Small Cities Emerge as New Growth Drivers

The demand for cosmetics and household products as well as pet， maternal and infant items witnessed robust growth in 2019 with residents from lower-tier cities and counties leading the purchases and adding new vitality to Chinas economic growth， a new report said on December 17.

The report， released by JD Digits， a leading Chinese digital technology company， said sales of pet， makeup and skincare products surged 50 percent year on year. Spending on household products， books， maternal and baby products， medicine and healthcare goods as well as clothing and innerwear saw 20 percent to 40 percent growth， faster than in 2018.

Notably， consumption growth in fourthand fifth-tier cities was higher than in first- and second-tier cities， showing huge potential. This was due to residents in these cities pursuing high-quality lifestyles along with improvement in living standards and rising disposable incomes， the report said.

As the economy transforms from a phase of rapid development to a new stage of high-quality growth， consumption is playing an increasingly important role amid the pressure of an economic growth downturn.

“To bolster consumption， more efforts are needed to increase residents incomes and expand the scale of middle-income consumers，” Shen Jianguang， Vice President and chief economist at JD Digits， said.

Shen called for the primary and secondary distribution of incomes to be improved via multiple channels and a diversified tax adjustment mechanism. “We should also enhance consumers acceptance of credit products in counties，” he added. The percapita disposable income of rural residents continued to grow at a faster pace than that of urban dwellers in the first three quarters of 2019， according to the National Bureau of Statistics.

“We expect consumption in lower-tier cities to surge from $2.3 trillion in 2017 to$6.9 trillion in 2030，” said Robin Xing， Morgan Stanleys chief China economist， in a research note. “These smaller cities could be the engine driving Chinas overall private consumption market of $11.8 trillion over the same period.” Xu Feifei， associate partner at global consultancy Prophet， said while lowertier cities have been less brand-conscious and placed more importance on economic value， rising disposable income and diversification of spending behavior will slowly change that.

Xu added that brands， hoping for increased demand for high-quality goods and premium services， are establishing their presence early in burgeoning markets even before they fully mature to capture their potential.

Statistics from global data analytics company Nielsen show there are 953 million people living in third-tier cities and below， far surpassing the 427 million in first- and second-tier cities. It also shows that smaller cities have huge untapped consumption potential.