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Chinese Consumer Sentiment Improving, Driven by MACs in Smaller Cities

BCG Study Finds Chinese Consumers Cautiously Optimistic; Middle-Class and Affluent Consumers From Smaller Cities Will Spend More Across the Board, While Those in Bigger Cities Will Spend at Higher Prices in Fewer Categories

HONG KONG, CHINA -- (Marketwired) -- 07/22/14 -- After dipping last year, Chinese consumer sentiment has improved and in smaller cities has even bounced back, according to a new article from The Boston Consulting Group (BCG). The article, titled "Chinese Consumers: Increasingly Optimistic but Also Realistic," is being released today. It offers insights into the way Chinese consumers plan to spend as the country's economy stabilizes.

BCG's Center for Consumer and Customer Insight (CCCI) surveyed 1,000 people in 12 cities and found that consumers feel more optimistic and secure, while also accepting that economic growth is leveling off. "Last year was the first time in recent history that more Chinese consumers wanted to cut spending than to increase it. This year, the balance has shifted back. The number of consumers who plan to spend more money in the coming year exceeds the number who plan to spend less," said Youchi Kuo, an expert principal at BCG and a coauthor of the report.

The improvement in sentiment is driven by middle-class and affluent consumers (MACs) from smaller cities, where people intend to spend more money on more things. "Last year, small-city MACs were feeling the hit of the Chinese government's anticorruption campaign, which caused cancellation of subsidies and reduced discretionary spending," said Jeff Walters, a BCG partner and report coauthor. "However, people have adjusted, and sentiment has returned to previous levels."

In bigger cities, sentiment continues to deteriorate, but the intention to spend is strong in certain categories. Big-city MACs have become more cautious and selective when it comes to where they spend. They are saving their money for big purchases such as cars, houses, and education, and they are valuing quality over quantity. They are willing to spend even more than before on high-priority categories but are no longer interested on trading up in nonessential categories like packaged food and beverages and entertainment. These categories may see slower growth in big cities. Opportunity remains for them, however, in smaller cities.

The article concludes that the road ahead will be bumpier than in the past, but growth opportunities still exist in some consumer segments. To capture them, companies will need to act swiftly in response to the changing dynamics across small and big cities.

A copy of the article can be downloaded at www.bcgperspectives.com.

To arrange an interview with one of the authors, please contact Eric Gregoire at +1 617 850 3783 or [email protected].

About The Boston Consulting Group
The Boston Consulting Group (BCG) is a global management consulting firm and the world's leading advisor on business strategy. We partner with clients from the private, public, and not-for-profit sectors in all regions to identify their highest-value opportunities, address their most critical challenges, and transform their enterprises. Our customized approach combines deep insight into the dynamics of companies and markets with close collaboration at all levels of the client organization. This ensures that our clients achieve sustainable competitive advantage, build more capable organizations, and secure lasting results. Founded in 1963, BCG is a private company with 81 offices in 45 countries. For more information, please visit bcg.com.

About BCG's Center for Consumer and Customer Insight
The Boston Consulting Group's Center for Consumer and Customer Insight (CCCI) applies a unique, integrated approach that combines quantitative and qualitative consumer research with a deep understanding of business strategy and competitive dynamics. The center works closely with BCG's various practices to translate its insights into actionable strategies that lead to tangible economic impact for our clients. In the course of its work, the center has amassed a rich set of proprietary data on consumers from around the world, in both emerging and developed markets. The CCCI is sponsored by BCG's Marketing and Sales and Global Advantage practices. For more information, please visit www.bcg.com/expertise_impact/capabilities/center_consumer_customer_insight.

About bcgperspectives.com
Bcgperspectives.com features the latest thinking from BCG experts as well as from CEOs, academics, and other leaders. It covers issues at the top of senior management's agenda. It also provides unprecedented access to BCG's extensive archive of thought leadership stretching back 50 years to the days of Bruce Henderson, the firm's founder and one of the architects of modern management consulting. All of our content -- including videos, podcasts, commentaries, and reports -- can be accessed by PC, mobile, iPad, Facebook, Twitter and LinkedIn.

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