A social revolution will soon transform China, and multinationals that do business there can’t afford to ignore it. So far, they have mostly focused on the country’s tiny minority of urban-affluent consumers. But as more Chinese migrate to the cities for higher-paying work, they are steadily climbing the income ladder. By 2011, McKinsey research suggests, China should have a lower middle class of 290 million people; by 2025, the upper middle class will be 520 million strong, with staggering disposable wealth. For many multinationals, this is the market of the future.
Multinational companies should remember that as incomes rise, spending patterns change: food and other necessities account for a smaller proportion of household budgets, discretionary expenses such as recreation for a larger one. Meanwhile, however, tomorrow’s middle-class consumers are today’s relatively poor urban workers. By serving them now, a company can gain the experience needed to stay in the game as their incomes and tastes evolve. For more on the country’s changing consumer segments, read “The value of China’s emerging middle class” (2006 Special Edition: Serving the new Chinese consumer).
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