Guangdong resident Stephen Yao used to take more than 20 overseas trips a year to buy properties for wealthy Chinese clients in popular tourist destinations like Kyoto, Bangkok, Pattaya and Kuala Lumpur.
But the coronavirus pandemic brought an abrupt halt to his business, with his last overseas trip in March 2020. Unable to travel abroad due to border closures, the 46 year old and his middle-aged clients left their overseas properties vacant or rented them at rock bottom prices.
Despite few signs of China loosening its travel restrictions, Yao is still hoping to restore his dream life: Freedom to travel, global investment and retirement abroad — common aspirations for middle-class Chinese born in the 1970s.
“People born in the 1960s and 1970s are still eager to return to the pre-pandemic life, travelling and investing abroad, once the pandemic is over, but such an idea is waning among the younger generation,” said Yao.
More patriotic and career focused, many young middle-class Chinese are likely to concentrate on building wealth at home.
Jay Li, who is in his 20s and runs an e-commerce business, spent three million yuan (S$642,000) decorating his 90-square-metre flat in Guangzhou.
“Luxurious home design and a modern art collection are more fun and they are a better means to store value,” he said. “Buying a 30-square-metre condo in a Southeast Asian country for 500,000 to 800,000 yuan does not sound cool at all to me.”
Li’s sentiment will be music to the ears of China’s leadership, which launched its “dual circulation” strategy with the goal of shifting the focus of economic development to the domestic market and unleashing the spending potential of the world’s largest middle-income group.
Many Chinese millennials and Generation Z made their first pot of gold from domestic investments in e-commerce, online entertainment and gaming, Yao said, adding the attitudes towards consumption are changing between generations of wealthy Chinese.
Though they are interested in overseas travel if border controls are removed, millennials see less of a need to buy foreign property or live overseas, Yao said.
“Those born in the 1970s and 1980s have benefited from globalisation, which in turn has prompted them to diversify investment offshore to ensure security of their wealth,” Yao said.
“But the younger generation of new money do not share this eagerness. They prefer to focus on domestic consumption and investment because they think their assets are safer and more controllable in China.”
Yao’s opinion is echoed by the 2021 White Paper on the New Middle Class released by Wu Xiaobo Channel, one of China’s leading independent financial media companies.
It concluded that middle-class Chinese aged 40 and above mainly pursue global asset allocation and are interested in immigration, medical care, retirement and wealth preservation. Meanwhile, middle-class Chinese in their 20s and 30s are more focused on education, careers and wealth appreciation, with asset allocation concentrated domestically.
The average pre-tax annual income of wealthy middle-class families is 660,000 yuan, with an average household net worth 4.96 million yuan, according to the white paper. Properties accounted for on average 56 per cent of wealth.
More than 60 per cent of these upper middle-class Chinese are employed in four industries: Internet, manufacturing, finance and real estate. About 29 per cent do not have a mortgage, but for those that do, the average household debt is 1.47 million yuan.
Nineteen per cent have sideline jobs and 41 per cent plan to start their own business or freelance in the future.
Belle Liang, who runs Hainan Wakesurf Paradise in Sanya city in Hainan province, said domestic spending by young affluent Chinese has fuelled new business on the tropical island.
“More than 50 surfing clubs have been newly set up in Sanya and Wanning since July 2021.
“They all are lured by the rise of new domestic consumption, such as surfing and skiing … which has been partly been promoted by domestic celebrities, online influencers and various TV shows over the past couple years.
“In the past, people born in the 1980s liked to show off which countries they have been to, while nowadays Generation Z loves to discuss which domestic surf club or ski resorts they have been to.”
Liang said visitors might spend about 10,000 to 30,000 yuan each trip.
China’s Generation Z population was about 260 million in 2020, with cumulative expenditure around four trillion yuan, accounting for about 13 per cent of national household expenditure, according to the 2020 Generation Z Consumer Attitude Insight Report released by CBNData.
Not only is this group willing to spend more at home, but they have far more local brands to splurge on than previous generations.
Li Bingyue, an operations director at a Guangdong-based online group-shopping platform, has seen members jump to more than three million since the first Covid-19 outbreak two years ago. Most are middle-class women in first- and second-tier cities.
“Unlike the early days when everyone was keen to buy overseas products, we now find a narrowing gap in users’ preferences for domestic and foreign brands, mainly due to pandemic controls,” Li said.
“The younger the users are, the more interested they are in trying new trendy domestic brands. And for those in their 30s and 40s, take myself for example, I used to travel to Hong Kong and Japan to purchase most of my daily necessities — milk powder, toothbrushes, shampoo, vitamins — but now I have turned to domestic mid- and high-end brands and I find the quality is not bad.”
This article was first published in South China Morning Post .
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