China’s Domestic Consumer Market in 2020

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By Matthew Zito and Eunice Ku, Dezan Shira & Associates

SHANGHAI – Domestic consumption, particularly among the middle class, is expected to be a major factor in the US$4 trillion of growth forecasted for the Chinese economy over the next decade. Rising wage costs in China may be prompting companies to relocate their manufacturing operations elsewhere, but few are leaving the country entirely—opportunities for growth in the domestic consumer market are simply too lucrative to pass up. Below, we forecast what China’s consumer market will look like in 2020, by which point China will have surpassed the U.S. as the world’s biggest economy, with an estimated gross domestic product of RMB 100 trillion (US$16 trillion). Long before then, China is predicted to become the world’s largest retail market by 2016, at a value of around US$4.2 trillion.


Trends among Chinese consumers will largely follow those seen in the economic booms of Japan, Korean, and Taiwan. Chinese consumers today are richer, more urbanized, better educated, more upwardly mobile, and more willing to postpone life stages than they were twenty, or even ten, years ago, and these trends are only set to continue. In regards to household wealth, for example, by 2020 the share of urban households earning $16,000 a year or more will have grown to 57 percent from 8 percent in 2012. 2020 also happens to be a benchmark in China’s massive urbanization campaign of moving 250 million rural residents into its cities over the coming decade.

The demographic dividend that helped usher in China’s rapid economic transformation will have spent itself by 2020, resulting in a much older Chinese population overall. Five percent more of the Chinese population will be above the age of 65 than at present—an additional 126.5 million people. However, this group will have spent their prime working years during China’s economic reform period, which should be expected to significantly inform their purchasing behavior. While the Chinese virtue of frugality will continue to play a role in consumption habits, a growing trend of using consumption to fulfill one’s emotional needs and express individuality has been documented by McKinsey.


Certain industries are poised to boom in light of the coming economic and demographic shifts in Chinese society and thus represent the brightest opportunities for foreign investment:

E-commerce—For several years, e-commerce in China has been one of the most-watched markets in the world, with predictions valuing the industry as being worth more by 2020 than e-commerce in the U.S., the U.K., Japan, Germany, and France combined. At present, cosmetics represent one of the most commonly made online purchases by Chinese consumers, followed by women’s shoes and apparel, and accessories and bags. The Chinese government plans to connect 1.2 billion people (85 percent of the population) to high-speed mobile internet by 2020.

Beauty and personal care—A BCG survey found that the Chinese are the world’s most health-conscious consumers, placing high premiums on looking and feeling good. Overall, the health and wellness market is expected to reach nearly $70 billion by 2020, with more and more Chinese buying supplements and over-the-counter health treatments to relieve the stresses of a modern lifestyle. Notably, this is one industry in which e-commerce has yet to close the gap with traditional in-store purchasing, but can be expected to do so in the coming years.

Automotive—Already the world’s largest automobile market, China is on track for strong sales growth concentrated in the tier-two and tier-three cities of the country’s interior, even as the megacities of the east coast reach saturation. It is estimated that by 2020 some 30 million cars will be sold annually in China. The country will surpass the U.S. well before 2020 as the largest market for luxury cars. The aftersales sector will also maintain strong growth, including for spare parts, services, used car sales, and financing.

Luxury goods—As the ratio of middle-class and affluent Chinese expands, the luxury goods market will grow apace through 2020. Already by 2013, Chinese consumers accounted for 47 percent of global luxury good sales, spending about US$102 billion for the year. Today the strongest market sectors are watches; cosmetics, perfume and personal care products; and leather bags. While the use of e-commerce platforms for buying luxury goods remains somewhat limited in this respect, by 2020 this is likely to be much more common.

This article is an excerpt from the July-August 2014 edition of China Briefing Magazine, titled “Adapting Your China WFOE to Service China’s Consumer.” In this issue, we look at the challenges posed to manufacturers amidst China’s rising labor costs and stricter environmental regulations. Manufacturing WFOEs in China should adapt by expanding their business scope to include distribution and determine suitable supply chain solutions. In this regard, we will take a look at the opportunities in China’s domestic consumer market and forecast the sectors that are set to boom in the coming years.

Asia Briefing Ltd. is a subsidiary of Dezan Shira & Associates. Dezan Shira is a specialist foreign direct investment practice, providing corporate establishment, business advisory, tax advisory and compliance, accounting, payroll, due diligence and financial review services to multinationals investing in China, Hong Kong, India, Vietnam, Singapore and the rest of ASEAN. For further information, please email or visit

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