While the world watches China’s slowing economy with anxiety-filled anticipation, Chinese consumers are largely optimistic and willing to spend, according to a new report released last Friday by consulting firm McKinsey.

The report, which surveyed 10,000 people across 44 cities in China, found that more than half of Chinese consumers were confident that their income would increase significantly over the next 5 years, compared with 32% of Americans and 30% of U.K consumers.

Though certain regions, such as the northeastern belt from Henan to Heilongjiang, were less optimistic, overall, McKinsey’s report shows that Chinese consumers are increasingly willing to spend their disposable income on entertainment, travel, and lifestyle services such as spa treatments and massages.

In 2015, box office revenue jumped about 50%, reaching a record amount of 40 billion yuan (about $6.16 billion USD), a sign that Chinese consumers are also happy to pay for leisurely activities such as going to the movies.

Domestic consumption will become an important pillar of China’s “new normal” economy, as the Chinese government tries to shift China towards an annual GDP growth rate of 6.5 – 7% for the next five years, the lowest in a quarter-century. According to Premier Li’s annual work report, the Chinese government will also focus on growing “emerging areas of consumption such as information goods and services, smart homes, and personalized fashion,” and work to “usher in a new era of mass tourism.”

That isn’t to say that Chinese consumers are wholly unaware of their slowing economy. As they find more ways to spend their money, while staying mindful of the need to save and invest, Chinese consumers are becoming more selective about how they spend their money. Drawing from McKinsey’s report, here are 3 things about today’s Chinese consumers that you should know about:

1. Earning Brand Loyalty Is Harder

Brand-awareness is not a new trait in Chinese consumers. In fact, they’re notorious for traveling abroad for the express purpose of purchasing brand-name luxury goods. According to a report by Bain, mainland China’s luxury goods market was worth about 113 billion RMB (about $17.4 billion USD) in 2015. Chinese consumers are also more likely to believe that higher prices correspond to better quality, compared to consumers in the U.S and Japan.

Today’s Chinese consumers are still brand-conscious, but they’re getting pickier about the brands they choose to support. According to McKinsey’s report, a growing number of Chinese consumers are narrowing their focus to just a few brands, or even a single brand.

For example, in apparel, less than 30% of Chinese consumers said they were open to considering brands outside of their “consideration list” in 2015, down from about 40% in 2011. In industries such as food and beverages, consumer electronics, and personal care, a similar trend applies. Today, Chinese consumers are less open to trying new brands, and outreach via promotions may not be as effective.

2. Personal Health Matters For Chinese Buyers

Over the past decade, various food scandals have pushed food safety to the forefront of consumer awareness in China. In 2008, for example, melamine-tainted milk powder resulted in 300,000 sickened infants and 6 infant deaths.

Despite efforts from the Chinese government, including the creation of a China Food and Drug Administration (CFDA) in 2013, consumer confidence hasn’t recovered. According to McKinsey, about “72% of Chinese consumers…worry that the food they eat is harmful to their health, up from 60% in 2012.”

In the past, concerns around food quality made Chinese consumers more careful about what they ate and where they food came from. Today, that wariness has translated directly into purchasing behavior, as unhealthy food and beverages, such as carbonated soft drinks, chewing gum, and Western fast food, have taken a hit in market penetration. Instead, more Chinese consumers are opting to buy food and drinks that are perceived as healthy, such as fruit juice.

In addition, Chinese consumers are developing more specific requirements for food safety. According to McKinsey, “‘organic/green food’ has become one of the top criteria that Chinese consumers use to identify the safety of food, with 38% of consumers mentioning this attribute among their top three criteria.”

Finally, Chinese consumers are putting their money towards preventative healthcare products, such as regular health checkups, lifestyle apps, private medical insurance, and wearables, which have exploded in recent years as domestic tech companies, such as Xiaomi, have jumped on the wearables trend. Chinese consumers are also becoming sportier with an estimated 73% of Chinese urbanites involved in some kind of sports activities, compared to about 70% of American consumers.

3. Offline Shopping Is Entertainment

Online retail is a booming market in China, with tech giant Alibaba raking in 3 trillion yuan across its different platforms, including Taobao and Tmall, in 2015. That doesn’t mean that brick-and-mortar retail establishments, such as shopping malls, are falling out of favor with Chinese consumers, however. According to McKinsey’s report, two-thirds of Chinese consumers see offline shopping as one of the best ways to spend time with their family, an increase of 21% compared to 2012.

This means that shopping malls are becoming more popular, in comparison with department stores, since they combine dining, shopping, and entertainment in one venue. Traveling, another popular way to bond with family, also centers around shopping. According to McKinsey, more than 80% of Chinese travelers made overseas purchases in 2015 and almost 30% chose their travel destination based on shopping opportunities.

For Chinese consumers, it’s clear that shopping offline is not only about purchasing products. It’s a social experience, particularly for families, and one that can be mixed with other leisurely activities. In 2015, there were more than 70 million Chinese tourists who traveled abroad.

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Eva Xiao

Eva Xiao is a tech reporter based in Shanghai. Contact her at eva.xiao@technode.com or evawxiao (wechat & twitter).

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