Little Emperors, Big Consumers

Ian SoderChinese Culture, Ecommerce1 Comment

Chinese Youth Consumer Habits Stemming From the One-Child Policy

Chinese consumers are liberal, open-minded, and willing to spend. With a middle class that is larger than the entire U.S. population, the opportunity is vast. How was it, though, that China transformed in to having such an expansive consumer culture? The answer is largely due to a generation of millennials born during the One-Child policy.

This post will dive into the dynamics of why Chinese consumers are catching the attention of so many economies worldwide. To get a better understanding, we will examine:

  • China before the economic reform in 1978
  • How the different waves of the one-child policy shaped consumer characteristcs
  • How and what exactly do Chinese consumers shop for?

The opening up of China greatly changed the mindsets of Chinese policymakers, businessmen, entrepreneurs, and individual families. By examining the one child policy, we can better understand how the consumer habits of Chinese people have changed throughout the reform period and beyond. More importantly, we can acknowledge the significance of the Chinese consumer today.

Generations Before the Chinese Economic Reform

Photo from The Economist

China pre-1978 was an agrarian society (agriculturally-focused economy). After the Unification of China in 1949, the First Five-Year Plan, the Great Leap Forward, and Agricultural First initiatives focused on collective farm units and an increase in agricultural products. The subsequent call for people to move to the countryside during the Cultural Revolution called for a nationwide strengthening of Communist ideals.

During the cultural revolution, the same characteristics we attribute to today’s China were nonexistent. People born before the 1960s lacked an education, were politically conservative, and were greatly distant from the outside world. Communist ideals flourished under chairman Mao. Parents merely focused on how they could make a better life for their children; China certainly did not manifest consumer culture.

Economic Reform: Immediate Impact

One Child Policy: Overview

In 1978, after Mao’s death, the takeover of Deng Xiaoping completely reinvented China’s image as a consumer nation in the global marketplace and economy. However, Deng noticed that China’s population was growing too quickly, as population growth outpaced economic growth. He therefore called for a one-child policy relating to a great portion of China’s population, to give greater importance to economic growth. There were however exemptions for rural families and ethnic minorities.

People born in this generation were part of a great transition: China’s economy gradually opened up to the western world; education was revived through the reemergence of the Gaokao entrance exam; and Chinese values changed from being more traditional to modern.

Photo from sbs.com.au

1st wave

Moving into the 1980s, China really started to enter a completely new phase. The characteristics of the one child policy became much more solidified. For many families, the 4-2-1 pyramid structure became established; the individual child became the main focus of two parents along with four grandparents. As a result, children born after 1980, known as the balinghou, became autonomous and were heavily nourished. They also acquired more wealth. Although at times they started to become more selfish and entitled, they turned into quite experienced consumers.

This first wave of the one child policy period still remained quite “Chinese” before exhibiting more of the Westernized characteristics of today. Cross cultural consultant Barry Spalding states that families remained protective. Older generations who had distinct memories of the Cultural Revolution still continued to foster strict Confucian values within their family. Regardless, the 1980s was truly the origin where the Chinese youth began to develop into the consumers they are today.

2nd Wave and Beyond

Children born in the 1990s, known as the jiulinghou, became immersed in a much more advanced society and economy compared to the decade before. According to author Eric Fish, a child in 1995 was exposed to an economy that was twice as large as the economy in 1985. Likewise, the likelihood of having internet access was much higher for a person born in the 90s versus the 80s.

With the influx of technology, young people born in the 90s acquired an entirely new outlook on life compared to their predecessors. David Lung, a manager at Deloitte China, notes that the Chinese youth have become more open-minded, entrepreneurial, and willing to spend money. Also, their exposure to the outside world, including an increase in Chinese students studying, living, and traveling abroad, has contributed to this mindset.

How do Millennials Consume?

Ecommerce

Photo from mckinsey.com

Parallel to the burgeoning Chinese economy, digital and online consumption platforms have become increasingly important and necessary. Online platforms such as Alibaba, JD.com, and Tmall control the market in China. Shopping, consumption, communication, and purchasing is now all possible online.

One great advantages of Ecommerce is its convenience. Goods can be delivered to your door, even on the same day that you order the product. This has contributed to a rise of people staying in their houses rather than going out, otherwise known as “zhai” culture. For example, according to Analysys International, China’s online food delivery market will reach US$37.5 billion dollars by 2018. However, frequent time spent online has given Chinese youth exposure to Western influences, and increased their interest of life outside of China.

Photo from marketingtochina.com

Mobile

Besides consumption via a computer, the Chinese are incredibly mobile. Deloitte states that about 97 percent of Chinese people between the ages 14 and 47 own smartphones. And, more than half of this amount access the internet through their phone over 25 times per day. 

This is almost impossible without the functions of WeChat. On WeChat, China’s number one do-it-all smartphone app, you can do anything from chat with your friends to order a taxi. Even more importantly in terms of commerce, you can shop for goods on Wechat; individual companies can post what they are selling and people can browse and shop through WeChat. 

What do they Consume?

The products that younger Chinese generations have been consuming have become incredibly diversified. Youth stemming from being the only child of upper-middle class families have a large array of tastes. This can range from spending great amounts of money on traveling to vast places, or paying for an expensive pastry at a cafe.

Traditionally, both household goods and electronics have accounted for a large portion of China’s retail market. However, the arrival of youthful, open-minded, and liberal consumers have caused other sectors to recently flourish. Education, fashion, beauty products, cosmetics, tourism, luxury shopping, and other sectors have been gaining popularity.

Photo from webshopinchina.com

The Future Relies on the Youth

Although the one child policy has formally stopped in 2015, the consumerism is greater than ever. The Boston Consulting Group states that the Chinese consumer economy will rise by a whopping US $2.3 trillion during the next five years. Despite the large growth, there is another demographic that needs greater attention- the youth from the rural areas. As they continue to relocate and resettle in urban areas, they will gradually receive more exposure to the modern, consumer lifestyle. However, their transition will not be easy, and will take time.

As we move into the future, the remnants of an enclosed, exclusive, pre-1978 China move farther into the past. Older generations and older mindsets with gradually have less of an impact on offspring. The discontinuance of the one-child policy will lead to an ever-increasing youthful population.

Diverse consumption has become the new norm, and it is a wave that is led by the youth. Those born post-1980 have contributed to a fresher, more worldly China. In order to meet this unique, modern type of demand, companies will need to exhibit the best goods with the highest quality if they want to keep up.

 

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