(Yicai Global) Dec. 8 -- This year has been one of consumer resilience in China, and next year will continue along the same lines, according to a new report released by McKinsey.

The 2023 McKinsey China Consumer Report is based on a survey of 6,700 Chinese consumers conducted in July, picking out key consumption trends in 2022. 

China’s upper-middle and high-income consumers accounted for 55 percent of urban household consumption in 2021, and the segment continues to grow. Households with income of over CNY160,000 (USD21,800) grew 18 percent annually from 2019 to 2021, rising to 138 million from 99 million.

By 2025, another 71 million households could enter this higher-income bracket, underscoring the vibrant potential of China’s consumer market, the report said.

People with high incomes tend to spend more and 26 percent of respondents increased their outlays this year, while 14 percent spent less, 4 percentage points down on 2019. 

But consumers are spending in a more conservative way. Without hiking spending, consumers tended to reduce their purchase frequency and changed preferences rather than switching to cheaper brands or products. This was facilitated by the brands available, particularly domestic ones, which have upped their game and offered more widely differentiated products.

Chinese consumers are becoming much savvier about what they buy, according to the report, with the importance of functionality increasing again, having lost some ground to emotional factors between 2015 and 2019. 

The survey indicates that 49 percent of Chinese consumers think domestic brands are of “better quality” than foreign brands, versus 23 percent who believe the converse is true. This tendency has translated into consumers increasing their purchases of local brands over the past few years.

Editor: Tom Litting