BEIJING — Keeping up with China requires a keen understanding of its young generations, who are playing a leading role in changing consumption patterns.
So says Andrew Y. Wu, who couched his opinion as “less as an executive of LVMH and more as a native son of China.”
Wu, president of the group in greater China, spoke mainly about the period from 1980 to the present, when the country underwent such dazzling changes that its citizens could barely keep up.
To be sure, urbanization and wealth creation has occurred at warp speed. Shenzhen, a fishing village with perhaps 30,000 residents in 1980, has transformed into a megacity of 10.8 million residents with “vibrant entrepreneurship” and a per-capita GDP that is rivaling Hong Kong, Wu said as a slide flashed of the gleaming metropolis.
When Forbes began tracking Chinese wealth in 1999, it took only a $6 million fortune to make the top 50. Flash to 2015, and $850 million only gets one into the top 400. The number of Chinese billionaires leaped to 345 this year, more than double the 168 in 2013.
Wu outlined three phases of Chinese consumption, from “desperation” in the Eighties and early Nineties after decades of shortages and queuing for basic necessities to a period of “massive showing off” in the late Nineties through 2009. Since 2010, a more sophisticated mind-set has taken hold and “this is something we are feeling very, very strongly” as China has “moved away from quantitative obsession to a qualitative focus.”
For example, Chinese citizens have begun to openly question the consequences of too-rapid growth in the wake of the July 2011 train derailment and widening concerns about the choking pollution in cities like Beijing, often cloaked in smog and haze.
While the government’s role in the economy has shifted, with more than 90 percent of employment generated outside the state, its recent anti-corruption crackdown bit hard.
Wu mounted a slide showing one female government official toting a luxury satchel in the pre-crackdown period, then a plastic folder in 2013 and today no carryall for her documents and cell phone.
In his view, “self-gifting” is a more sustainable trend, and now “almost all the consumption growth has been driven by new consumers.
“Despite the appearance of the same institutions, the same marketplace, we’re dealing with very, very new consumers today and this is a very, very positive sign for years to come,” he said. “China is moving into an era of differentiation.”
And one in which young generations will play a key role. Nearly half of China’s 1.34 billion citizens were born after 1980, a slice of the population that “has not seen anything but economic growth, and they are playing an increasing role in consumption.”
The generation born in the Eighties comprises 219 million consumers; the Nineties 171 million consumers; and the “new century” 175 million. The latter generation, he asserted, will “not just follow international fashion, but probably be the first able to lead fashion.
“Growing youth power is going to continue to challenge us, how we can keep with the Chinese consumer,” he added.
To be sure, today’s Chinese are increasingly mobile. While only 28 million people traveled when the Golden Week shopping period was first introduced, almost 600 million did so during the most recent one earlier this month, underscoring how decades of material deprivation has contributed to pent-up demand.
In 1972, China resembled North Korea in terms of isolation, when there were only 210,000 passports in circulation, mainly offered to diplomats. In 2015, some 65 million passports were in use. While that represents a small fraction of the population, it “offers you a feeling of the scale and the impact of the scale,” Wu said.
The number of students traveling overseas has almost doubled over the past 20 years to more than half a million. “China is getting increasingly connected with the rest of the world,” Wu said, noting that digitization is speeding that sense of connectedness.
“Youth-driven change actually influences many of the brands’ development for decades,” he said. “The strong brands, the brands that adapt obviously grow, and if you fail to adapt, you won’t.”