Secondly, bargaining, haggling, and deal making are common in the economic life of China. Haggling and bargaining between the vendor and customer, boss and employee, and so on are common and their direction is determined by the person who is more powerful. Bargaining and squabbling are common among the Chinese even over minute purchases.
Thirdly, the Chinese are not big consumers, buyers, or spenders, as they only consume about fifty percent of what they produce. Consumption by individual households comprises of thirty seven percent of China’s gross domestic product, the smallest share of any significant economy. This level fell to thirty six percent of gross domestic product in 2000 from forty nine percent in 1990 (Davis 104). This low consumption rate has made the Chinese economy too reliant on government spending and investment to maintain economic growth.
Fourthly, the government authorities regulate the prices for many of the consumer goods and services. It does that to avoid social unrest due to the large population and diminishing necessities. Ration coupons were used for this purpose until the 1990s. Thirdly, the young urbanites encompass the largest spenders’ group in China. It is a common occurrence to find the twenty-five year olds with abundant cash and the fifty-year olds without enough money.
The consumer behavior in China comprises of some unique features. First of all, the Chinese consumer market is evolving at a rapid rate and in most instances new products get accepted before their predecessors even succeed in penetrating the market. Secondly, nearly sixty three percent of Chinese consumers usually have a shortlist of their preferred brands whenever they are planning to buy a product. Due to this, they tend to be more wary when buying unfamiliar products. In addition, majority of the Chinese consumers are ethnocentric and prefer own domestic brands to foreign ones. Consumer spending is apparently high between the age groups of twenty and forty nine and the category born after 1980 when the economic reforms began to take shape and they are the driving force of the Chinese consumer economy.
Consumer Behavior and the Middle Class
The growing economic environment has led to the emergence of a strong middle class and a rising consumerism culture, which will not only affect China’s middle class population but also the rest of the world. First of all, the overall development of the country will be impeded given that the urban areas are largely populated by the high income earners and workers. Increased consumption in the urban areas and less consumption in the populated rural areas, which comprise a great deal of middle class citizens, could lead to a greater disparity between the rich the poor and the middle class. The result of this is the cost of living will be too high for the middle class category and soon they will all fall in the category of the poor.
Secondly, the transition from investment-led economy to a consumer-focused model has brought out a continued economic growth that has seen the increase of China’s middle class from forty three percent of the population to about seventy six percent by 2025. Thirdly, consumerism would lead to the implementation of policies that are designed to get the citizen-consumers to consume more and more of the country’s products irrespective of the implications. The current income-constrained middle class will be forced to increase their consumption levels.
Consequently, the nation will be transformed from a country of scarcity and frugality to one that is ruled by consumer demands and ethos. The effect of this is that the Chinese consumers, who have been traditionally viewed as savers, will start spending. For quite a long time, China has been viewed as a spectacularly poor and enviably rich nation and through the new emerging trend of consumerism, this culture can be changed.
Conclusion
In conclusion, the Chinese consumer behavior has both positive and negative impacts on the middle class consumers. On the positive side, it is bound to increase their consumption rates and reduce their saving rates; a fact which will work to facilitate economic growth. Economic growth will consequently lead to the creation of more job opportunities and make more money available to the middle class consumers for consumption. On the negative side, the Chinese consumer behavior it will reduce the saving rates, given the fact that the government itself is promoting consumption among its citizens. The promotion of this habit is in line with the global consumerism trend that has its roots in the western nations. This trend involves availing a wide variety of goods to the consumers, with an aim of wooing them to consume them.
Works Cited
Croll, Elisabeth. China’s New Consumers: Social Development and Domestic Demand. London: Routledge, 2006. Print.
Davis, Deborah. The Consumer Revolution in Urban China. Berkeley, CA: University of California, 2000. Print.
Gerth, Karl. China Made: Consumer Culture and the Creation of the Nation. Cambridge, MA: Harvard UP, 2004. Print.
Li, Cheng. China’s Emerging Middle Class: Beyond Economic Transformation. Washington, DC: Brookings Institution, 2010. Print.
Wu, Yanrui. China’s Consumer Revolution: the Emerging Patterns of Wealth and Expenditure. Cheltenham: Edward Elgar, 1999. Print.