China’s status as the world’s top commercial power is being tested amid an economic slowdown and demographic shifts. Its sheer size, infrastructure and government efforts to move the country to a consumption-driven economy provide a strong foundation, but Asia’s other emerging markets – particularly India – are poised to challenge China’s top spot.
India’s consumer market is witnessing a remarkable acceleration fuelled by a rise in middle- to high-income households. The country’s per capita household spending rate is expected to soon surpass that of other developing Asian economies, including Indonesia, the Philippines and Thailand.
Moreover, the speed of India’s rise in consumerism is outpacing China’s as the gap between the two countries’ consumer markets narrows. Projections suggest that India will boast a consumer base of 773 million people by 2030, marking a 46 per cent increase from the 529 million recorded in 2023. China is still expected to maintain a larger total, with more than 1 billion consumers by 2030, but this represents 15 per cent growth from 2024.
The dynamics powering consumerism in each country are being shaped by the unique characteristics of their middle classes. China’s middle class tend to be concentrated in urban areas, while India’s can be found both in urban and rural areas.
As India’s middle class is less centralised, this could make it harder to access new consumers in the near term, until the dispersion of resources, labour and capital between urban and rural areas begins to equalise. Meanwhile, China needs to encourage citizens living beyond its first-tier cities, as well as in more rural areas, to spend more aggressively.
02:09
China’s young abandon consumerism in favour of fulfilling experiences
China’s young abandon consumerism in favour of fulfilling experiences
Consumption is currently driven by China’s largest cities, where consumers spend 80 per cent more per capita than the national average. However, household incomes in lower-tier markets have risen, creating more opportunities for consumer spending. Even so, many residents still prefer to save rather than spend as the economy cools, particularly in the face of a struggling property market.
Spurred by the Covid-19 pandemic, Chinese citizens have accumulated savings amounting to 53 trillion yuan (US$7.3 trillion) since 2020 that remain largely unspent, according to a McKinsey report. To encourage the redirection of these funds into consumer spending, it’s crucial for the government to enhance the financial security of its citizens, for example through improved pensions.
Additionally, China is exploring the consumption possibilities offered by rural migrants. By turning migrant workers into urban residents, their spending power could be substantially increased. However, such a change would require modifications to the hukou system – China’s household registration framework established to manage population movement – which would be challenging to achieve.
Furthermore, China is at a demographic crossroads, facing the challenges of an ageing population where about 15 per cent of people are now 65 and above, categorising it as a moderately aged society by United Nations’ standards. In contrast, India boasts a younger demographic, with a median age of just 28, compared to China’s 39.
12:50
World’s largest population: why it could be a headache for India
World’s largest population: why it could be a headache for India
At first glance, India’s youthful population might appear to give it a competitive edge in a consumer market that highly values youth. However, in China, most of its seniors will be online by 2030, while current purchasing power is in the hands of Generation Y, who are increasingly willing to pay a premium for a higher quality of life. This move marks a transformation in Chinese spending habits, favouring quality goods over quantity amid a desire for a more personalised buying experience.
Advanced digitisation, the integration of artificial intelligence and ongoing innovation have been key drivers propelling commerce in China, enabling it to maintain its lead over other economies so far. For instance, Chinese clothing company Shein has leveraged algorithms to personalise the shopping experience by recommending products tailored to individual tastes. Other brands have capitalised on China’s rising trend of live-streamed shopping, which has spurred the development of new technologies such as virtual human streamers.
In India, high internet penetration is helping to drive commerce, but challenges such as youth unemployment and unequal education access could hinder the future digital innovation that is essential for commerce growth. Additionally, while their concerns were somewhat addressed by the passage of the Digital Personal Data Protection Act last year, Indian millennials still have worries about digital data theft and privacy loss, according to a report this month from ECDB.
The push to modernise and adopt digital commerce stands in stark contrast to more traditional customs – which see many grown-up children continuing to live at home – which has partly influenced Generation Z’s reluctance towards e-commerce. This generational cohort’s cautious approach to digital commerce extends to their interactions online, where they are less engaged with companies compared to millennials.
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China’s ability to innovate and swiftly adapt to changing consumer needs, seen in its response to the post-pandemic surge in demand for services such as travel and entertainment, is essential for retaining its global consumer leadership. This transition from a product-based economy to a service-based one is significant, reflecting evolving consumer preferences.
To maintain this leadership, China needs to broaden its focus to include rural areas and cater to often-overlooked consumer bases such as migrant workers. Simultaneously, India must tackle digital concerns among its younger generations and close the gaps in digital infrastructure to fully exploit its demographic potential.
As both nations address these pivotal challenges, their competition for consumer dominance will depend on their ability to innovate and inclusively enhance their economic landscapes.
Sonja Cheung is editorial director at the Asia Business Council
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