Middle Class in China
MARKETING
China Foto Press
Understanding China’s Middle Class
Targeting key segments of China’s diverse and rapidly emerging middle class will be crucial as household incomes rise
Allison Cui and Kheehong Song
G
one are the days when companies looked at China as a monolithic land of 1 billion potential customers. Companies are now focusing on how to capture small segments of China’s giant market, and none of these segments is as attractive or as full of potential as the country’s rapidly growing—and multifaceted—middle class. As China’s economy continues to grow, more people will migrate to China’s booming metropolises to find better-paying jobs. These working consumers, once among the country’s poorest, will steadily climb the income ladder and
38 January–February 2009 chinabusinessreview.com
join the new middle class. Companies that can effectively understand the composition and needs of this diverse group will be positioned to reap massive rewards.
Why the middle class?
Though many foreign companies have remarked on the importance of China’s middle class as a consumer segment, few realize just how dramatic its ascendance is. From 1995 to 2005, the population of China’s middle class—defined here as households with annual incomes ranging from
MARKETING
$6,000 to $25,000—grew from close to zero in 1995 to an inexpensive racket in a sports stadium or shop near school. estimated 87 million in 2005, according to MasterCard Professionals and businesspeople, however, usually play Worldwide, Asia Pacific. China’s middle class will jump to badminton in indoor badminton clubs, gyms, or stadiums. 340 million by 2016 (see Figure 1). The purchasing One of the major reasons they play badminton is to make power—disposable income minus savings—of China’s midfriends or develop business relationships. They are aware of dle class is also growing. In 2006, around 39 percent of racket brands and wear professional sportswear to display urban households were
China Foto Press
Understanding China’s Middle Class
Targeting key segments of China’s diverse and rapidly emerging middle class will be crucial as household incomes rise
Allison Cui and Kheehong Song
G
one are the days when companies looked at China as a monolithic land of 1 billion potential customers. Companies are now focusing on how to capture small segments of China’s giant market, and none of these segments is as attractive or as full of potential as the country’s rapidly growing—and multifaceted—middle class. As China’s economy continues to grow, more people will migrate to China’s booming metropolises to find better-paying jobs. These working consumers, once among the country’s poorest, will steadily climb the income ladder and
38 January–February 2009 chinabusinessreview.com
join the new middle class. Companies that can effectively understand the composition and needs of this diverse group will be positioned to reap massive rewards.
Why the middle class?
Though many foreign companies have remarked on the importance of China’s middle class as a consumer segment, few realize just how dramatic its ascendance is. From 1995 to 2005, the population of China’s middle class—defined here as households with annual incomes ranging from
MARKETING
$6,000 to $25,000—grew from close to zero in 1995 to an inexpensive racket in a sports stadium or shop near school. estimated 87 million in 2005, according to MasterCard Professionals and businesspeople, however, usually play Worldwide, Asia Pacific. China’s middle class will jump to badminton in indoor badminton clubs, gyms, or stadiums. 340 million by 2016 (see Figure 1). The purchasing One of the major reasons they play badminton is to make power—disposable income minus savings—of China’s midfriends or develop business relationships. They are aware of dle class is also growing. In 2006, around 39 percent of racket brands and wear professional sportswear to display urban households were