"Current global economic conditions will slow the spending of even the wealthy. But that does not detract from the importance of China's wealthy consumers to manufacturers, retailers, and service companies across many sectors," said Vinay Dixit, director of McKinsey & Co's Asia Consumer Centers.
The number of households whose annual income exceed 250,000 RMB ($36,622), a benchmark figure for wealth in urban areas, topped 1.6 million last year, according to a recent report by McKinsey. The research was conducted in the last quarter of 2008 in face-to-face interviews with 1,750 wealthy households from 16 Chinese cities.
The number of middle-class consumers, meanwhile, is expected to nearly triple to 100 million from 2006 to 2016. A middle class income in China ranges from $7,500 to $25,000.
The number of wealthy consumers in China is growing at around 16% annually. About one half of today's wealthy Chinese were not wealthy four years ago. The country will have more than four million wealthy households by 2015, making it the world's fourth-largest country in terms of the number of wealthy families, trailing the U.S., Japan and the U.K. But wealthy consumers in China are, on average, 20 years younger than those in the U.S. and Japan.
Rich Chinese younger than western counterparts
About 80% are under 45, said McKinsey, compared with 30% in the U.S. and 19% in Japan. They are also much better educated than other Chinese consumers and more likely to be self-employed.
There are also marked differences between the wealthiest consumers and their less affluent counterparts in China. For example, wealthy consumers trust foreign brands more, are typically among the first to buy new technology, and are far more willing to pay a premium for high-quality products than less affluent Chinese.
"As the pool of wealthy consumers in China reaches scale, global luxury players will need to invest in adapting their marketing approaches to the unique characteristics and needs of these consumers, "said Yuval Atsmon, an associate principal in McKinsey's Shanghai office.
The number of China's super-rich class is also growing. The country has 825,000 individuals--or one in every 1,700 Chinese--with personal wealth of more than 10 million RMB ($1.46 million) and 51,000 individuals (one in 25,000) with more than 100 million RMB ($14.7 million), according to the Hurun 2009 Wealth Report. Those estimates are based on investment, spending on property and cars, and income distribution analysis.
Forty-eight percent of wealthy Chinese live in Beijing, Guangdong and Shanghai, but China's second- and third-tier cities are increasingly important "for brands looking to tap China's high-end consumers," said Rupert Hoogewerf, founder and publisher of the Chinese luxury business magazine Hurun Report. "With this growth in wealth comes a surge in self-confidence driving China's wealthy to continue to spend, despite the economic crisis."
In a survey by Hurun of 67 Chinese millionaires in February 2009, 82% said that their lifestyle had been unaffected by the current financial crisis. Compared with six months previously, 30% had increased their cash deposits and 12% their investments in gold, while 54% had decreased their equity exposure.
Preferred Brands of China's Richest Consumers
Overall Luxury Brand Louis Vuitton
Overall Watch Patek Philippe
Jewelry Watch Piaget
Sports Watch Rolex
Fashion Watch Louis Vuitton
Super Luxury Car For Business Rolls-Royce Phantom
Super Luxury Car for Self-Drive Bentley Continental
Luxury Sedan Mercedes-Benz S Class
Luxury SUV BMW X Series
Super Luxury Performance Car Porsche 911
Performance Car BMW M Series
Luxury Drinks Brand Royal Salute
Super Luxury Whiskey Royal Salute 21 Years Old
Premium Whiskey Chivas 18 Years Old
Premium Cognac Hennessy XO
Premium Chinese Spirits Swellfun
Chinese Spirits Moutai
Premium Champagne Veuve Clicquot La Grande Dame
Premium Cigarette Zhonghua
Bank for Onshore Personal Banking China Merchants Bank
Bank for Offshore Personal Banking HSBC
Credit Card Visa
Fashion Label Giorgio Armani
Luxury Writing Instrument Montblanc
Accessory Louis Vuitton
Skincare Product Shiseido
Healthcare Product Harmony
Luxury Mobile Vertu
Mobile Phone Nokia
Laptop Computer Lenovo's ThinkPad
Luxury Hotel Brand Shangri-La
Spa Brand Banyan Tree
Asian Airline Cathay Pacific
Chinese Airline Air China
European Airline Lufthansa
International Luxury Destination U.S.
European Luxury Destination France
Asia Luxury Destination Singapore
Middle East Luxury Destination Dubai
Domestic Luxury Destination Yunnan
Source: Hurun Report
(View the complete list of the preferred brands of China's richest consumers.)
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