We met with close to 150 investors across the UK, Europe and North America to discuss topics such as sentiment in higher vs. lower tier cities and upgrading demand among urban homeowners; demographics; 'hukou' (i.e. China’s household registration system) and other potential reforms. Top of mind for all investors was how households might behave if property stabilizes and confidence improves.
Dining and drinking outside a top priority if income goes up
Dining and drinking outside a top priority if income goes up
Dining and drinking out, along with daily necessities, is one of the main areas consumers say they would spend more money on if their income were to go up. It is also one of the main segments where spending by households has softened notably in the past year. Spending on leisure travel has been heavily impacted, too, based on this survey and as evidenced in official data. Yet, while travel tops the list of areas that higher income households (>Rmb600k/c.US$85k in annual income) would spend more on if their income rose, it is a lower priority for households below that threshold: they would prioritize saving/investing extra income over travel. Most investors we spoke to on our trip appeared to agree that it may take time for spending on leisure travel to pick up and concur with the UBS-S leisure team that business travel may be first to benefit. Although only 8% would spend more on autos if their income goes up, this may reflect ownership/ticket size (relative to other categories in this question). In fact, c.50% of respondents said that they planned to buy an EV in the next 12 months.
Consumers likely to remain value focused, benefitting domestic brands
Consumers likely to remain value focused, benefitting domestic brands
As per the UBS China Activity Tracker, there are already signs of stabilization with home sales and other indicators picking up. Even if these trends prove sustainable and fuel consumer confidence, it may take time to translate into better job/income prospects, the top factors that consumers say would support their consumption. In the absence of a sizeable direct stimulus to households, consumers' focus on value for money over premium offerings may be slow to reverse, in our view. This may present ongoing opportunities for domestic brands that score well in value-for-money perceptions in the eyes of consumers; brands which may also benefit if the upgrading potential of lower income households can be unlocked in the longer run. Chinese consumers' growing focus on services, experiences, and health and wellness are other key trends that are likely to endure.
This article leverages the following UBS Evidence Lab assets:
This article leverages the following UBS Evidence Lab assets:
China Low-tier Cities Market Expansion Consumer Survey: This is the 5th wave of the China Low-tier Cities Market Expansion Consumer Survey. UBS Evidence Lab conducted an online survey of 2,000 consumers aged above 18 years old across the Tier 1-3 cities in mainland China. Fieldwork took place from 28 June to 23 August 2024. To qualify for the survey, respondents had to be the decision makers of purchasing at least one of the following categories for themselves or their families: electrical vehicle, sportswear, restaurant, baijiu, beauty, and coffee. Previous fieldwork dates for this survey are: Wave 4: January 2024; Wave 3: June 2023; Wave 2: February 2023; Wave 1: July 2022.
China Brand Equity Consumer Survey: This is the first wave of the China Brand Equity Consumer Survey. UBS Evidence Lab conducted an online survey of 1,800 respondents across China. Fieldwork took place from 4 March to 15 April 2024. The distribution of survey respondents was designed to mirror the population of the country by using census data for age, gender & tier. Participants did not have to meet any qualifying criteria in the survey. The margin of error for 1,800 respondents is +/- 1.84% at 90% confidence level.
