On November 29, 2020, China’s National Development and Reform Commission stated that in 2019, China’s total retail sales of consumer goods exceeded 40 trillion yuan for the first time, an increase of over 42% over 2015, and will soon surpass the United States to become the world’s largest consumer goods retail market.

As the scale of consumption continues to expand, China has become the world’s second largest consumer market. In 2019, the contribution rate of China’s final consumption expenditure to economic growth remained at about 60%, and consumption has become the number one engine of economic growth for six consecutive years. In terms of growth trends, between 2016 and 2019, China’s total annual retail sales of consumer goods increased from 33.2 trillion yuan to 41.2 trillion yuan.

How does China’s consumer goods retail market expand?

China has the largest middle-income group, the largest manufacturing value added, the largest number of Internet users and the largest number of Fortune 500 companies.

China has 1.4 billion people and more than 400 million middle-income people. China’s market is vast, and with the continuous expansion of economic development, the scale of total consumption continues to expand. China’s consumption upgrade continues, and there is room and potential to expand China’s demand, especially in the fields of elderly care and health.

The income growth rate of China’s middle-income class is much higher than the per capita disposable income of residents. Maintaining a positive correlation with consumption data, national income growth is a direct support for expanding the consumer market. The “middle class” is reshaping the Chinese consumer market. The steady growth of China’s “middle class” has brought about economic transformation and consumption transformation, and this change is still going on.

It is estimated that by 2022, more than 75% of urban households in China will have an annual income of between RMB 60,000 and RMB 229,000. This group spends less than 50% on daily necessities, and its consumption behavior and consumption habits are different from other classes. The middle class accounted for only 4% of urban households in China in 2000, and by 2012 this number had increased to 68%.

In the next ten years, the growth of household income of the aforementioned groups will come from three major driving forces:

1. Structural changes in government policies and the labor market will increase wage levels
2. Financial market reform may further stimulate employment growth, thereby generating new income
3. Opening up more economic fields to private enterprises can encourage the improvement of labor productivity, reduce costs and increase household income.

Assuming that the above situation is realized, by 2022, the annual income of urban households in China will at least double.

Residents’ income has grown steadily, and consumption upgrades have followed closely and have bottomed out the overall situation of China’s consumption under the impact of the epidemic. From the data point of view, online retail sales increased month by month and achieved growth against the trend at the beginning of the year. In the first 10 months, the national online retail sales reached 9,127.5 billion yuan, an increase of 10.9% year-on-year, and the growth rate increased by 1.2% over the previous three quarters.