Just as important has been the changing consumption behavior towards higher quality, lifestyle-related spending. This has driven significant growth in the Chinese population’s spending on technology, now over 12% of the World’s total and second only to the US.5 We are also starting to see the emergence of home-grown brands that are increasingly competitive on the global stage, further supporting the Chinese economy’s transition toward higher value-add manufacturing. Companies and component-makers in industries such as smartphones, robotics, and drones have been gaining market share, leading to stronger brand recognition and pricing power. We are also seeing this growth in industries supported by global secular growth trends, such as electric vehicles, solar panels, factory automation, lithium battery manufacturing and pharmaceuticals.
Rapid innovation has also occurred in reaction to changing consumer habits and values. As mentioned in previous Viewpoints, this phenomenon has been accelerated by the rising wealth of the millennial cohort. Aided by more tech-savvy consumers, cutting-edge mobile payment systems and almost universal internet access, online sales in China have been rapidly accelerating – last year online retail grew by 36%, compared to offline sales growth of just 6%.6 This has left Chinese e-commerce penetration at over 30% of total retail, compared to less than 15% in the West.7 We expect this phenomenon to continue as Chinese government continues to focus on a gradual transition to a more consumer-orientated economy.