The free-spending younger generation is fueling China's transition from an export-led economy to one driven by domestic consumption.
Concerns about China's slowing growth rate may be overplayed, according to economists and analysts, who said long-term growth will be driven by industrial upgrades steered by changing patterns of domestic consumption and constantly rising consumer spending as a percentage of GDP.
Last year, consumer spending accounted for 65 percent of China's GDP, far higher than the 42 percent recorded a decade ago, data from the National Bureau of Statistics show. By comparison, domestic consumption accounted for about 61 percent of GDP in Japan and 68 percent in the United States.
A report released in February by Nielsen, a global market research company, showed that although last year economic growth registered its slowest rate in 26 years, consumer confidence hit a four-year high in the fourth quarter, mainly driven by optimism about job prospects and future income growth.
On Sunday, Premier Li Keqiang announced that the government was cutting the annual growth target to 6.5 percent.[Special coverage]
The modern consumer
Wang Yuan, a 27-year-old saleswoman at an electronic products store in Beijing's Haidian district, is a typical modern consumer.She recently went shopping after work at a mall a block away from her store, looking for a brightly colored dress for a Friday night matchmaking event.
"I hope I will make a good first impression," she said, holding a dress that cost 520 yuan ($75), far above her budget. Despite the cost, Wang didn't hesitate too long before deciding to buy it.
"I will try to earn more money next month. Maybe I'll find a part-time job as a waitress at a restaurant after work," she said. "I don't really mind if I am unable to save much this month－if I hadn't bought the dress I wanted, I would probably have spent the money on other things, anyway."
Born in 1989, when China was reaping the early rewards of the reform and opening-up policy, Wang's views on saving money are very different to her parents' ideas.
"I didn't save much at first because I didn't earn much. I don't think I would be happy if I copied my parents' experience－they saved carefully for several decades, but did not end up becoming richer," she said.
Her mindset reflects the changes in China's macro consumption story in recent years. The younger generation has become a leading force in the ever-growing role of consumption as a driver of economic growth, one that will power China's economy for decades to come, according to analysts.
'New generation'
People born in the 1980s, estimated to number about 210 million, have become the biggest consumer group, accounting for 16 percent of consumers nationwide, followed by those born in the 70s, 90s, and 60s, the Nielsen report said.
Moreover, according to report by analysts at Morgan Stanley called "Why we are bullish on China", published in February, these "new generation" consumers generally spend more than the pre-1980s generations, who experienced much harsher living conditions.
Morgan Stanley expects consumer spending to reach $9.7 trillion by 2030, from $4.4 trillion last year, and people will spend a greater proportion of their incomes on healthcare, hotels and catering, household goods and services."China is already on the track of a gradual transition toward a consumption- and services-led growth model," the analysts wrote, in an emailed response to questions from China Daily about the sustainability of consumer-led growth.
