Changing shape of consumption in China; up to US$5.3trn increase
Changing shape of consumption in China; up to US$5.3trn increase
UBS expects China to take a further share of global consumption over the next decade, reaching the current US level in 2030E, implying roughly US$6trn in household consumption growth in the next decade. We believe increasing female empowerment and related changes to household structures in China have a potentially significant impact on the shape of this consumption growth. Our regression and scenario analysis allows us to model US$$3.3-5.3trn of household consumption growth by 2030E from these factors alone. We think markets underestimate the potential implications of the changing consumption drivers in China across sectors and companies. The UBS Evidence Lab survey of Chinese females and our collaboration with global analysts across 16 sectors suggest this female-driven evolution in consumption behaviour and household structure favours investment (asset management/insurance) and individual consumption with higher spending per capita (luxury, pets, healthy food, and beer) over other traditional consumer sectors.
Isolating impacts: China's female empowerment and single-person households
Isolating impacts: China's female empowerment and single-person households
We use country panel regressions and our log-linear predictive model on female population share, GDP growth, single-person household patterns and income growth by gender to quantify this theme. Our most optimistic Female Empowerment scenario of US$5.3trn incremental household consumption growth by 2030E is 80% driven by Chinese women's income growth (6% CAGR) and 25% by the single-person household uptrend (from 19% in 2020 to 25% in 2030E). Interestingly, the higher ratio of young females versus males in education would have a small negative (about 5%) impact on consumption growth over the next decade, potentially hitting traditional consumer sectors but benefitting investments. Note our model captures the impact of these specific factors only and shows how significant they could be (for context, UBS economists’ base-case household consumption growth in China is US$6trn by 2030E).
UBS Evidence Lab: changing patterns in Chinese females' consumption
UBS Evidence Lab: changing patterns in Chinese females' consumption
We leverage UBS Evidence Lab China Female Consumption survey to understand their behaviours and values. Consumption changes post COVID-19, especially a focus on "health"/"easiness to purchase" over "brand"/"price" seem likely to last. Millennials (beneficiaries of the progress towards gender equality in education and the only female working age group anticipated to have a growing population in the next decade) are more interested in investment and more independent in their spending, with consumption skewed more towards the self than the family. This supports findings in the UBS Evidence Lab Wealth Effect and Housing Intention surveys that indicate Chinese women have stronger intentions to buy insurance products and properties than men.
