China's middle class is creating a new wave of wealth, with around 20 per cent of the country's population expected to join the affluent class by the year 2020.
A study by the US's Boston Consulting Group, titled The Age of the Affluent: The Dynamics of China’s Next Consumption Engine, shows that with annual household disposable incomes of at least $20,000, the affluent are set to become a key growth driver, especially for premium products and services. (For a recent article on this, click here.)
The affluent are those who are richer than members of the middle class, but not as wealthy as the super rich. At present, there are around 120 million affluent individuals in China with an annual buying power of $590 billion.
By 2020, BCG predicts that this group will reach 280 million, comprising 35 per cent of China's urban population or 20 per cent of the total population. This also translates to around 5 per cent of global consumption.
"Reaching the affluent is important not only because of their sheer numbers but also because they have the financial resources and willingness to purchase premium goods and services," said Vincent Lui, a partner at Boston Consulting Group and co-author of the report.
In addition, the annual buying power of the Chinese affluent is touted to reach $3.1 trillion by 2020. This is almost equivalent to Japan's total consumption in 2020, 28 per cent more than Germany's and thrice more than South Korea's.
The businesses most poised to expand are those with differentiated offerings, such as cars, overseas travel and luxury goods.