A new trend is emerging among China's consumers., in a recent report produced by Mckinsey. While the affluent are still shopping and traveling as ever before, those in the middle are either holding onto their money until the annual bargains -- such as Singles Day on Nov. 11 -- or spending it in different ways.

China has two week-long holidays: Golden Week, the National Day holidays beginning Oct. 1; and the Chinese New Year, or Spring Festival, in January or February. While Spring Festival is about visiting hometowns, Chinese tend to shop, travel and enjoy leisure time during autumn's Golden Week.

Shopping slipping

Facing the prospects of lower growth for the foreseeable future, middle-class consumers have begun to hold back on purchases. Statistics from the recently concluded Golden Week show that Chinese were keen to spend on travel, movies and dining but not so much on shopping.

Retail spending on clothing and luxury items during the holiday increased 10.3% year-on-year, but was slower than last year's 10.9%. Shoppers seem to be in wait-and-see mode, with e-tailers expecting them to splurge on Singles Day, the largest online shopping day in the world.

Combined retail and restaurant sales during the first week in October came to a record 1.5 trillion yuan ($228 billion) on a preliminary basis, according to the Ministry of Commerce. Most of the growth was through experiential spending, such as trips and movies.


Meanwhile, the rich are still doing what they always do. A new report by McKinsey & Company estimates that global luxury spending by Chinese will climb to an annual $150 billion by 2025, which constitutes nearly 44% of the projected $400 billion global figure.

McKinsey also found that affluent Chinese are becoming increasingly impulsive in their shopping. One in two of their luxury purchases are decided within a day. This is a major shift from 2010, when only one in four luxury bags were bought after a day's deliberation.

Wanderlust gaining

An increasing number of people are choosing to travel, often abroad. The Golden Week holiday is a bonanza for travel agencies and retailers, but the quickly changing habits of the Chinese consumer is forcing a shift in strategy.

According to the China National Tourism Administration, a total of 705 million tourists traveled throughout Mainland China, accounting for roughly half of the 1.4 billion population. This marked an 11.9% year-on-year increase, with domestic travel spending hitting 583 billion yuan.

Meanwhile movie box office sales during the holidays rose 35% from a year earlier to 2.46 billion yuan, according to research company EntGroup. "Never Say Die," a comedy about boxers, was the biggest draw.

The number of travelers going abroad, however, was similar to last year, at around 6 million. Considering that this year's holiday week had one more day, the number effectively fell.

The lack of growth in foreign travel stems from the government's move to limit the number of tourists to Japan and South Korea, two of the top three destinations for Chinese tourists. (The other is Thailand.)

In the case of South Korea, Beijing is retaliating for the U.S. putting an anti-missile system in the country. In February, Beijing totally banned visa issuance for package travelers to South Korea. As a result, the number of tourists to South Korea during the National Day holiday fell 70% from the year before.

In a new development, Chinese authorities have begun to limit the number of visas for package tours from certain Chinese cities to Japan. This is reportedly related to a recent incident in which dozens of Chinese citizens traveling on fake passports entered Japan and disappeared. They were apparently looking for work opportunities.

An inquiry by The Nikkei revealed that in at least 14 cities across China, authorities had implemented visa restrictions on groups traveling to Japan. With the restrictions expected to remain for the immediate future, outbound package tours to Japan could suffer.

The measure does not apply to the growing number of independent tourists, generally those with higher incomes. A traveler needs to have an annual income of at least 100,000 yuan to be eligible for an independent tourist visa to Japan. This is nearly double the average yearly salary.

The McKinsey report noted that wealthy Chinese take an average 5.9 international trips per year. "Wealthy Chinese luxury consumers are constantly on the move and shopping plays an important role in their global travel plans," McKinsey said. While the middle-class are affected by the government's visa policies, retailers may need to focus on wealthy customers and "become part of the travel itinerary," the report said.

Sourced from Asian Review