Business leaders rush to dissect the Chinese consumer

Business titans gathering for the World Economic Forum in Davos this week will find themselves in communal obsession over a mysterious figure they barely understand but already adore — the Chinese consumer.

Everyone, from moisturiser makers to lithium smelters, has a stake in the love-in. The numbers for this emerging economic force are impossible to ignore and the questions they raise expose how little is known about the way the Chinese will spend their cash.

What size LCD television will a first-time apartment owner buy in Dalian? How many pairs of shoes will it be normal for a 30-year-old secretary to own in Fuzhou? How many credit cards will the average Dongguan accountant have by 2015? What will luxury apartment blocks in Yantai mean for international copper prices?

A new survey of the Chinese consumer market maps a future of staggering financial value. Dong Tao, chief China economist for Credit Suisse, believes that it will rise from its 2009 level of $1.72 trillion (£1,060 billion) to $15.94 trillion over the next decade. Chinese private consumption has already overtaken Britain’s, narrowly, in terms of percentage of global consumption, but, analysts say, by 2020, China will have surpassed the United States as the largest market on the planet. HSBC says in a report that soon the Chinese consumer will be the driving force for luxury goods. The report’s authors contend that “the future is female” and describe China as the “pick-me-up” for high-end brands after the financial crisis.

Such forecasts join harder data that have hinted at the Chinese consumer’s potential. Between 2004 and 2009, the average income of the poorest 20 per cent of households surveyed by Credit Suisse doubled. For the top 10 per cent, income rose 255 per cent.

Simultaneously, a new class of super-rich is developing whose spending preferences will exert a powerful influence on the wealth layers below them. When China’s first rich list was compiled in 1999, entrants needed $6 million in financial assets to appear among the top 50 names. A decade later, you needed $150 million to make it into the top 1,000.

Gradually, a clearer picture of this new consumer is forming. Six years ago, the average Chinese household saved 26 per cent of income, but that rate has fallen relentlessly. Last year, households funnelled less than one eighth of income into savings.

Many observers focus on underlying social trends for a sense of what will determine the way in which people shop. Chinese are marrying later; the financial autonomy of women is increasing; and a younger generation has grown up under a barrage of branding and advertising. Urbanisation has created millions of consumers overnight as people stock their new homes with furniture, fridges and washing machines. Veterans of the motor industry believe it is possible that the car-ownership ratio will surpass 50 per cent in urban China within the next five years.

Urbanisation will define Chinese consumption at the high end, according to HSBC. More than 46 cities are expected to have more than two million inhabitants by the end of this year. This year Paris is set to have the same population as Hefei, the fortieth-largest city in China. Paris has five Louis Vuitton sites; Hefei, so far, has none.