Everything You Need To Know About The Chinese Middle Class
It is no surprise that the Chinese middle class have become a major corner stone of consumerism. With the rise of the middle class in China and the decrease in the American middle class, many companies have transferred their advertising to this lucrative market.
The Chinese middle class are an interesting demographic and it is important to understand how they work when moving into China.
In 2000, around 4% of China’s urban population was considered to be middle class, however by 2020 it is meant to be around 76%. This is a massive increase in this group, and it will result in the increasing spending power of China and the Chinese consumer.
According to business insider, the Chinese middle-class spending power is set to increase by 55% between 2015 and 2020. Just like the American middle class, the Chinese middle class have increased their spending in sectors such as fast food, education and above all healthcare.
Healthcare is one the largest markets that will grow because of the boom in the Chinese middle class. The growing fast food market is leading to more and more long-term health problems which are in turn boosting the healthcare market.
The Chinese government provides some form of health care for all its citizens, however, most middle-class Chinese consumers use a form of private healthcare. This does not include the forms of healthcare that are non-life threatening such as vitamins and supplements.
Business Insider has claimed that by 2020, the Chinese middle class will spend around $1 trillion on private healthcare. Clearly, this is an excellent market to move into.
Why is the Chinese middle class is growing so much-
The reason behind the growth of the Chinese middle class is simple, the growth of the Chinese economy and the movement away from the manufacturing industry and it services.
In the past few years, China has been moving away from its traditional manufacturing background. Since there has been a movement away from manufacturing, it means that more and more people are moving into the white collar jobs.
However, despite the movement away from the traditional business, there is still a large amount of fixed investment, which is a key driver for economic growth. In 2016, it rose to $8.7 billion dollars, which accounts for around 80% of the total GDP. According to the Star, this is due to the strong push from the government’s push towards larger investment.
However, this does not mean that China is not moving away from export and investment led economy. Due to the ageing population, the working population has been softening and slowing down.
This has resulted in a large proportion of workers moving away from the hard labour jobs and into better-paid jobs due to more experience, thus causing a glut in the middle class.
How can we define the Chinese middle class-
The term middle class gets thrown around a lot. The middle class, in general, tend to be those who fall into the middle economic bracket of a country. It is one of those demographics that companies try and target them.
This is the most obvious way of identifying the Chinese middle class. Generally, a middle-class income is an income that falls in the middle tax bracket.
This graph demonstrates the different levels of taxation in China. Chinese tax brackets tend to be more wide ranging than other countries to incorporate the sheer amount of people, as well as different income levels.
This makes it slightly harder to identify the Chinese middle class, but not entirely impossible. Generally, the Chinese middle class will fall in the four middle tax brackets. The Chinese middle class is defined by their income because it sets their spending habits, which are also a very big factor in determining who the middle class are.
Taxation plays a large role in spending habits. Most people understand that the less tax you pay, the more disposable income you have, so in the case of the Chinese middle class, the various levels of tax determine the different class structures even within the middle class.
Location is another factor you should take into consideration when identifying the Chinese middle class. Chinese social structure differs according to which city you are in. This is seen in the different ‘tier’ cities. Introduced in the 1980’s by the Chinese government, the tier system identifies which cities should receive the most investment from the government.
While it initially started as a system for infrastructure, by the late 90’s it became a way of creating class divisions. This means that people who are the middle class in a second or third tier city might not be the same as the middle class in a top tier city like Shanghai.
Rising cost of living may mean that those who classify in the middle class in certain cities may have less spending power, but it may also mean that what they deem as a necessity will be different to those in lower class cities. Fashion will also play a big role in disposable income levels.
The location will determine what kind of products that the Chinese middle class will want to spend money on. Trends and fashion dictate what people see as luxury items versus what people see as necessities. Thus, you should do some research into how location affects different products that you are competing against.
This may seem like a daunting task since the Chinese population is extensive, but you should narrow it down based on the two previous points. By looking at top tier locations and looking at those who fall into the various different tax brackets, you will narrow it down massively.
Spending habits will help you narrow down the Chinese middle class, and will help you understand them more. Spending tends to be focused on luxury items, but not in the same league as the upper-income classes. Cars and holidays are popular items.
Equally, as we have already discussed, healthcare, specifically private healthcare, also takes a large chunk out the Chinese middle-class incomes. Since the rise of their ageing population, there has been a focus on health, wellness, and longevity. There are also rising costs of medical care in order to pay for older members of the family.
It is also important to note that there is an income gradient within the middle class. Those products that sell to the top end or bottom end of the tax brackets may not sell in the other brackets. Therefore, it is important to do your research into the individual tax brackets as well.
How do I market to the Chinese middle class-
Marketing to the Chinese middle class is much like marketing to any other consumer in China. You need to understand how the different social media platforms are received and which ones are actually used.
For instance, Weibo tends to be used by consumers who are lower tier rural cities. Thus, if you have a product that is more likely to perform better in the higher tier cities, then this app may not be the one you want to focus on, although you should have a Weibo profile.
Furthermore, platforms like Zhihu are used by those in the higher income bracket, therefore you should have an extensive knowledge of how this platform works. Essentially, this is like Quora but for China. It is important to understand the differences, however, so take a look at our article to find out more.
WeChat is also essential for marketing to the Chinese middle class. WeChat is the most used platform in China, and they offer a wide range of services that can make selling your product a lot easier. A great example of this is the WeChat store feature. This allows customers to browse your shop while on WeChat. This is a great way for you to integrate sales and marketing.
How can we help you?
Here at Dragon Social, we understand that you will probably be learning a lot in one go and having a lot of information thrown at you. Many companies who are new to the Chinese market will hire a digital marketing agency in order to maximise their understanding of the market, as well as effectively use their resources.
Dragon Social is a great investment for those who want to seriously market to the Chinese middle class. We offer a range of services that can be tailored to your specific needs. If you would like to know more visit our website!