Huge 'grey yuan' spend predicted

PUBLISHED : Thursday, 24 February, 2011, 12:00am
UPDATED : Thursday, 24 February, 2011, 12:00am

The future belongs to the young, but the world's second-largest economy expects a bonanza in services and products involving wheelchairs, prostheses and nursing homes for the elderly.

The mainland's elderly population will reach 200 million, or 15 per cent of the total, by the end of 2015, according to the Li & Fung Research Centre, which has been studying consumption and commercial trends there.

Centre managing director Chang Ka-mun said elderly consumers' spending power had huge growth potential. He said growth in household consumption had not kept pace with the growth in gross domestic product over the past decade because consumers wanted to save money.

This partly reflected the poor social security system. The government had also made domestic consumption a relatively low priority.

'Net export, investment and consumption are the three main economic drivers, but China shifted towards export-oriented policies in 2000,' said Chang.

The research found that the mainland's greying population could represent of one of the fastest-growing segments because spending by the elderly was expected to rise more than threefold to an estimated 4.3 billion yuan by 2020 from 1.4 trillion yuan last year.

'Today's senior citizens are different from the past. They have a lot of spending power,' said Chan. 'But the market is relatively new and has a lot to improve.'

About 90 per cent of elderly people surveyed were not satisfied with present products and services, according to the China National Committee on Age.

Another area expected to deliver strong growth is online retail business. Li & Fung's study showed that there is a growing trend for online shopping operators to invest in their own logistics and shipping facilities.

For example, shopping website 360 Buy handles 70 per cent of its own shipments.

Traditional retailers are also responding to growth in the online market.

According to the China Chain Store and Franchise Association, 31 of the mainland's top 100 retailers had launched shopping websites by 2009.

The value of online shopping transactions reached 498 billion yuan last year, up 89.4 per cent year on year, according to iResearch, a consulting group on internet media.

Analysing consumption by region, Beijing's 'go west' plan to spur the development of western regions seems to be delivering changes, with increased consumption. But coastal regions still spent more in absolute terms, said Helen Chin, Li & Fung research manager.

Tibet, Sichuan, Shaanxi and Yunnan have seen some of the fastest growth in retail sales of consumer goods, but Guangdong, Shandong and Jiangsu spent the most on consumption, at 3.87 trillion yuan in 2009, according to the National Bureau of Statistics.