BIZCHINA / Top Biz News

High-end consumers drive up luxury sales
By Xing Zhigang (China Daily)
Updated: 2006-07-01 09:15

They own cars, property, digital electronics, bankcards and insurance policies.

They are keen international travellers, media savvy and dependent on the Internet for shopping and communication.

They are young and well-educated and dine out at least three times a month.

And most of all, they are the driving force behind luxury consumption in China, shopping for brands such as Longines, Omega, Pierre Cardin, Dunhill and Montblanc.

This is a general portrait of China's premium consumers, or the "first-world consumers" defined in the country's first comprehensive report on domestic consumption.

The China Life Report 2006, released on Friday, was based on a one-year survey conducted by the China National Research Association and MasterCard International.

The survey interviewed 10,000 respondents in 10 major Chinese cities with a combined population of 40 million, including Beijing, Shanghai, Guangzhou and Nanjing.

The report divides the consumers into three groups  first-world, second-world and third-world  in line with their purchasing power.

The first-world consumers refer to the urban high-income earners whose consumption demand and capacity support China's upscale consumption market, according to the report.

It estimates that the number of consumers in the three categories stands at 6 million, 32 million and 2 million respectively in the 10 cities.

About 53 per cent of first-world consumers are college-educated or above and nearly 52 per cent of them are middle- or senior-level managerial staff and professionals.

In contrast, more than 75 per cent of the second-world consumers have no college education and over 72 per cent of them work in the manufacturing industry and service sectors such as business, transport and catering.

The report notes that the annual household and individual income of the first-world consumers averages 218,000 yuan (US$27,250) and 117,000 yuan (US$14,147), and about 85 per cent of them are aged between 25 and 39.

The average annual income of the second-world consumers is 19,680 yuan (US$2,460) per person, while third-world consumers are the poverty-stricken living in urban areas.

While the first-world consumers spend up on cosmetics, sports, recreation and travel, their second-world counterparts are suffering against inadequate resources for housing, medical treatment and education for their children.

These starkly contrasting situations reflect two sides of the coin: growing consumption demand from the nouveau riche versus lack of purchasing power of the urban poor, said Yuwa Hedrick Wong, economic adviser to MasterCard International Asia/Pacific Region.

"While the fast economic growth in China has generated a huge demand for consumption ... it has failed to spread wealth to most people," he told China Daily.

Zhang Zhongliang, secretary-general of the China National Research Association, said although first-world consumers boast tremendous purchasing power they make up only a very small proportion of the urban population.

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