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Report| McKinsey Global Institute

From 'made in China' to 'sold in China': The rise of the Chinese urban consumer

November 2006 | byDiana Farrell, Eric Beinhocker, Ulrich Gersch, Ezra Greenberg, Elizabeth Stephenson, Jonathan Ablett, Mingyu Guan, Janamitra Devan

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As China transitions to a more consumption-led economy, Chinese incomes will grow and a massive middle class is expected to emerge.

Interactive exhibit

See how the demographics of the Chinese consumer are expected to change over the next 20 years.

The urban consumer markets, in particular, will develop rapidly, moving from 43 percent of the population today, to 69 percent by 2015, and 76 percent by 2025. Most important, this urban phenomenon will spread beyond China’s large wealthy coastal cities, to smaller cities further inland.

As the incomes of the new middle class rise dramatically, China will become the third-largest consumer market in the world by 2025. A key characteristic of China’s new middle class will be that these households will begin to spend a larger proportion of their income on discretionary items, thus significantly changing the patterns of spending in the economy.

It is important to note that the spectacular rise of China’s urban middle class, and its consequent impact on consumption, does not depend on major changes in Chinese savings behavior or on particular government policies (although certain policies could accelerate or slow the process). Even the impact of varying future growth rates tends to alter only the timing of these developments, not whether they happen at all.

McKinsey Global Institute

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About this research

This report draws on applied research carried out by McKinsey consultants. To learn more about our expertise please visit Mckinsey Global Institute, Shanghai. Mckinsey Global Institute,