Pocket money of 'little emperors' offers engine for growth

Mainland children of well-off families get billions in allowances, and domestic and foreign firms are looking to tap into that

PUBLISHED : Saturday, 26 January, 2013, 12:00am
UPDATED : Saturday, 26 January, 2013, 4:48am

The 50 million "little emperors and empresses", the children of mainland middle and upper-class households, have emerged as a strong force in consumer spending as their parents and grandparents shower them with generous pocket money.

A report by the market intelligence consultancy Mintel found that more than nine in 10 children born to well-to-do mainland families received pocket money, with one in seven given more than 500 yuan (HK$617) each month.

The pocket money, amounting to several hundred billion yuan a year, is expected to help support the mainland's consumer market at a time when developed economies are still dealing with the fallout from the global financial crisis of 2008. The Economist Intelligence Unit (EIU) and Mintel predicted this week that consumer spending in China would grow at an annualised 15 per cent between 2013 and 2016.

Jon Copestake, a consumer analyst at the EIU, a sister company of the Economist magazine, said: "Understanding the trends and opportunities in the market is essential for any business looking to invest in China in the next four years."

The cash-rich and free-spending "little emperors and empresses", all aged under 16, are a result of the mainland's one-child policy and doting parents and grandparents.

Their families have household incomes of at least 15,000 yuan a month in first-tier cities, or at least 10,000 yuan in lower-tier cities, according to Mintel.

Zhang Jiyong, a senior accountant, said: "I am fully aware that my son will get spoiled as we spend so much money and time on him, but it's just difficult to stop ourselves from doing so. Because of the one-child policy, the whole family pins all the hopes on the kid."

In Shanghai, an average family would spend as much as 3,000 yuan a month on kindergarten fees or 2,000 yuan on English lessons.

Increasing, consumer demand from the children is seen as a new growth engine for domestic and foreign firms to tap further into the mainland market. A report jointly compiled by Mintel and the EIU found that, amid rising household incomes, Chinese consumers were shifting from commodity foods to prepared food.

Peter Ayton, a global consumer analyst with Mintel, said: "In China, there is still huge potential migration of unpacked food to packaged products."

Laundry detergent and prepared food are expected to record the fastest growth over the next few years in China, the report said.

China has been leading growth in the global consumer market in recent years thanks to white-collar employees' rising income. Chinese shoppers became the biggest spenders in the global luxury market last year. The global consultancy Bain & Co reported that Chinese shoppers, including those from Hong Kong and Macau, accounted for more than a quarter of worldwide luxury consumption, estimated at around US$145 billion.