Dynamics of Chinese consumption
image by Allen Liu on Flickr

China’s luxury market provides a sneak preview in the changing dynamics of Chinese consumption spending. The relationship between rising income and luxury consumption is not one-dimensional: rather, luxury consumption spending is influenced by a broader set of factors.


  • Chinese millennials are the biggest purchasers of luxury items in Asia-Pacific, spending $4,362 yearly on luxury goods. This is double the average in Asia-Pacific ($2,584).
  • The consumption growth rate of Chinese millennials between 2015 and 2020 is 14%, compared to a national average of 9% and a 7% growth rate for Chinese aged 36 and above.
  • In contrast to the under-indexed consumption spending on ‘fun related activities’ we discussed last week, Chinese consumption spending is over-indexed on ‘looking more beautiful’, consisting of the luxury consumption categories ‘clothes and footwear’, ‘cosmetics and personal care’ and ‘jewelry’.
  • China scores high on Geert Hofstede’s cultural dimension of power distance (score 80), meaning that the Chinese believe that socio-economic inequalities amongst people are acceptable. Furthermore, China can be considered to be a masculine society (score 66), meaning that society is driven by competition, achievement and success.
  • A time-series analysis in the World Value Survey shows that the Chinese increasingly adopt ‘post-material’ values between 1999 and 2014, like quality of life or ecological well-being.


China has a tough social hierarchy compared to Western societies. Furthermore, in the West people identify themselves from the perspective of the ‘independent self’, interpreting success and achievement in terms of personal effort and talents and consumption as an expression of one’s personality and individuality. In China the Confucian perspective of the ‘interdependent self’ is dominant, crediting achievement and success for a larger part to the circumstances and relationships in which individuals are embedded, and in which consumption should fit one’s social instead of personal standing. Therefore, luxury consumption is a dominant social sign in China’s masculine society.

The ‘traditional’ perception of luxury consumption is changing, as Chinese millennials seem to hold different values and a less Confucian worldview.

However, this ‘traditional’ perception of luxury consumption is changing, as Chinese millennials seem to hold different values and a less Confucian worldview. This change manifests itself in different luxury consumption preferences between Chinese generations. For example, older Chinese generations prefer shopping and grouporganized tours when travelling abroad, while Chinese millennials prefer independent travel, focusing on unique and authentic travel experiences. Another example is China’s car market, where traditional car ownership is losing its appeal as cars no longer primarily function as status symbols but as a growing part of Chinese car consumers consider co-owning and car-sharing services viable alternatives to traditional car ownership.

A case study in Hangzhou shows that Chinese millennials more often use car-sharing services (besides age, income and education were significant determinants as well). In food and beverage Chinese millennials are more worried about health, consequently spending more on healthy juices compared to carbonated soft drinks (as well as chewing gum, ice cream and Western fast-food). Lastly, almost three-fourth of Chinese millennials are willing to pay extra for sustainable products, compared to just over 50% of Chinese baby boomers.

Chinese demand for luxury consumption products can be expected to rise in the future as Chinese middle class income continues to rise. But the examples show that Chinese millennials, who have higher disposable incomes and are more urban, tech-savvy and higher educated, will reshape China’s luxury demand. Apart of solely having a status function, luxury consumption products must reflect their personality and individuality besides basic-valuefor-money of consumption products. This is apparent from the fact that Chinese millennials are more brand loyal and are more concerned about environmental issues. As luxury consumption trends are considered forerunners of China’s main consumer market, understanding Chinese millennials’ worldview and values might provide an insight in Chinese future consumption preferences.