Asian Demographics LtdChina Contents page 1 China A detailed report on the demographic and socio-...

1Asian Demographics Ltd ChinaContents page

China

A detailed report on the demographic and socio-economic changes projected to occur in China

between 2003 and 2023.

Copyright: Asian Demographics Ltd 2003Released December 2003

Asian Demographics Ltd

ForecastAsia


About Asian Demographics Ltd

Asian Demographics specializes in the collection and analysis of demographic data to provide a perspective of the demographic future of Asia. Asian Demographics is able to provide unique and insightful reports on the demographic trends of Asia and their implications for consumer products and services by combining in-house statistical skills and knowledge of the consumer markets of Asia with its unique data bases. Econometric style models have been built using the in-house databases which cover all the major countries of Asia and extend back 30 years covering a wide range of demographic and socio-economic series, harmonized to enable comparison between countries.

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Significant Trends

Total Population– Currently 1.279 billion persons– largest population in Asia.– Projected to stop growing in 2014 and by

2023 the total will be 1.282 billion.– Population will peak in 2014 at 1.3 billion

Age Profile– Rapidly declining total births per annum

and increased life span shifts age profile.– By 2023 population ‘bulge’ moves from

being under 15 to 39 years to 35 to 55 years.

– between 2003 and 2023. • Under 15s decline at 3.4% pa• 15 to 24 years decline at 3.5% pa• 25 to 39 year decline at 0.7% pa• 40 to 59 year grows at 1.7% pa• 60+ grows at 3.9% pa

– Significant implications for next two decades as very substantial decline in the youth population means:

• Significantly fewer women of child bearing age and rapid decline in total births

• Lack of growth in labour force.

Life cycle Stages– In 2003 ‘young singles’, Young married

with no children’ and ‘Married with a child account for over 75% of adults.’

– However, growth stages are all the older stages.

– As a result by 2023 Working age and retired empty nesters will be 44% of adults and the younger groups will have declined to 43% of adults.


Significant Trends

Urbanization– 40.2% of population is in urban areas in

2003. With improving education this will increase to 57.2% by 2023.

– This is 11 million additional urban dwellers each year

– Migrant labour from other areas is an issue and in 2003 accounted for 30% of Beijing’s populations and 20% of Shanghai.

– Overall migrants are about 10% of populations.

– Provincial capitals are particularly important economically. In 2003 they are 9% of the total population but account for 31% of earned income.

The Household– Total households growing at 1.1% pa 2003

to 2023– Households size declines from 3.31 to 2.7

persons in same period.– Households with more than 5 persons are

declining in number. Smaller households are where growth is.

– There will be more urban households than rural households after 2010.

Education– Rapidly improving.– Proportion with Secondary or better

projected to grow from 57% in 2003 to 76% in 2013

– Number of tertiary educated persons in the population is growing at 5% pa 2003 to 2023.

– Number of school age children declining by 11 million pa between 2003 and 2013.


Significant Trends

Labour Force– Grows at 0.7% pa to 2009 when it peaks at

785 million. Then declines at -0.76% pa through to 2023.

– Agriculture declining in absolute number.– Skilled white collar sector grows at 2% per

annum in next decade but declines at -0.1% for the subsequent decade.

– Skilled white collar occupations projected to grow from 30% of labour force in 2003 to 39% by 2023.

Labour Force Impact on GDP– Productivity per worker will grow by a

larger absolute amount, but slower rate.– That combined with slower labour force

growth means total GDP growth will average 5.2% per annum to 2013.

– GDP per capita will average 5.0% pa for the same period.

Urban Households Income and Expenditure

– Average in 2003 is Rmb 26,370– Projected to increase to Rmb 35,028 in

2008 and Rmb 41,803 by 2013.– US$ values are 3,185, 4,234 and 5,049– Represents 5.9% growth pa to 2008 and

3.6% for 2008 to 2013.– Top quintile in 2003 is earning over Rmb

34,378 (US$4,152) and above– Number of households earning more than

that will grow at 17.8% pa to 2008– Average household spends 76% of income.– Total expenditure of all urban households

projected to grow at 7.6% pa to 2013. Savings will grow at 9.3% pa over same period.

– Top quintile accounts for 34% of all household expenditure in 2003.

– Housing, clothing and Food account for 62% of average household’s total expenditure (57% of top quintile’s expenditure).


Significant Trends

Rural Households Income and Expenditure

– Average in 2003 is Rmb 11,167– Projected to increase to Rmb 12,915 in

2008 and Rmb 14,556 by 2013.– US$ values are $1,349, $1,560 and $1,758– Represents 2.7% growth pa.– Top quintile in 2003 is households earning

over Rmb 14,803 (US$1,788) and above– Number of households earning more than

that will grow at 6.8% pa to 2008– Average household spends 65% of income.– Total expenditure of all rural households

projected to grow at 1.2% pa to 2013. Savings will grow at 4.2% pa over same period.

– Top quintile accounts for 36% of all household expenditure in 2003.

– Housing and Food account for 75% of average households total expenditure (67% of top quintile’s expenditure)


Summary Contents

Population 15

Lifecycles Stages 40

The Household 44

Education 53

The Labour Force 58

Labour Force and the Economy 64

Household Income and Expenditure 70Urban 75Rural 90


Table of ContentsThe Population 15

Total population growth rates 16Long term population projection: 2050 17Growth relative to Asia 18Comparative age profiles

2003 to 2008 192003 to 2013 202003 to 2023 21

Relative importance of age segments 22Average age relative to Asia 23Propensity to have children and

females of child bearing age 24Trend in total births 25Segment size trends

0 to 14 yeas olds 26Value of 0 to 14 yr olds 2715 to 24 year olds 28Value of 15 to 24 yr olds 2925 to 39 year olds 30Value of 25 to 39 yr olds 31

40 to 59 year olds 32Value of 40 to 59 yr olds 3360 + year olds 34Value of the 60 yrs + Market 35Urbanization 36Urban Migration 37Importance of Provincial Capitals 38Working age population 39

Lifecycle Stages 40Changing size of lifecycle stages 41Projected growth rates 42Lifecycle profile of key age segments 43

The Households 44Total number of households and

associated growth rates 45Growth relative to Asia 46Profile of households by size 47Age profile of householders 48


Table of ContentsProportion of households with

children 49Trend in average household size 50Estimated number of urban and

rural households 51Total number of households and

associated growth rates 52

Education 53Education profile of persons 15 yrs + 54Education profile relative to Asia 55Number of persons with post-

secondary qualifications 56Number of school age children 57

The Labour Force 58Size and growth of the employed

labour force 59Growth rate relative to Asia 60Trend in propensity to work 61Changing occupation profile 62Changing size of key occupation

groups in the labour force 63

Labour Force and the Economy 64Trend in gross productivity perlabour unit and size of labour force 65Implications for real GDP growth 66Implications for real GDP per capita 67US$ GDP per capita relative to

the Asia region 68Dependents per employed person 69

Household Income 70Trend in average urban and

rural household income 71Growth rates in average urban and

rural household incomes 72Comparative Distributions of Urban

and rural households: 2003 73Is the data reliable 74

Urban Household Income and Expenditure 75Changing shape of the distribution

1995 to 2013 76


Table of Contents

Projected distribution by Quintiles

Rmb values 77US$ values 78

Sensitivity to 1% variation in real total GDP growth rate 79

Sensitivity of top quintile to 1%change in GDP growth rate 80

Urban Household Expenditure Patterns 81Average propensity to spend 82Implications for absolute amount

spent and saved 83Total Expenditure and savings of

all households 85Average pattern of expenditure per

household 86Trend in average absolute expenditure

per household 87Relative importance of quintiles 88Expenditure pattern by quintile 89

Rural Household Income and Expenditure 90Changing shape of the distribution

1995 to 2013 91Projected distribution by Quintiles

Rmb values 92US$ values 93

Sensitivity to 1% variation in real total GDP growth rate 94

Expenditure of Rural Households 95Average propensity to spend 96Implications for absolute amount

spent and saved 97Total Expenditure and savings of

all households 99Average pattern of expenditure per

household 100Trend in average absolute expenditure

per household 101Relative importance of quintiles 102Expenditure pattern by quintile 103


Summary StatisticsAverage Growth Rate per annum

1998 2003 2008 2013 2023 1998 to 2003 to 2008 to 2013 to 2003 2008 2013 2023

The Population

Total Population (persons 000s) 1,242,661 1,278,885 1,292,785 1,299,758 1,282,831 0.6% 0.2% 0.1% -0.1%

0-14 yrs (000s) 307,945 244,168 188,966 157,640 122,058 -4.5% -5.0% -3.6% -2.5%15-24 yrs (000s) 201,645 223,513 229,081 184,211 109,932 2.1% 0.5% -4.3% -5.0%25-39 yrs (000s) 346,838 352,197 328,098 321,734 305,024 0.3% -1.4% -0.4% -0.5%40-59 yrs (000s) 263,753 315,272 379,078 421,620 438,985 3.6% 3.8% 2.2% 0.4%60+ yrs (000s) 122,480 143,735 167,562 214,554 306,832 3.3% 3.1% 5.1% 3.6%

Number of births pa (000s) 14,923 11,298 10,189 9,166 6,262 -5.4% -2.0% -2.1% -3.7%

Females aged 15 to 49 yrs (000s) 345,942 366,869 377,701 363,065 291,375 1.2% 0.6% -0.8% -2.2%Births per 000 females 15 to 49 yrs 43 31 27 25 21 -6.1% -2.8% -1.6% -1.7%

Total Deaths per annum 7,880 7,389 7,587 8,056 10,257 -1.3% 0.5% 1.2% 2.4%

Net Natural Population Change 7,043 3,909 2,602 1,109 -3,995 -11.1% -7.8% -15.7%

Percent Urban 33.4 40.2 44.7 49.0 57.2

HouseholdsTotal Number of Households (000s) 338,571 385,905 412,392 437,285 478,848 2.7% 1.3% 1.2% 0.9%Total Number of Urban Households 131,148 170,523 201,292 233,596 301,043

(000s)Average Household Size 3.67 3.31 3.13 2.97 2.68 -2.0% -1.1% -1.1% -1.0%

Urban 3.16 3.01 2.87 2.73 2.44 -0.9% -1.0% -1.0% -1.1%Rural 3.99 3.64 3.39 3.25 3.08 -1.8% -1.4% -0.8% -0.5%

Number of 1 and 2 persons households 70,379 104,016 129,933 157,688 216,285 8.1% 4.6% 3.9% 3.2%(000s)


Summary Statistics

Average Growth Rate per annum1998 2003 2008 2013 2023 1998 to 2003 to 2008 to 2013 to

2003 2008 2013 2023Education

Persons (000s) 15 years + with Tertiary 31,230 56,259 81,258 105,627 149,320 12.5% 7.6% 5.4% 3.5% Technical Secondary 94,821 130,137 165,270 197,780 252,829 6.5% 4.9% 3.7% 2.5%

Proportion of persons 15 yrs + with Tertiary 3% 6% 8% 10% 14% Technical Secondary 10% 13% 16% 18% 23%

School Age Children (000s) 307,379 283,325 221,856 172,614 129,290 -1.6% -4.8% -4.9% -2.8%

Labour Force

Employed Persons (000s) 706,370 751,657 784,048 772,369 705,027 1.3% 0.8% -0.3% -0.9%

Skilled White Collar (000s) 119,138 145,662 164,406 164,211 148,441 4.1% 2.5% 0.0% -1.0%Clerical and Service (000s) 133,656 174,607 210,845 225,591 234,836 5.5% 3.8% 1.4% 0.4%Production/Other (000s) 116,826 117,618 115,513 110,729 96,866 0.1% -0.4% -0.8% -1.3%Agricultue (000s) 332,320 313,662 293,190 271,781 224,872 -1.1% -1.3% -1.5% -1.9%


Summary Statistics

Average Growth Rate per annum1998 2003 2008 2013 2023 1998 to 2003 to 2008 to 2013 to

2003 2008 2013 2023Urban Household Income

China Rmb constant 2002 valuesMean 17,245 26,370 35,058 41,803 8.9% 5.9% 3.6%Median 16,053 23,185 29,433 34,008 7.6% 4.9% 2.9%

US$s constant 2002 valuesMean 2,083 3,185 4,234 5,049 8.9% 5.9% 3.6%

Urban Households (000s) earning (2002 Rmb values)over Rmb 40,000 4,917 41,509 87,985 126,680 53.2% 16.2% 7.6%over US$4,000 pa 2,518 28,697 76,696 117,358 62.7% 21.7% 8.9%

Urban Household Expenditure

Total exp per households (Constant Rmb 2002)13,179 19,966 25,921 30,457 8.7% 5.4% 3.3%

Exp as % of Income 76.4% 75.7% 73.9% 72.9%

Total Expenditure all Urban Households Constant Rmb Millions 2002 values

Total 1,728,418 3,404,631 5,217,653 7,114,569 14.5% 8.9% 6.4%

Food 777,086 1,185,784 1,552,197 1,901,190 8.8% 5.5% 4.1%Clothing 191,601 300,598 380,462 455,346 9.4% 4.8% 3.7%Housing related 303,237 634,372 1,024,641 1,442,388 15.9% 10.1% 7.1%Health 80,947 261,986 480,651 717,825 26.5% 12.9% 8.4%Transport and communications 100,030 355,401 650,732 970,979 28.9% 12.9% 8.3%Education and Recreation 197,683 518,979 907,175 1,326,439 21.3% 11.8% 7.9%Other 77,835 147,510 221,795 300,401 13.6% 8.5% 6.3%


The Population

This section examines the major trends in the Population of China.

In addition to looking at the trend in the overall population in the medium (next 5 years) and long term (next 10 and 20 years) it examines the trends for specific age/life cycle segments.

Note:Detailed yearly data of total population, males and females by 5 year age groups, birth rates and total births, death rates and total deaths by gender are provided in Tables 1.1 to 2.7 in the accompanying Excel File.


Total Population Growth Rates: 1983 to 2023

Next 5 years (2008)Total population is projected to increase at the rate of 0.2% per annum taking it from 1.279 billion to 1.293 billion persons. Next 10 years (2013)Total population is projected to increase by 0.2% per annum or 1.6% for the entire period. This is an additional 20.87 million persons, compared with 95.5 million for the previous decade demonstrating the structural change that is taking place in the population dynamics.

Next 20 years (2023)By 2023 the total population of China is projected to reach 1.282 million persons. This reflects negative population growth after 2014.

Total Population 000s

Absolute Change 000s

% Increase

Avg pa Growth rate

By previous and next 5 years1998 1,242,661 59314 5.0% 1.0%2003 1,278,885 36224 2.9% 0.6%2008 1,292,785 13900 1.1% 0.2%

By Previous and Future Decades1983 1,031,2001993 1,183,348 152148 14.8% 1.4%2003 1,278,885 95537 8.1% 0.8%2013 1,299,758 20873 1.6% 0.2%2023 1,282,831 -16927 -1.3% -0.1%

By Previous and next 20 years1983 1,031,2002003 1,278,885 247685 24.0% 1.1%2023 1,282,831 3946 0.3% 0.0%


Long Term Population Projection to 2050

Based on the most recent data available from the 2000 Census and the change in behavior evident from 1990 (last census) in respect to trends in births and deaths the projection model indicates that the population will peak in 2014 at 1.3 billion persons.

As shown subsequently in this report, this is very much a function of the combined effects of a reduced propensity to have children and a significant reduction in the number of women of child bearing age as the one child policy takes affect on the size of that age group. It should be noted that as a proportion of the total population, immigration and emigration are not significant issues. 0

200

400

600

800

1000

1200

1400

1982

1987

1992

1997

2002

2007

2012

2017

2022

2027

2032

2037

2042

2047

Per

son

s M

illi

on

s

Populaiton peaks at 1.3 Bn in 2014


2.5%

2.1%

1.9%

1.6%

1.4%

0.8%

1.0%

1.5%

0.7%

0.8%

0.8%

0.8%

0.2%

1.2%

1.8%

1.6%

1.5%

1.2%

0.8%

0.7%

0.7%

0.7%

0.4%

0.4%

0.4%

0.2%

-0.1%

0.7%

1.3%

1.3%

1.0%

0.9%

0.5%

0.5%

0.2%

0.4%

0.0%

0.1%

0.1%

-0.1%

-0.4%

0.4%

-1.0% -0.5% 0.0% 0.5% 1.0% 1.5% 2.0% 2.5% 3.0%

Malaysia

Philippines

India

Singapore

Vietnam

Australia

Indonesia

Hong Kong

Thailand

South Korea

Taiwan

China

Japan

Total

Average Population Growth Rate per annum

2012-2022

2002-2012

1992-2002

Relative to Asia: 1992 to 2022

Relative to other low income countries, specifically India and the Philippines, China has a much lower population growth rate.

In many respects this gives China a strategic advantage as its ability to educate and develop its (fewer) children increases.


Comparative Population Age Profile: 2003 and 2008

For this time period:

– the bias of the population is substantially to the 15 to 39 year age group and

– All age groups under 35 years are projected to experience a considerable decline in number.

– Age groups in the range 40 to 59 will grow rapidly in number.

59289

78324

106555

123058

100455

100661

128618

122919

100438

79510

82155

53169

43989

37187

28893

18825

14840

52197

58591

78178

106359

122722

100074

100176

127848

121844

99251

78082

79901

50684

40409

32071

23102

21297

0 50000 100000 150000

0- 4

5- 9

10- 14

15- 19

20- 24

25- 29

30- 34

35- 39

40- 44

45- 49

50- 54

55- 59

60- 64

65- 69

70- 74

75- 79

80+

Persons 000s

2008

2003



The population bulge continues to move up and hence the projected size of the older age groups starts to increase.

In contrast the size of the youngest age groups declines significantly. The total number of persons under 20 years of age is projected to decline by 36% between 2003 and 2013.

59289

78324

106555

123058

100455

100661

128618

122919

100438

79510

82155

53169

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37187

28893

18825

14840

47483

51653

58504

78070

106141

122374

99694

99666

126883

120632

97816

76288

76818

47033

35288

26138

29277

0 50000 100000 150000

0- 4

5- 9

10- 14

15- 19

20- 24

25- 29

30- 34

35- 39

40- 44

45- 49

50- 54

55- 59

60- 64

65- 69

70- 74

75- 79

80+

Persons 000s

2013

2003



This shows how dramatically the population profile of China is expected to change over the next 20 years.

This change will have implications for the range of products and services that will be in demand.

59289

78324

106555

123058

100455

100661

128618

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100438

79510

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47007

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58380

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117373

93440

69295

63789

34695

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0 50000 100000 150000

0-4

5-9

10-14

15-19

20-24

25-29

30-34

35-39

40-44

45-49

50-54

55-59

60-64

65-69

70-74

75-79

80+

Persons 000s

20232003


Relative Importance of Key Age Segments:

In 2003, persons aged 40 years and above accounted for 36% of the population, or effectively 1 in 3 persons. By 2023 it is projected that this will have increased to 58% (or 1 in 2 persons). Conversely, those under 25 years of age are projected to decline from 36% (or nearly one in three persons) to 27% (one in four persons) by 2023.

19%15% 12% 10%

17%

18%

14%

9%

28%

25%

25%

24%

25%

29%

32%

34%

11% 13%17%

24%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

2003 2008 2013 2023

Perc

ent

of

tota

l popula

tion

60+

40- 59

25- 39

15- 24

0- 14


Average Age Relative to Asia2002 and 2022

With the quite dramatic impact of the reduction in births on the population profile in the space of 20 years China will move from being a middle aged country (33 years) to one of the older countries (43 years). By then only Japan and Hong Kong will have an older average age.

25.5

26.4

27.6

27.7

27.7

31.6

32.9

33.4

33.7

33.4

36.37

37.1

41.3

30.2

32.3

35.0

32.8

33.1

39.6

43.4

41.9

41.3

40.2

40.92

46.2

47.2

0.0 10.0 20.0 30.0 40.0 50.0

Philippines

Malaysia

Vietnam

India

Indonesia

Thailand

China

South Korea

Taiwan

Singapore

Australia

Hong Kong

Japan

Average Age (years)

2022

2002


Propensity to Have Children and Femalesof Child Bearing Age: 1990 to 2023

There has been a substantial decline since 1990 (if not earlier) in the propensity of women of child bearing age to have a child. It has reached the point where the rate of decline must slow in order to stay in line with the level for more developed countries and that has been assumed for the projections. The big change is, however, in terms of the number of women of child bearing age (15 to 49 years). This suffers what might be called a “demographic shock” as a result of the combined effects of the earlier introduction of the one child policy and the bias of births to males.

0

50000

100000

150000

200000

250000

300000

350000

400000

1990

1992

1994

1996

1998

2000

2002

2004

2006

2008

2010

2012

2014

2016

2018

2020

2022

Fem

ale

s aged b

etw

een 1

5 a

nd 4

9 i

ncl

usi

ve (

000s)

0

10

20

30

40

50

60

70

80

Bir

ths

per

thousa

nd f

em

ale

s of

child b

eari

ng a

ge

Females 15 to 49years

Propensity to havea child


Trend in Total Births:1993 to 2023

As a result of fewer females of child bearing age and a reduced propensity to have children, for the period 2003 to 2013 it is projected that the total number of births per annum will decline by 18%.

By 2023 it is projected that there will be 44% fewer births per annum than in 2003.

The decline in total births for the period 1990 to 2000 is confirmed by the census data – specifically the number of people in the 0 to 10 year age groups in 2000. 18,552

14,923

11,298

10,189

9,166

6,262

0 5,000 10,000 15,000 20,000

1993

1998

2003

2008

2013

2023

Total Births per annum (000s)


The Child Population1993 to 2023

The 0 to 14 year age group is projected to decline as a proportion of the total population from 19% in 2003 to an estimated 10% by 2023

It is projected that between 2003 and 2008 this segment will reduce by 55 million individuals or 6.0% pa. By 2013 it will have reduced by a further 31 million individuals, a further 3.6% pa decline.

Collectively in the next decade this segment is projected to reduce by 86.5 million individuals or 35%.

Persons 000s Increase 000sAnnual Growth rate % change

0-4 years1993 105,5401998 79,278 -26,262 -5.6% -25%2003 59,289 -19,989 -5.6% -25%2008 52,197 -7,092 -2.5% -12%2013 47,483 -4,714 -1.9% -9%2023 34,010 -13,473 -3.3% -28%

5-9 years1993 123,6061998 105,965 -17,641 -3.0% -14%2003 78,324 -27,641 -5.9% -26%2008 58,591 -19,733 -5.6% -25%2013 51,653 -6,938 -2.5% -12%2023 41,041 -10,612 -2.3% -21%

10-14 years1993 93,4421998 122,702 29,260 5.6% 31%2003 106,555 -16,147 -2.8% -13%2008 78,178 -28,377 -6.0% -27%2013 58,504 -19,674 -5.6% -25%2023 47,007 -11,497 -2.2% -20%

0-14 years1993 322,5891998 307,945 -14,644 -0.9% -5%2003 244,168 -63,777 -4.5% -21%2008 188,966 -55,202 -5.0% -23%2013 157,640 -31,325 -3.6% -17%2023 122,058 -35,582 -2.5% -23%


The ‘Value’ of the Child Market

Such is the reduction in the number of children, that it substantially offsets the projected 6.9% pa increase in the income per capita of households for 2003 to 2008.

As a consequence the total value (average income per capita multiplied by the number of persons in the age group) of the child market is projected to show 1.5% pa growth over the next decade to 2013.

1.5%

1.5%

0% 2% 4% 6% 8% 10%

2003-2008

2008-2013

Projected growth per annum in value of the child market


The Young Adult Market 15 to 24 Years

In total this segment is projected to show only a small increase in size over the next 5 years (growing by 5.6 million persons). It is then projected to decline by -4.3% per annum through to 2013 and this continues through to 2023 at an increasing rate. These changes mean that as a proportion of the total population this segment is projected to decline from 17% in 2003 to 9% by 2023.

Persons 000sIncrease 000s

Annual Growth rate % change

15-191993 106,2581998 98,390 -7,868 -1.5% -7%2003 123,058 24,668 4.6% 25%2008 106,359 -16,699 -2.9% -14%2013 78,070 -28,288 -6.0% -27%2023 51,552 -26,518 -4.1% -34%

20-241993 124,0231998 103,255 -20,768 -3.6% -17%2003 100,455 -2,799 -0.5% -3%2008 122,722 22,267 4.1% 22%2013 106,141 -16,582 -2.9% -14%2023 58,380 -47,761 -5.8% -45%

15-241993 230,2811998 201,645 -28,636 -2.6% -12%2003 223,513 21,868 2.1% 11%2008 229,081 5,568 0.5% 2%2013 184,211 -44,870 -4.3% -20%2023 109,932 -74,279 -5.0% -40%


The ‘Value’ of the Young Adult Market

If it is assumed that the expenditure (affluence) of this age group increases in line with that of the average household per capita income then the ‘value’ of this market segment is projected to grow by 7.4% per annum between 2003 and 2008 when there is still growth in the size of this segment.

For the period 2008 to 2013 the decline in the size of the segment (-4.3% per annum) offsets the increase in per capita income (5.3% per annum) and as such the total estimated expenditure by this age group is projected to grow by a more sedate 0.8% per annum.

7.4%

0.8%

0.0% 2.0% 4.0% 6.0% 8.0%

2003-2008

2008-2013

Percent Growth per annum in Value of 15 to 24 year old segment


The Young Householder Market (25 to 39 Years)

This age segment is projected to decline by -7% over the next 5 years to 2008 losing 24.1 million persons.

For the period 2008 to 2013 the rate of decline decreases to 6.4 million persons, which represents an average annual rate of decline of -0.4%.

After 2013 this age segment declines further at a rate of -0.5% per annum. Within the context of a growing total population this means that as a proportion of the total population this segment declines from 28% to 24% between 2003 and 2023.


25-291993 119,5771998 125,736 6,160 1.0% 5%2003 100,661 -25,076 -4.4% -20%2008 100,074 -586 -0.1% -1%2013 122,374 22,300 4.1% 22%2023 77,823 -44,551 -4.4% -36%

30-341993 94,1691998 121,828 27,660 5.3% 29%2003 128,618 6,789 1.1% 6%2008 100,176 -28,441 -4.9% -22%2013 99,694 -482 -0.1% 0%2023 105,638 5,945 0.6% 6%

35-391993 85,7371998 99,273 13,536 3.0% 16%2003 122,919 23,646 4.4% 24%2008 127,848 4,929 0.8% 4%2013 99,666 -28,182 -4.9% -22%2023 121,563 21,896 2.0% 22%

25-391993 299,4821998 346,838 47,356 3.0% 16%2003 352,197 5,360 0.3% 2%2008 328,098 -24,099 -1.4% -7%2013 321,734 -6,364 -0.4% -2%2023 305,024 -16,710 -0.5% -5%


The ‘Value’ of the Young Householder Market

The ‘value’ of this segment is projected to increase at an annual rate of 5.4% per annum for the period 2003 to 2008, and then at 4.9% per annum to 2013.

These rates of growth in ‘value’ are a function of both the projected increase in per capita income and the projected small decrease in the number of persons in this age segment through to 2013.

5.4%

4.9%

0.0% 2.0% 4.0% 6.0%

2003- 2008

2008- 2013

Projected % annual Increase in Value of Young Householder Segment


The Middle Aged Householder Market (40 to 59 Years)

This age group is projected to be the high growth segment of the next decade. It is projected to increase by just over one third in size in ten years.

It represents a ‘wave’ of householders who are now used to consumerism entering the empty nester/mature household stage with huge implications for demand for many new products and services.


40-491993 134,6501998 162,322 27,672 3.8% 21%2003 179,948 17,626 2.1% 11%2008 221,095 41,147 4.2% 23%2013 247,516 26,421 2.3% 12%2023 197,036 -50,480 -2.3% -20%

50-591993 89,0531998 101,431 12,378 2.6% 14%2003 135,324 33,893 5.9% 33%2008 157,983 22,659 3.1% 17%2013 174,104 16,121 2.0% 10%2023 241,949 67,845 3.3% 39%

40-591993 223,7031998 263,753 40,050 3.3% 18%2003 315,272 51,519 3.6% 20%2008 379,078 63,806 3.8% 20%2013 421,620 42,541 2.2% 11%2023 438,985 17,366 0.4% 4%


The ‘Value’ of the Middle Aged Householder Market

The projected rapid growth in the total size of the segment (as shown on the previous page) combined with the expected increase in per capita income (for 2003 to 2013) means that the estimated ‘value’ of this age segment is expected to increase significantly. Between 2003 and 2008 it is estimated to increase at the rate of 10.9% per annum, and then at 7.6% per annum for the subsequent five years.

10.9%

7.6%

0.0% 2.0% 4.0% 6.0% 8.0% 10.0% 12.0%

2003-2008

2008-2013

Projected Annual Growth rate of Segment Value


The Older Person Market (60 Years +)

This age group is still a relatively small proportion of the population of China. In 2003 it is estimated to be 11% of the total. Between 2003 and 2008 it is projected that the total number of persons over the age of 60 years will increase by 17% (or 3.1% per annum). The growth rate is projected to accelerate to 5.1% per annum for the next 5 years to 2013 and then continue at a more moderate 3.6% per annum through to 2023.

As a result, by 2023 persons 60 years and older will account for 24% of the total population, and the segment will have doubled in absolute size.


60-691993 66,5691998 74,303 7,734 2.2% 12%2003 81,177 6,874 1.8% 9%2008 91,093 9,916 2.3% 12%2013 123,850 32,758 6.3% 36%2023 162,735 38,885 2.8% 31%

70 -791993 35,1051998 39,201 4,096 2.2% 12%2003 47,718 8,517 4.0% 22%2008 55,172 7,454 2.9% 16%2013 61,427 6,254 2.2% 11%2023 98,484 37,057 4.8% 60%

80 +1993 5,6181998 8,976 3,358 9.8% 60%2003 14,840 5,863 10.6% 65%2008 21,297 6,457 7.5% 44%2013 29,277 7,980 6.6% 37%2023 45,613 16,335 4.5% 56%

60 +1993 107,2931998 122,480 15,188 2.7% 14%2003 143,735 21,254 3.3% 17%2008 167,562 23,828 3.1% 17%2013 214,554 46,992 5.1% 28%2023 306,832 92,278 3.6% 43%


The ‘Value’ of the Older Person Market

The combination of a rapidly increasing number of persons in the segment and increasing average affluence results in an indicated growth in ‘value’ of this age segment of 10.2% per annum for the next 5 years, and then 10.6% per annum for the subsequent five years to 2013. The problem with this segment is that they, like the previous age segment, are generally poorly educated and have had a very low earnings history. As such their capacity to consume is extremely limited.

10.2%

10.6%

0.0% 2.0% 4.0% 6.0% 8.0% 10.0% 12.0%

2003-2008

2008-2013

Projected Annual Growth of Value of Age Group


Urbanisation

Current estimates from the State Statistical Bureau put 40.2% of the population as being urban dwellers. That is engaged in non-agricultural activity and living in a village/town/city of more than 20,000 persons. The rate of improvement in education is steady in China and as a result there is projected to be a steady increase in the proportion of the population that is urbanized. By 2013 it is projected to have reached 49%. This trend is projected to continue at least until 2023 by when the total urban population is projected to be 43% greater than what it is estimated to be in 2003.

Percent population in Urban areas

Total Number of Persons 000s


% Increase

Avg pa Growth rate

By previous and next 5 years1998 33.4 414,428 83,209 25.1% 4.6%2003 40.2 513,855 99,427 24.0% 4.4%2008 44.7 577,688 63,833 12.4% 2.4%

By Previous and Future Decades1983 21.6 222,7391993 28.0 331,219 108,480 48.7% 4.0%2003 40.2 513,855 182,636 55.1% 4.5%2013 49.0 636,877 123,022 23.9% 2.2%2023 57.2 734,363 97,486 15.3% 1.4%

By Previous and next 20 years1983 28.0 331,2192003 40.2 513,855 182,636 55.1% 2.2%2023 57.2 734,363 220,508 42.9% 1.8%


Urban Migration

A related issue is the question of movement of populations from less prosperous area to more prosperous ones in search of higher incomes.

Data on this is becoming available now and the picture for two cities and one more prosperous province is as shown opposite.

The surprising item here is that Shanghai has less migrants than Beijing. Overall (nationally) about 10% of the population is living in locations away from their official place of residence.

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

% of total population

Unknown 0.5% 0.4% 0.6% 0.9%

Immigrant < 6mths 0.7% 2.3% 1.5% 2.8%

Immigrant > 6mths 7.9% 28.0% 19.5% 16.3%

Residents 90.9% 69.3% 78.4% 80.0%

National Beijing Shanghai Guangdong


Provincial Capitals

In terms of share of total population the provincial capitals account for just 9%, but because they have significantly smaller average household size they account for 20% of all households (both urban and rural).

In addition, these cities tend to offer the higher value (more productive) jobs and as a consequence the households in the Provincial Capitals account for 31% of the total earned income of all households in China. and 46% of all households earning over Rmb 40,000 pa in 2003.

Thus targeting 9% of the population reaches nearly half the affluent market of China.

9%

20%

31%

46%

0% 10% 20% 30% 40% 50%

Share ofPopulation

Share ofHouseholds

Share of totalearned incomes

Share ofhouseholds

earning over Rmb40,000 pa

Percent of total


Working Age Population

Working age is defined as 15 to 64 years inclusive and the number of persons in this age band is an essential determinant of the size of the labour force. For the period 2003 to 2008 there is projected to be an additional 52 million persons of working age each year. For the period 2008 to 2013 the number of additional working age persons per annum is projected to be just 17 million or about one third of the grow rate of 2003 to 2008. After 2013 it starts to decline. This has direct implications for the size of the labour force and in turn the total GDP of the country.

0

200

400

600

800

1000

1200

1993

1995

1997

1999

2001

2003

2005

2007

2009

2011

2013

2015

2017

2019

2021

2023

Per

sons

(M

illion

s) a

ged

betw

een

15 a

nd 6

4 ye

ars

incl

usiv

e


Lifecycle Stages

– Young Single; typically persons 15 to 39 years of age and not married.

– Young Married, no Children– Young Married with at least one child under

10 (i.e. still a young family)– Married and Youngest Child is over 9 years

of age but under 20 (and deemed to still be economically dependent on the parents)

– Working Age Empty Nester: Being persons under the age of 64 years and whose children are now over 20 years and therefore deemed economically independent.

– Working Age Older Single: Unmarried persons or Widow aged 40 to 64 years.

– Retied Empty Nester: Married and over 64 years of age, typically no dependent children as all are over 20 years of age.

– Retired single/Widow/Widower: Over the age of 64 and single.

The concept of ‘Life Cycle’ generally encompasses the different stages as listed in the left hand column of this page.

As will be apparent to the reader, the needs and wants of an individual change as they progress through these stages and this is a useful basis for defining just who efforts should be targeted at.

Note: A detailed Table giving the age and gender profile of each life cycle stage is given in the second worksheet in the accompanying Excel file.


Changing Size of Lifecycle Stages

As shown in the chart opposite, the younger life cycle segments (Young single through to married with youngest child over 9 years) are projected to decline slowly in number to 2013 and then quite rapidly through to 2023. This applies particularly to the two stages including children.

All growth in the absolute size of a segment takes place in the four older segments, with the working age empty nester showing particularly strong growth. From 102 million persons in 2003 to 343 million persons in 2023.

0

200,000

400,000

600,000

800,000

1,000,000

1,200,000

Adu

lt P

erso

ns (

000s

) in

Life

cycl

e S

tage

Old retired single 25,114 28,885 35,077 54,684

Old working age single 60,744 72,662 81,124 86,216

Retired Empty Nester 73,884 87,555 102,430 158,659

Working age EmptyNester

102,915 151,657 212,673 343,344

Married youngest child>9 & <20

234,051 282,668 257,755 150,372

Young married - a child< 10

283,098 222,461 197,566 114,617

Young married - no kids 37,192 29,263 36,522 41,432

Young single 217,720 228,669 218,971 179,357

2003 2008 2013 2023


Projected Growth Rates of Stages

This is the compound average growth rate (CAGR) of the number of persons in each life cycle stage as shown on the previous page.

In both the short and medium term the growth is really concentrated in the four older life cycle stages. However, do note the projected growth of the ‘married with older child’ segment in the next five years.

2003 to 2008 to 2013 to 2003 to2008 2013 2023 2023

Young single 1.0% -0.9% -2.0% -1.0%Young married - no kids -4.7% 4.5% 1.3% 0.5%Young married - a child < 10 -4.7% -2.3% -5.3% -4.4%Married youngest child >9 & <20 3.8% -1.8% -5.2% -2.2%Working age Empty Nester 8.1% 7.0% 4.9% 6.2%Retired Empty Nester 3.5% 3.2% 4.5% 3.9%Old working age single 3.6% 2.2% 0.6% 1.8%Old retired single 2.8% 4.0% 4.5% 4.0%


Life-cycle Profile of Key Age Segments - 2003

Age segments (however defined) typically encompass at least three and often four life cycle stages and from a marketing point of view it is important to understand that.

The age segments discussed in the earlier section on the age profile of the population are replicated here – by life cycle stage in 2003.

78%

12%

0% 0%

4%

8%

0% 0%

18%

59%

11%

0%

0%

20%

50%

3%

0% 0%

23%

73%

0% 0%

16%24%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

15-24 25-39 40-59 60+

Per

cent

ofA

ge G

roup

in L

ifecy

cle

Seg

men

t

Old Single

Empty Nester

Married youngest child>9 & <20

Young married - a child< 10

Young married - nokids

Young single


The Household

A household is defined as a group of individuals living together as an independent economic unit. A nuclear household/family is the most common form and that is parents living with 1 or 2 never married children.

The Household is a crucial aspect of the socio-economic environment of a country. Many financial decisions, including the level of individual daily consumption, are taken within the context of the family budget. That in turn is a function of the size of the household, age composition and stage in life cycle of the different members of the household.

Note: A detailed Table giving the number and distribution of households by size for each year is given in Table 4.1 in the accompanying Excel file.


The Total Number of Households and Associated Growth Rates

Next 5 Years (2008)The total number of households is projected to increase by 26.5 million over the next 5 years. This is a 6.9% increase and a growth rate of 1.3% per annum This compares with 2.7% growth for the previous 5 years, when 47 million households were added. Next 10 Years (2013)There are projected to be 51.4 million additional households over the next decade, down from 92.1 million in the previous decade. The growth rate in total number of households is expected to slow further for the period 2013 to 2023.

All HouseholdsTotal Number of Househol


% Increase

Avg pa Growth rate

By previous and next 5 years1998 338,571 44,771 15.2% 2.9%2003 385,905 47,333 14.0% 2.7%2008 412,392 26,488 6.9% 1.3%

By Previous and Future Decades1983 221,8601993 293,800 71,940 32.4% 3.2%2003 385,905 92,105 31.3% 2.8%2013 437,285 51,380 13.3% 1.3%2023 478,848 41,563 9.5% 0.9%

By Previous and next 20 years1983 221,8602003 385,905 164,045 73.9% 3.0%2023 478,848 92,944 24.1% 1.1%


Growth Rate in Total Number of Households —China Relative to Asia

The rapid decline in the number of people entering marrying age, combined with the now slowing decline in average household size (number of persons) results in China’s position changing from being in the middle for the region for the period 2002 to 2012 to ultimately being one of the slowest growing for the period 2012 to 2022 at 1% per annum.

2.53%

2.08%

2.2%

2.15%

1.76%

1.88%

1.40%

1.70%

1.32%

1.18%

1.51%

1.1%

0.99%

2.0%

1.8%

2.3%

2.0%

1.7%

1.5%

1.0%

1.0%

0.9%

0.9%

1.0%

0.9%

0.8%

0.00% 0.50% 1.00% 1.50% 2.00% 2.50% 3.00%

Malaysia

Philippines

Vietnam

Singapore

Indonesia

Taiwan

Thailand

India

Hong Kong

South Korea

China

Australia

Japan

Average Annual Growth Rate of Number of Households

2012-2022

2002-2012


Profile of Households by Size

Continued (and in fact accelerated) growth is projected for single and 2 person households. This will be the result of both young people becoming more independent and also delaying the arrival of the first child and also the increasing number of older households where the children have left home.

The 3 and 4 person household also continues to grow in number and is really the core household profile. However, the growth rate of that group slows substantially after 2013. In contrast the 5 or more person households is steadily declining in number.

19936

50443

188778

79416

30522

73493

210833

71056

44298

113390

229353

50244

59144

157141

232893

29670

0 50000 100000 150000 200000 250000

1 person

2 persons

3-4 persons

5+ persons

Households (000s)

2023

2013

2003

1998


Age Profile of Householders

Some measure of the overall age profile of householders can be determined by looking at the age profile of married persons. Whereas in 2003 an estimated 52% of married couples (and to some extent households) consisted of adults aged over 40 years, by 2013 it is estimated that they will have increased to 67%.

This means most purchasers for household products will be over the age of 40 years, and one in five of them will be over the age of 60 years in 2013.

17% 15% 14%

31%

24%20%

37%

43%

46%

15% 17%21%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

2003 2008 2013

Pe

rce

nt

of

Ho

use

ho

lds

by

ag

e o

f m

arr

ied

co

up

le

60+

40-59

30-39

15-29


Proportion of Households (urban and rural) with Children

With the changing life cycle profile of the population the very nature of households is changing.

Already 36% of households have no economically dependent child in them and this is projected to reach 51% by 2013.

Households 000s Percent of total2003 2008 2013 2003 2008 2013

With at least 1 under 10 141,549 111,230 98,783 37% 27% 23%With youngest >9 but 107,234 121,505 114,572 28% 29% 26%under 20All Other Households 137,122 179,657 223,930 36% 44% 51%

Total Households 385,905 412,392 437,285


Trend in Average Household Size

Household size has been declining steadily since 1983 (although there are some short term fluctuations – probably as a result of sampling). The rate of decline is projected to slow for the next decade as family sizes get close to an average of 3.

It is worth noting that rural households, while larger in size have experienced a very similar rate of decline in average size.

Note. The average household size of rural households in this report is lower than that from official sources. The official sources somewhat overstate the number (the number of household times average household size exceeds total population). We have assumed that the error relates to rural households

0.0

1.0

2.0

3.0

4.0

5.0

6.0

1983

1985

1987

1989

1991

1993

1995

1997

1999

2001

2003

2005

2007

2009

2011

2013

Ave

rage

per

sons

per

hou

seho

ld

All Households

Rural Households

Urban Households


Estimated Number of Urban and Rural Households

The urbanization of the population means that the number of rural households will probably stabilize around the present (2003) level and then decline, whereas the number of urban households will grow rapidly in number.

It is expected that the number of urban households will exceed the number of rural households by 2010.

0

50

100

150

200

250

300

350

19

83

19

86

19

89

19

92

19

95

19

98

20

01

20

04

20

07

20

10

20

13

20

16

20

19

20

22

Ho

use

ho

lds

(Mill

ion

s)

Urban

Rural


The Total Number of Urban Households and Associated Growth Rates

Relative to total households, the number of urban households is growing at a much faster rate reflecting the trend in urbanization.

In fact the growth statistics are quite substantial. In the next 5 years there is expected to be an additional 30.8 million urban households. That is an average of 6.1 million per annum. This quite rapid growth of around 60 million additional households a decade is projected to continue to 2023.

By 2023 the total number of urban households will have increased by 76% over the number in 2003.

Urban HouseholdsTotal Number of Households 000s


% Increase

Avg pa Growth rate


By Previous and Future Decades1983 55,4351993 100,066 44,631 80.5% 6.8%2003 170,523 70,457 70.4% 5.5%2013 233,596 63,073 37.0% 3.2%2023 301,043 67,446 28.9% 2.6%

By Previous and next 20 years1983 55,4352003 170,523 115,088 207.6% 6.1%2023 301,043 130,519 76.5% 2.9%


Education

Education is probably one of the most important drivers of the shape of society in the future. It clearly impacts on birth rates, household structure, occupation profile, earnings potential and urbanization. It also affects consumption habits.

Note: A detailed Table giving the education profile of the labour force for each year to 2021 is given in Table 3.1 in the accompanying Excel file.


The Education Profile of Persons 15 yrs +

The overall education standard of the adult population is expected to improve more rapidly in future as a result of there being fewer school age children (see later).

By 2013 a projected 77% will have secondary or better education, up from 58% in 2003. This, as shown later, will have positive implications for the productivity of the labour force and hence growth of both real GDP per capita as well as total real GDP which in turn will attract investment. 22%

10%

7%

4%

1%

37%

33%

26%

18%

1%

33%

39%

44%

49%

60%

3%

13%

16%

18%

23%

2%

6%

8%

10%

14%

0% 20% 40% 60% 80% 100%

1993

2003

2008

2013

2023

Percent of Persons 15 yrs +

None/lower primary Completed Primary Junior Secondary

Technical Secondary Tertiary


China’s Education Profile Relative to Asia: 2002

While there has been a significant improvement in China’s education standard, it is still behind the region in terms of overall education standard. This is both good and bad news. Assuming that the government sustains its effort to improve the education standard of its adult population then the upside potential of the economy (as a result of improved skill levels of the labor force) is considerable.

But, until that improvement is achieved the overall affluence of people in China will be lower than most other countries.

72

65.6

60.9

44.5

39.4

36.0

28.6

30.0

28.0

26.1

33.0

16.2

25

23.0

34.3

49.9

37.3

19.0

54.6

45.4

51.5

46.2

28.2

27.4

3

11.4

4.8

5.6

23.3

44.9

16.8

24.5

20.5

27.7

38.8

56.4

0% 20% 40% 60% 80% 100%

Vietnam (1999)

Thailand

Indonesia

China (all 15yr +)

Philippines

Australia

Malaysia

South Korea

Hong Kong (all 15yr +)

Japan (all 15yrs +)

Singapore

Taiwan

Percent of employed persons unless otherwise stated

Less than Secondary Secondary incl J Col. Post Secondary


Persons 15 yrs + with Secondary or Tertiary Qualifications

For the last decade (1993 to 2003) China added an average of 21.15 million persons with secondary qualifications and 3.68 million with tertiary qualifications each year. This is an average annual rate of 5.4% and 11.2% respectively. It is projected that the number of secondary level graduates will grow at around 20 million each year through to 2023. In the case of tertiary level graduates the increase is projected to be just under 5 million per annum through to 2023, making them 14% of the labour force, up from 6% in 2003.

Secondary & Tech secondary Tertiary

Secondary & Tech secondary Tertiary

Secondary & Post secondary Tertiary

1993 304,724 19,4632003 516,243 56,259 21,152 3,680 5.4% 11.2%2008 631,097 81,258 22,971 5,000 4.1% 7.6%2013 734,285 105,627 20,638 4,874 3.1% 5.4%2023 902,945 149,320 16,866 4,369 2.1% 3.5%

Persons (000s) Increment pa (000s) Growth Rate per annum


The Projected Demand for School Age Education Facilities:

In this respect China has a strategic advantage. The changing age profile of the population means that the number of persons seeking school level education is also in decline. Therefore the government can improve the quality of education without any need to increase the budget (although one hopes it does increase the budget as well). This is an advantage to China. With the exception of Thailand all other countries of similar affluence are facing an increasing number of school age children and their ability to improve education standards is constrained.

0

50

100

150

200

250

300

350

1992

1995

1998

2001

2004

2007

2010

2013

2016

2019

2022

Per

sons

of

scho

ol a

ge (

mill

ions

)


The Labour Force

The Labour Force is important for a number of reasons.

– First, obviously, it is a market in its own right and the size and composition of it creates demand for particular products and services.

– Second, understanding the trends in factors affecting the size and productivity of the labour force provides a basis for understanding the future size and growth of the economy and affluence of the individuals within it.

Note: A detailed Table giving the size, gender composition, occupational profile and industry sector employment for each year to 2021 is given in Tables 7.1 to 7.4 in the accompanying Excel file.


The Size and Growth of the Employed Labour Force

For the next 5 years the increase in size will be smaller than that of the previous five years. Furthermore, after 2009 the absolute size of the labour force is projected to decline. For the decade 2013 to 2023 the labour force is projected to decline at 0.9% per annum, a drop of 67.3 million persons. Note: The projection assumes that the average unemployment rate for the pervious decade continues into the forecast period – it is actually higher than average in 2002

Total Number of Employed Persons 000s

Absolute Change 000s % Increase

Avg pa Growth rate


By Previous and Future Decades1993 668,0802003 751,657 83,577 12.5% 1.2%2013 772,369 20,712 2.8% 0.3%2023 705,027 -67,342 -8.7% -0.9%

By Previous 10 and next 20 years1993 668,0802003 751,657 83,577 12.5% 1.2%2023 705,027 -46,630 -6.2% -0.3%


-0.5%

0.2%

0.5%

0.6%

0.7%

0.8%

0.9%

1.0%

1.6%

1.9%

2.0%

2.1%

2.5%

1.0%

-0.8%

-0.5%

-0.8%

-0.2%

-0.2%

0.3%

0.5%

0.1%

0.4%

0.7%

1.4%

1.7%

1.8%

0.1%

-2% -1% 0% 1% 2% 3%

Japan

Taiwan

China

South Korea

Thailand

Australia

Indonesia

Hong Kong

Vietnam

Singapore

Philippines

India

Malaysia

Total

Projected Average Annual Growth Rate of Employed Labour Force

2012- 2022

2002- 2012

Growth Rate Relative to Asia

Relative to Asia, China is one of five countries where labour force growth is under 1% per annum for the next decade, and then goes negative for the subsequent decade (2012 to 2022).


Trend in Propensity to Work

The historic downward trend in this is a reflection of increased education opportunities delaying entry into the labour force.

For the next decade, with the projected high growth of the economy and declining number of new entrants to the labour force the propensity to work is expected to stabilize at around 82% which is quite high relative to the region.

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2015

2018

2021

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The Changing Occupation Profile of the Labour Force:

Historically the agriculture labour force has consistently been 41% of the non urban population and that is the basis used for forecasts. The overall trend is that the agricultural component of the labour force is projected to continue a steady decline both in absolute numbers and as a proportion of the labour force. Conversely, with the rapid increase in post secondary education, so the skilled white collar component is projected to increase, through to 2023 even though the total labour force is projected to decline after 2009. Note: Skilled white collar is Professionals, Associate Professionals, Managers and Administrators.

21%

30%

34%

36%

39%

9%

12%

14%

14%

15%

18%

16%

15%

14%

14%

51%

42%

37%

35%

32%

0% 20% 40% 60% 80% 100%

1993

2003

2008

2013

2023

Percent of Employed Persons

Skilled white collar Clerical and ServiceProduction Agriculture


The Changing Size of the key Occupation Groups in the Labour Force:

This table shows the effect of the proportion changes in the occupation profile of the labour force profile (previous page) on the absolute number of persons in each occupation group.

The ‘skilled white collar’ and ‘clerical and service’ segments are projected to grow at 2.0% and 1.9% per annum respectively over the next decade. This is against total labour force growth of 0.3% pa.

In contrast manufacturing will decline at around 0.6% per annum for the decade and as for most other countries in Asia, the agricultural sector is also projected to decline in absolute size.

Skilled White Collar

Clerical and Service Production Agriculture

Persons 000s1993 142,781 58,619 123,450 340,2092003 227,613 92,656 117,373 313,9082008 267,282 107,969 115,341 293,3612013 278,450 111,353 110,609 271,9022023 275,915 107,362 96,807 224,930

Avg Growth Rate per annum1993-2003 4.8% 4.7% -0.5% -0.8%2003-2008 3.3% 3.1% -0.3% -1.3%2008-2013 0.8% 0.6% -0.8% -1.5%

2003-2013 2.0% 1.9% -0.6% -1.4%2013-2023 -0.1% -0.4% -1.3% -1.9%


The Labour Force and the Economy

It is possible to use the size and productivity of the labour force to estimate the likely capacity of the economy, and hence the average Gross Domestic Product over a period of time. However, it should be appreciated that the growth rate of a particular year will vary from the average trend.


Trend in the Gross Productivity and Size of the Labour Force:

A strong historical relationship exists between the GDP per labour unit employed and the overall education standard of the labour force. Based on that relationship and projected trends in education, it is expected that real GDP per labour Unit will grow by Rmb 930 per annum in real terms for the period 2003 to 2013. This compares with Rmb 785 per annum for 1993 to 2003. However, in growth rate terms it is 4.9% per annum compared to 7.6% for the previous decade. The Figure also shows the trend in the size of the employed labour force. In absolute terms the number of workers is projected to grow by 20.7 million in the next decade, compared with 83.6 million the previous decade.

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GDP per Labour Unit

Labour Force (000s)


Implications of Size and Productivity of Labour Force for Real GDP Growth

The future trend in GDP year on year growth rate is really an inevitable consequence of the slower growth rate of the labour force. The trend in total real GDP growth rate over the last 10 years has been moving to this level as indicated by the ‘projection line’ in the chart opposite.

It might be noted that for the decade to 2003 total real GDP grew in absolute terms by Rmb 651 Billion per annum. For the next decade it is projected to grow at around Rmb 750 Bn per annum.

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Real Total GDP Rmb Bn (Constant 2002 values)

Real average growth rate pa

Absolute increase pa Rmb Bn pa

1993 4893.3 10.4% 308.22003 11403.3 8.8% 651.02008 15376.3 6.2% 794.62013 18901.1 4.2% 705.0


Implications for Real GDP per capita Growth

A strong GDP growth does not translate into growth of individual affluence unless the population is growing at a slower pace than the economy. Therefore the true measure of improved affluence of a country is GDP per capita.

Using the projected figures for total population and total GDP, indications are that the economy will achieve an average of 5.9% per annum growth in per capita GDP to 2008, dropping to 4.1% for 2008 to 2013.

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Real GDP Rmb per capita (Constant 2002 values)

Real average growth rate pa

Absolute increase pa Rmb pa

1993 4,123 8.9% 2372003 8,917 8.0% 4792008 11,894 5.9% 5952013 14,542 4.1% 530


US$ GDP per Capita Relative to the Region

While the growth statistics might be positive, in absolute US$ terms China is currently (2003) one of the less affluent countries in the region at a GDP per capita of US$993 in 2002.

Furthermore, the projected growth of the economy is not sufficient to significantly change the position by 2012 although the gap between China and Thailand does reduce.

Also note that if the Rmb was revalued – which is unlikely but has been promoted as a concept – then the position would change significantly and almost surely result in China matching if not exceeding Thailand.

28824

19752

16282

19668

11463

9758

4224

2638

664

1625

3376

613

35247

23800

20887

19829

12818

10106

3741

2047

993

939

841

464

459

38687

29434

27123

22706

16265

13645

5232

2929

1696

1110

1063

595

577

0 10000 20000 30000 40000 50000

J apan

Hong Kong

Singapore

Australia

Taiwan

South Korea

Malaysia

Thailand

China

Philippines

Indonesia

Vietnam

India

US$ GDP per capita 2001 values

2012

2002

1992


Dependents per Employed Persons

One demographic variable that significantly influences the ability of a country to lift its GDP per capita is the ratio of dependents per employed person.

If this can be lowered (i.e. a higher proportion of the population is working) then GDP per capita also tends to lift at a faster pace.

In the case of China this ratio has been declining quite steadily and this clearly helps the overall trend in individual affluence.

However, with the ageing of the population the rate of decline slows after 2008. 0

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Per

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Household Income

The evolving nature of the distribution of households by income has considerable implications for the marketing of a wide range of products and services. Yet household income is not generally reported by any country in a manner which allows a proper understanding of the changes that are taking place. For example, it is rarely adjusted for the effects of inflation. Asian Demographics have developed a proprietary statistical model which removes the effects of inflation and shows the real historical changes in the distribution of households by income and the projected changes for the next decade. It also provides the inflation adjusted mean, median and variance which can then be used for forecasting relative to GDP forecasts.

Note: A detailed Table giving the distribution of allhouseholds by annual income and their expenditure pattern for each year is given in Tables 5.2, 5.3 and 6.1


Trend in Average Urban and Rural Household Incomes: 1993 to 2023

Average Household Incomes have grown steadily since consistent data series have been available. However, do note the difference in growth rates between urban and rural.

[Note: the fluctuation in rural incomes is a function of fluctuations in reported household size. This impacts household income as that is reported on a per capita basis in raw format.]

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Rural

National


Growth Rates in Average Urban and Rural Household Incomes: 1998 to 2023

These are the growth statistics associated with the chart on the previous page. The differential between the urban and rural households is considerable.

Do note that growth statistics can be misleading, the rate declines as the base on which they are calculated increases. As such while the analysis shows much slower growth rates for the next 5 years (5.7% compared with 7.3%), in absolute real terms average household incomes are increasing by a greater amount than in the previous 5 years (Rmb 1,150 pa compared with Rmb 1,069 pa).

National Urban RuralMean Rmb pa

Avg Annual Growth rate

Rmb increase pa

Mean Rmb pa


Rmb increase pa

Mean Rmb pa


Rmb increase pa

1998 12,629 17,245 9,7102003 17,976 7.3% 1,069 26,370 8.9% 1,825 11,167 2.8% 2912008 23,723 5.7% 1,150 35,058 5.9% 1,738 12,915 3.0% 3502013 29,111 4.2% 1,078 41,803 3.6% 1,349 14,556 2.4% 328

Rmb (constant 2001)


Comparative Distributions of Urban and Rural Households by Income: 2003

This chart serves to show the dichotomy of income distribution between urban and rural households.

In 2003, urban households which are 44% of all households, account for 79% of all households earning over Rmb 40,000 (US$4,800).

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Is the Data Reliable?

Many claims are made about incomes being understated in China.

A simple ‘sanity check’ on these claims is to determine what percentage of total GDP in 2002 does total (urban and rural) household expenditure (which is a function of income) represent.

While China is, perhaps, on the low side, it is not significantly so for a socialist society. There is no real case to argue that incomes are significantly (>10%) higher than that reported by official sources.

South Korea 51%Philippines 54%Taiwan 47%Hong Kong 44%Australia 44%China 41%Thailand 36%Malaysia 32%

Total Household Expenditure as %

GDP


Urban Household Income and Expenditure

The Following two sections focuses on the distribution of urban households by Income and their expenditure. The subsequent two sections looks at the same for Rural Households.

Note: A detailed Table giving the distribution of all urban households by annual income and their expenditure pattern for each year is given in Tables 8.1 to 8.3.


Changing Shape of the Income Distribution: 1995 to 2013 Urban Households

The overall trend is one of steady improvement in the distribution of households by income.

As is apparent from this chart, by 2003 a solid ‘middle class’ (earning between Rmb 16,000 and Rmb 40,000 was in place and these are households that can afford to spend beyond the essentials of living.

This middle class is now projected to expand upwards and will grow rapidly in size and affluence as detailed on the subsequent pages.

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Rmb per annum per urban household (2002 values)

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2013


Projected Distribution of Urban Households by Income – by Quintile size (Rmb breaks)

This table shows how dramatically the distribution of income is changing in urban China. For the next 5 years even the middle quintile starts to decline in absolute size as the ‘weight’ of households moves into the income range of what is currently the top two quintiles.

By 2013 it is projected that 49.2% of urban households will have an income above that used to define the top 20% in 2003.

To make the point further, there are currently 34.1 million households earning over Rmb 34,488 pa. By 2013 there will be 115.0 million.

Quintiles in year 2003

LowestLower middle Middle

Upper middle Highest Total

Break point (Rmb 2002 values)from - 15,636 20,661 26,016 34,378 to 15,636 20,661 26,016 34,378 plus

Percentage of Urban Households

1993 46.9% 29.7% 14.0% 6.6% 2.7% 100.0%2003 20.0% 20.0% 20.0% 20.0% 20.0% 100.0%2008 12.9% 12.7% 15.2% 20.8% 38.5% 100.0%2013 10.3% 9.7% 12.2% 18.6% 49.2% 100.0%

Number of Urban Households (000s)

1993 46,940 29,738 14,031 6,651 2,707 100,0662003 34,105 34,105 34,105 34,105 34,105 170,5232008 25,892 25,512 30,675 41,781 77,432 201,2922013 24,028 22,592 28,493 43,449 115,035 233,596

Growth Rate pa of Number of Urban Households in Quintile

1993 to 2003 -3.5% 1.5% 10.4% 19.9% 32.5% 6.1%2003 to 2008 -5.4% -5.6% -2.1% 4.1% 17.8% 3.4%2008 to 2013 -1.5% -2.4% -1.5% 0.8% 8.2% 3.0%


Projected Distribution of Urban Households by Income – by Quintile size. US$ Breaks

This is the same information as on the previous page except that the break points are now expressed in US$s. Quintiles in year 2003




Percentage of Urban Households

1993 11.5% 21.1% 26.3% 25.3% 15.8% 100.0%2003 20.0% 20.0% 20.0% 20.0% 20.0% 100.0%2008 12.9% 12.7% 15.2% 20.8% 38.5% 100.0%2013 10.3% 9.7% 12.2% 18.6% 49.2% 100.0%

Number of Urban Households (000s)

1993 11,557 21,102 26,270 25,293 15,845 100,0662003 34,105 34,105 34,105 34,105 34,105 170,5232008 25,892 25,512 30,675 41,781 77,432 201,2922013 24,028 22,592 28,493 43,449 115,035 233,596

Growth Rate pa of Number of Urban Households in Quintile

1993 to 2003 12.8% 5.5% 2.9% 3.4% 8.9% 6.1%2003 to 2008 -5.4% -5.6% -2.1% 4.1% 17.8% 3.4%2008 to 2013 -1.5% -2.4% -1.5% 0.8% 8.2% 3.0%


Sensitivity of Market Size to 1% Point change in Average GDP Growth rate 2003 to 2013.

The base case assumes the total GDP grows at an average of 5.2% per annum for the period 2003 to 2013.

This table shows the impact on the distribution of households if the GDP grows at an average of 4.2% (pessimistic) and 6.2% (optimistic).

Compared with the expected average urban household income of Rmb 41,803 in 2013, under the pessimistic scenario the average would be Rmb 39,716 and under the optimistic scenario it would be Rmb 46,676.





Percentage of Urban Households2003 20.0% 20.0% 20.0% 20.0% 20.0% 100.0%2008 12.9% 12.7% 15.2% 20.8% 38.5% 100.0%

Optimistic 12.8% 12.6% 15.2% 20.7% 38.6% 100.0%Pessimistic 13.3% 13.2% 15.7% 20.9% 36.9% 100.0%

2013 10.3% 9.7% 12.2% 18.6% 49.2% 100.0%Optimistic 9.1% 8.2% 10.6% 16.9% 55.2% 100.0%

Pessimistic 10.9% 10.4% 13.0% 19.3% 46.2% 100.0%

Number of Urban Households (000s)2003 34,105 34,105 34,105 34,105 34,105 170,5232008 25,892 25,512 30,675 41,781 77,432 201,292

Optimistic 25,808 25,416 30,588 41,739 77,742 201,292Pessimistic 26,749 26,486 31,551 42,157 74,349 201,292

2013 24,028 22,592 28,493 43,449 115,035 233,596Optimistic 21,227 19,266 24,677 39,493 128,934 233,596

Pessimistic 25,562 24,402 30,453 45,158 108,021 233,596

Growth Rate pa of Number of Households in Quintile 2003 to 2008Most Likely -5.4% -5.6% -2.1% 4.1% 17.8% 3.4%Optimistic -5.4% -5.7% -2.2% 4.1% 17.9% 3.4%

Pessimistic -4.7% -4.9% -1.5% 4.3% 16.9% 3.4%


Pessimistic -2.8% -3.3% -1.1% 2.8% 12.2% 3.2%


Sensitivity of Top Quintile to 1% Point change in Average GDP Growth rate 2003 to 2013.

This is a subset of the previous page and shows the trend in projected size of the top quintile (households earning over Rmb 35,000 (US$4,200 approx) to the different GDP growth scenarios.

Potentially the size of this ‘consumption’ segment could vary by 14% around the most likely outcome by 2013. However the difference in outcomes is quite small (less than 10% variance) until 2008, suggesting that projects with a payback within that time period are less at risk in terms of GDP outcomes.

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Base case

Optimistic

Pessimistic

Risk (Variance ofoutcomes)


Urban Household Expenditure Patterns

The manner in which households spend their money evolves with affluence. The proportion spent on essentials declines as affluence increases and as a result the more discretionary product and service categories experience growth rates much faster than would be expected on the basis of the growth of the overall economy. Using the Asian Demographics Household Income and Expenditure Model (which models the historic trends after removing effects of inflation and then provides forecasts of these trends) this section discusses the possible trends in Household Expenditure through to 2013.


Average Propensity to Spend

As a general rule, over time households spend a smaller proportion of their total income as their income increases. However, the reduction is less than the increase in income so total expenditure per household still increases.

There has been some variability in the relationship between income and expenditure in the past, but the projected pattern of income and expenditure indicates that the proportion spent will increase from 24% in 2003 to reach 27% in 2013.

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Average Household Income (Rmb pa2002)Average Household Expenditure (Rmbpa 2002)Percent not spent


Implications for Average Absolute Amount Spent and Saved per Urban Household - Rmb

The net effect of – Increasing average urban household

income at 4.7% per annum for 2003 to 2013 and

– Consequent increased propensity to save

means that for 2003 to 2013– Average total expenditure per

household is projected to grow at 4.3% per annum.

– Average amount saved per household is projected to grow at 5.9% pa

– And in absolute terms the average amount saved per household increases by 77%.

Average Household Income (Rmb pa 2002)

Average Household Expenditure (Rmb pa 2002)

Average Amount not Spent on Consumption (Rmb pa 2002)

Percent not spent

1997 16067 12251 3816 24%1998 17245 13179 4065 24%1999 19047 14751 4296 23%2000 20150 15831 4319 21%2001 21675 16230 5445 25%2002 24160 18427 5733 24%2003 26370 19966 6404 24%2004 28239 21260 6979 25%2005 30032 22493 7539 25%2006 31782 23693 8089 25%2007 33444 24825 8619 26%2008 35058 25921 9138 26%2009 36589 26955 9633 26%2010 38015 27918 10098 27%2011 39347 28812 10535 27%2012 40621 29666 10955 27%2013 41803 30457 11347 27%

CAGR2003 to

2008 5.9% 5.4% 7.4%2013 4.7% 4.3% 5.9%


Implications for Average Absolute Amount Spent and Saved per Urban Household – US$s

This table replicates that of the previous page except that all values are now US$s using the exchange rate for each year applied to the local currency expressed in constant 2002 values.

This gives an order of magnitude to the average household's income, expenditure and savings in US$s




1997 1,938 1,478 4601998 2,083 1,592 4911999 2,301 1,782 5192000 2,434 1,912 5222001 2,619 1,961 6582002 2,919 2,226 6932003 3,185 2,411 7732004 3,411 2,568 8432005 3,627 2,717 9102006 3,838 2,861 9772007 4,039 2,998 1,0412008 4,234 3,131 1,1042009 4,419 3,255 1,1632010 4,591 3,372 1,2202011 4,752 3,480 1,2722012 4,906 3,583 1,3232013 5,049 3,678 1,370


Implications for Total Expenditure and Savings of all Urban Households

The projected increase in average urban household expenditure and savings combined with the projected increase in the absolute number of urban households mean that for 2003 to 2013:

– Total urban household expenditure is projected to grow at 7.6% per annum and– Total urban households savings are projected to grow at 9.3% per annum.

Both are good ‘drivers’ for the domestic economy.

Total Number of Urban Households (000s)

Average Urban Household's Expenditure pa (Rmb 2002)

Total Annual Expenditure all Urban Households Rnb Bn 2002 values

Average Urban Household's Savings pa (Rmb 2002)

Total annual Savings of all Urban Households Rnb Mn 2002 values

1998 131,148 13,179 1,728 4,065 5332003 170,523 19,966 3,405 6,404 1,0922008 201,292 25,921 5,218 9,138 1,8392013 233,596 30,457 7,115 11,347 2,651

CAGR2003-08 3.4% 5.4% 8.9% 7.4% 11.0%2003-13 3.2% 4.3% 7.6% 5.9% 9.3%


Average Pattern of Expenditure per HouseholdUrban Households

Being a developing country in terms of both age and affluence there is substantial change projected in the pattern of expenditure of the average household. For example food and clothing are projected to decline from 43.7% to 33.1% of expenditure between 2003 and 2013.

Such a reduction in the proportion allocated to these basic aspects of living mean the other more discretionary categories grow as a proportion. The key growth area is transport and communications followed by recreation and education.

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Tot

al H

ouse

hold

Exp

endi

ture

Other 4.5 4.3 4.3 4.2

Recreation &Education

11.4 15.2 17.4 18.6

Transport &Communications

5.8 10.4 12.5 13.6

Health 4.7 7.7 9.2 10.1

Housing related 17.5 18.6 19.6 20.3

Food, Clothing 56.0 43.7 37.0 33.1

1998 2003 2008 2013


Trend in the average absolute expenditure per household - Urban

In the context of growing affluence and expenditure per household (4.0% per annum) even small changes in the proportion allocated to a category result in significant changes in the absolute amount spent.

In absolute terms expenditure per urban household on transport, communications and health is projected to increase by 94% between 2003 and 2013. Recreation and education by 78%.

0

5,000

10,000

15,000

20,000

25,000

Exp

endi

ture

pa

of A

vera

ge H

ouse

hold

(R

mb

per

annu

m 2

002

valu

es)

Other 593 865 1,102 1,286


1,507 3,043 4,507 5,678


763 2,084 3,233 4,157

Health 617 1,536 2,388 3,073

Housing related 2,312 3,720 5,090 6,175

Food, Clothing 7,386 8,717 9,601 10,088

1998 2003 2008 2013


Relative Importance of Income QuintilesThe relative importance of the income quintiles in terms of share of urban household expenditure varies significantly – both now and over time.

The top quintile (urban households earning in excess of Rmb 34,378 (approx US$3,800)) accounts for 34% of all urban household expenditure in 2003.

As a result of projected increases in overall affluence of the economy, 49% of all households will meet this income hurdle by 2013 and they will account for 69% of all urban household expenditure.

Finally, note that the highest income quintile accounts for 48% of all savings in 2003, increasing to 83% by 2013.




Break point Rmb 000s 2002 values)from 1 15,636 20,661 26,016 34,378 to 15,636 20,661 26,016 34,378 plus

2003Average HHold Income Rmb 11453 18094 22791 29407 48858% spent 89% 82% 78% 74% 67%Average Expenditure Rmb 10220 14757 17761 21791 32739Num of Households 000s 34110 34102 34109 34102 34101 170,523Total Expenditure of quintile Rmb Bn 348,608 503,244 605,822 743,120 1,116,429 3,317,224Share of all Urban Households 20% 20% 20% 20% 20% 100% Hhold Expenditure 11% 15% 18% 22% 34% 100% Hhold saving 4% 10% 15% 23% 48% 100%

2008Average HHold Income Rmb 11165 18138 22839 29601 55846% spent 92% 84% 80% 76% 68%Average Expenditure Rmb 10275 15213 18330 22607 37765Num of Households 000s 25893 25507 30677 41778 77437 201,292Total Expenditure of quintile Rmb Bn 266,058 388,044 562,319 944,466 2,924,429 5,085,316Share of all Urban Households 13% 13% 15% 21% 38% 100% Hhold Expenditure 5% 8% 11% 19% 58% 100% Hhold saving 1% 4% 7% 15% 73% 100%

2013Average HHold Income Rmb 10980 18145 22852 29677 61785% spent 94% 85% 82% 78% 68%Average Expenditure Rmb 10284 15462 18647 23057 41831Num of Households 000s 24028 22585 28493 43444 115046 233,596Total Expenditure of quintile Rmb Bn 247,099 349,223 531,316 1,001,689 4,812,438 6,941,765Share of all Urban Households 10% 10% 12% 19% 49% 100% Hhold Expenditure 4% 5% 8% 14% 69% 100% Hhold saving 1% 2% 4% 10% 83% 100%


Urban Household Expenditure Pattern by Quintile:2003

The combined effects of significant differences in average income and propensity to spend (the lowest quintile spend 90% of their income where as the highest spend only 66%) mean expanding differences in expenditure patterns.

While the highest quintile spends 2 times as much as the lowest on food, it spend in excess of 4 times as much on most of the other categories of expenditure.



Upper middle Highest


2003Rmb (2002 values) per household per annuimFood 4334 5275 5841 6540 8185Beverages 195 277 322 377 506Tobacco 205 279 320 370 486Clothing/Footwear 895 1297 1565 1927 2914Household articles/svcs 572 987 1271 1661 2762Medical and Health 617 1037 1324 1720 2834Transport 287 541 715 955 1632Communications 305 735 1028 1430 2561Recreation 597 908 1122 1417 2251Education 725 1198 1523 1968 3223Housing 466 666 804 994 1529Utilities 660 966 1177 1466 2281Other 361 591 749 965 1576

US$ (2002 values & exch rate) per household per annuimFood 523 637 705 790 989Beverages 24 33 39 46 61Tobacco 25 34 39 45 59Clothing/Footwear 108 157 189 233 352Household articles/svcs 69 119 153 201 334Medical and Health 75 125 160 208 342Transport 35 65 86 115 197Communications 37 89 124 173 309Recreation 72 110 136 171 272Education 88 145 184 238 389Housing 56 80 97 120 185Utilities 80 117 142 177 275Other 44 71 90 117 190


Rural Household Incomes and Expenditure

The Following two section focuses on the distribution of rural households by Income and their expenditure patterns.

Note: A detailed Table giving the distribution of all urban households by annual income and their expenditure pattern for each year is given in Tables 8.4 to 8.6.


Changing Shape of the Distribution: 1998 to 2013Rural Households

As shown at the start of this section, rural households income has and is projected to continue grow at a much slower rate than that of urban households.

Consequently the change in the distribution of households by income over time is less dramatic.

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2003

2008

2013


Projected Distribution of Rural Households by Income – by Quintile size (Rmb breaks)

While the average rural income is increasing, the number of rural households is not. Therefore the growth of the top two quintiles is much more moderate than that of urban households, but it nonetheless positive.

The highest quintile is projected to increase from 42 million households in 2003 to 71 million in 2013.

The next highest quintile is relatively stable in size, and the three lower quintiles are all projected to decline in size.





Percentage of Rural Households

1993 26.4% 22.9% 19.7% 16.8% 14.2% 100.0%2003 20.0% 20.0% 20.0% 20.0% 20.0% 100.0%2008 14.7% 16.4% 18.9% 22.4% 27.7% 100.0%2013 11.4% 13.5% 17.1% 23.1% 35.0% 100.0%

Number of Rural Households (000s)

1993 51,094 44,456 38,086 32,584 27,515 193,7342003 42,043 42,043 42,043 42,043 42,043 210,2172008 31,026 34,556 39,862 47,188 58,469 211,1002013 23,122 27,399 34,825 47,064 71,279 203,689

Growth Rate pa of Number of Rural Households in Quintile

1993 to 2003 -2.1% -0.6% 1.1% 2.9% 4.8% 0.9%2003 to 2008 -5.9% -3.8% -1.1% 2.3% 6.8% 0.1%2008 to 2013 -5.7% -4.5% -2.7% -0.1% 4.0% -0.7%


Projected Distribution of Rural Households by Income – by Quintile size. US$ Breaks

This is the same information as on the previous page except that the break points are now expressed in US$s.




Break point (Rmb 2002 values)from - 641 921 1,243 1,788 to 641 921 1,243 1,788 plus

Percentage of Rural Households

1993 10.5% 13.6% 18.0% 24.3% 33.6% 100.0%2003 20.0% 20.0% 20.0% 20.0% 20.0% 100.0%2008 14.7% 16.4% 18.9% 22.4% 27.7% 100.0%2013 11.4% 13.5% 17.1% 23.1% 35.0% 100.0%

Number of Rural Households (000s)

1993 20,295 26,438 34,782 47,065 65,154 193,7342003 42,043 42,043 42,043 42,043 42,043 210,2172008 31,026 34,556 39,862 47,188 58,469 211,1002013 23,122 27,399 34,825 47,064 71,279 203,689

Growth Rate pa of Number of Rural Households in Quintile

1993 to 2003 8.4% 5.3% 2.1% -1.2% -4.8% 0.9%2003 to 2008 -5.9% -3.8% -1.1% 2.3% 6.8% 0.1%2008 to 2013 -5.7% -4.5% -2.7% -0.1% 4.0% -0.7%


Sensitivity of Market Size to 1% Point change in Average GDP Growth rate 2003 to 2013.

The base case assumes the total GDP grows at an average of 5.2% per annum for the period 2003 to 2013.

This table shows the impact on the distribution of households if the GDP grows at an average of 4.2% (pessimistic) and 6.2% (optimistic).

Compared with the expected average household income of Rmb 14,556 in 2013, under the pessimistic scenario the average would be Rmb 14,226 and under the optimistic scenario it would be Rmb 16,142.





Percentage of Rural Households2003 20.0% 20.0% 20.0% 20.0% 20.0% 100.0%2008 14.7% 16.4% 18.9% 22.4% 27.7% 100.0%

Optimistic 14.7% 16.4% 18.9% 22.4% 27.7% 100.0%Pessimistic 15.2% 16.8% 19.1% 22.2% 26.8% 100.0%

2013 11.4% 13.5% 17.1% 23.1% 35.0% 100.0%Optimistic 9.6% 11.7% 15.7% 23.0% 40.1% 100.0%

Pessimistic 12.3% 14.3% 17.7% 23.0% 32.8% 100.0%

Number of Rural Households (000s)2003 42,043 42,043 42,043 42,043 42,043 210,2172008 31,026 34,556 39,862 47,188 58,469 211,100

Optimistic 31,042 34,569 39,868 47,182 58,440 211,100Pessimistic 32,088 35,390 40,251 46,800 56,571 211,100

2013 23,122 27,399 34,825 47,064 71,279 203,689Optimistic 19,494 23,802 31,915 46,776 81,701 203,689

Pessimistic 24,955 29,101 36,018 46,860 66,755 203,689


Pessimistic -5.3% -3.4% -0.9% 2.2% 6.1% 0.1%

Growth Rate pa of Number of Households in Quintile 2003 to 2013Most Likely -5.8% -4.2% -1.9% 1.1% 5.4% -0.3%Optimistic -7.4% -5.5% -2.7% 1.1% 6.9% -0.3%

Pessimistic -5.1% -3.6% -1.5% 1.1% 4.7% -0.3%


Rural Household Expenditure Patterns

The manner in which households spend their money evolves with affluence. The proportion spent on essentials declines as affluence increases and as a result more discretionary product and service categories experience growth rates much faster than would be expected on the basis of the growth of the overall economy. Using the Asian Demographics Household Income and Expenditure Model (which models the historic trends after removing effects of inflation and then provides forecasts of these trends) this section discusses the possible trends in Household Expenditure through to 2013.

Note: A detailed Table giving the distribution of household expenditure by expense category for each year is given in the Appendix. Table 6.1


Average Propensity to Spend

While Rural households on average earn 57% less than urban households, they nonetheless have a greater propensity to save. In 2003 only 65% was spent, compared with 76% for urban households.

This means that the rural market is substantially smaller than the urban market even in spite of having more households.

For 2003 to 2013 it is expected that the proportion not spent (i.e. saved) will increase from 35% to 42% given projected trends in average total income and expenditure patterns.

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Average Household Income(Rmb pa 2002)Average HouseholdExpenditure (Rmb pa 2002)Percent not spent


Implications for Average Absolute Amount Spent and Saved per Household - Rmb

The net effect of – Increasing average household

income at 2.7% per annum for 2003 to 2013 and

– Consequent increased propensity to save

means that for 2003 to 2013– Average total expenditure per rural

household is projected to grow at 1.5% pa.

– Average total savings per household is projected to grow at 4.5% pa.

– And in Absolute terms the average amount saved per household increases by 56%.




Percent not spent

1997 9275 6342 2933 32%1998 9710 6265 3445 35%1999 10033 6624 3409 34%2000 10015 7041 2974 30%2001 10269 6930 3339 33%2002 10719 7095 3624 34%2003 11167 7264 3902 35%2004 11333 7325 4008 35%2005 11747 7479 4268 36%2006 12152 7627 4525 37%2007 12538 7766 4772 38%2008 12915 7901 5014 39%2009 13276 8028 5248 40%2010 13617 8147 5470 40%2011 13941 8259 5682 41%2012 14256 8367 5889 41%2013 14556 8468 6088 42%

CAGR2003 to

2008 3.0% 1.7% 5.1%2013 2.7% 1.5% 4.5%


Implications for Average Absolute Amount Spent and Saved per Household – US$s

This table replicates that of the previous page except that all values are now US$s using the exchange rate for each year applied to the local currency expressed in constant 2002 values.

This gives an order of magnitude to the average household's income, expenditure and savings.




1997 1,119 765 3541998 1,173 757 4161999 1,212 800 4122000 1,210 851 3592001 1,241 837 4032002 1,295 857 4382003 1,349 877 4712004 1,369 885 4842005 1,419 903 5152006 1,468 921 5462007 1,514 938 5762008 1,560 954 6062009 1,603 970 6342010 1,645 984 6612011 1,684 997 6862012 1,722 1,010 7112013 1,758 1,023 735


Implications for Total Expenditure and Savings of all Rural Households

The projected increase in average rural household’s expenditure and savings combined with the projected decrease in the absolute number of rural households mean that for 2003 to 2013:

– Total rural household expenditure is projected to grow at 1.2% per annum and– Total urban households savings are projected to grow at 4.2% per annum.

This indicates a slower rural economy relative to the urban economy.

Total Number of Rural Households (000s)

Average Rural Household's Expenditure pa (Rmb 2002)

Total Annual Expenditure all Rural Households Rnb Bn 2002 values

Average Rural Household's Savings pa (Rmb 2002)

Total annual Savings of all Rural Households Rnb Mn 2002 values

1998 207,423 6,265 1,300 3,445 7152008 211,100 7,901 1,668 5,014 1,0592013 203,689 8,468 1,725 6,088 1,240

CAGR2003-08 0.1% 1.7% 1.8% 5.1% 5.2%2003-13 -0.3% 1.5% 1.2% 4.5% 4.2%


Average Pattern of Expenditure per HouseholdRural Households

Being both less affluent and also having slower average income and expenditure growth, the relative proportion allocated to the main categories does not change dramatically over time.

However, gradually the proportion devoted to food and clothing has and will be reducing (from 54.8% in 2003 to 49.8% in 2013) and this does mean a greater proportion can be given to other areas of expenditure.

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Other 2.1 2.9 3.2 3.5


10.0 11.2 12.3 13.0


3.8 5.6 6.5 7.1

Health 4.3 5.1 5.7 6.0

Housing related 20.2 20.3 20.5 20.7

Food, Clothing 59.7 54.8 51.7 49.8

1998 2003 2008 2013


Trend in the average absolute expenditure per household - Rural

In absolute terms, expenditure per household on food and clothing is expected to be almost unchanged for the next decade – in spite of a smaller household size.

Additional funds appear to now be allocated to transport and communications, recreation and education and health. These are projected to increase by over 33% per household over the decade.

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rage

exp

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per

rur

al h

ouse

hold

pe

r an

num

(R

mb

2002

val

ues)

Other 129 211 256 293

Recreation &Educaiton

627 817 971 1,097


238 406 514 601

Health 268 373 449 510

Housing related 1,265 1,475 1,623 1,754

Food, Clothing 3,738 3,984 4,088 4,214

1998 2003 2008 2013


Relative Importance of Income Quintile

With the lower average incomes of rural households the distribution is less extreme and the top quintile accounts for 36% of all rural household expenditure in 2003.

As a result of projected increases in overall affluence of the economy, 35% of all rural households will meet this income hurdle (Rmb 14,803) by 2013 and they will account for 54% of all rural household expenditure.

Finally, note that the highest income quintile accounts for 55% of all savings in 2003, increasing to 71% by 2013.




Break point Rmb 000s 2002 values)from 1 5,304 7,626 10,296 14,803 to 5,304 7,626 10,296 14,803 plus

2003Average HHold Income Rmb 3727 6401 8667 12247 23841% spent 86% 75% 69% 63% 52%Average Expenditure Rmb 3209 4793 5987 7698 12385Num of Households 000s 42045 42045 42042 42041 42044 210,217Total Expenditure of quintile Rmb Bn 134,932 201,535 251,703 323,609 520,699 1,432,479Share of all Urban Households 20% 20% 20% 20% 20% 100% Hhold Expenditure 9% 14% 18% 23% 36% 100% Hhold saving 2% 8% 13% 22% 55% 100%




Rural Household Expenditure Pattern by Quintile:2003

There is a considerable dichotomy between the lowest and highest quintiles in terms of absolute spending levels. Even for the basic category of food, the differences are great.

Also note that in the lower quintiles the amount of expenditure on the more discretionary categories (e.g. transport and communications) is minimal.



Upper middle Highest


2003Rmb (2002 values) per household per annuimFood 2173 2733 3118 3634 4882Clothing/Footwear 242 306 357 434 657Household articles/svcs 116 194 260 363 689Medical and Health 114 217 296 413 746Transport & Comms 0 151 282 473 1014Recreation & Education 215 454 637 906 1673Housing 329 642 882 1236 2245Other 21 97 155 239 478

US$ (2002 values & exch rate) per household per annuimFood 262 330 377 439 590Clothing/Footwear 29 37 43 52 79Household articles/svcs 14 23 31 44 83Medical and Health 14 26 36 50 90Transport & Comms 0 18 34 57 122Recreation & Education 26 55 77 109 202Housing 40 78 107 149 271Other 3 12 19 29 58

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