Domestic spending to hit 12t yuan

Consumer spending is expected to increase by 50 percent in China's top 25 cities in the next five years due to a rapid increase in the country's per capita disposable income, according to a new report from the global consulting firm McKinsey & Company.

The report, released earlier last month, based its findings on the company's annual survey of 606 of China's 815 cities.

The report estimated that per capita spending in China's urban areas will rise to 16,000 yuan per year in 2015, up from 10,000 yuan in 2008. The volume of domestic consumer spending is expected to total 11.7 trillion yuan.

"We anticipate consumption growth in China to keep pace with GDP in the coming years, at a 10 percent compounded annual growth rate (CAGR) by 2012," said Max Magni, partner and head of McKinsey's consumer practice based in Shanghai.

However, there are variations in consumer spending increases among different cities, with Beijing and Yantai and Weihai of Shandong province having the highest CAGR of 10.2 per cent in 2008 to a projected 14.0 in 2015.

Cities like Shanghai, Guangzhou and Shenzhen - with export-oriented economies - will have a CAGR as low as 6.5 percent during the same period, according to the report.

Vinay Dixit, senior director of McKinsey's Asia Consumer Center, said export-dependent cities have suffered a harder blow from the global financial crisis, which means a longer recovery of consumer spending momentum.

McKinsey recently released the findings of a separate survey of 15,000 people in 58 cities that showed lower consumer confidence in the wake of the financial crisis, particularly among low-income earners and those living in export-reliant regions.

The consumer confidence index dropped to 86 points in March from 94.5 points in the same period last year.

(China Daily 10/12/2009 page5)