China’s booming economy may prove to be one of the keys to the global economic recovery. Though exports are down, domestic spending is up - a boon to other export nations, including the U.S.

 

The International Monetary Fund (IMF) said the Chinese government’s response to the global financial crisis was effective, and that increased domestic demand would allow it to meet forecasts of growth at about 9.5% annually through 2012.

 

IMF acting managing director John Lipsky affirmed that China’s performance is greatly benefitting the world economy. China’s good fortunes mean good news for those brands exporting to the nation of 1.3 billion people.

 

The U.S. exports $100 billion in goods and services to China each year, making it America’s largest trading partner after Canada and Mexico. Those exports support more than half a million U.S. jobs. In the years ahead, as China increases its consumer economy, that could translate into millions of U.S. jobs designing, manufacturing or selling goods and services to the Chinese. The United States and China share “one of the most important trade and economic relationships in the world,” as the White House stated recently.

 

A positive economic outlook also encourages Chinese consumers to keep spending their hard-earned money. More than 8 out of 10 Chinese consumers (81%) say current economic conditions in their household are “very” or “fairly good.” More than two-thirds (69%) feel the same way about country’s economy. And a majority (53%) is bullish on the global economy, according to the CCI and Cotton Incorporated Chinese Consumer Survey.

 

In the more populated, urban tier 1 and 2 regions, 78% of Chinese consumers say current economic conditions are “very” or “fairly good” in China, and 62% feel the same way about global economic conditions. Yet compare that to the more agricultural, rural tier 3 and 4 regions, where just 62% felt “very” or “fairly good” about China’s economic conditions, and 48% felt likewise about global economic conditions.

 

“The good news is that income is rising faster than inflation, particularly in rural areas, and people’s living standards continue to improve,” says Mitch Barns, president of Nielsen Greater China. “As a result, we continue to see strong growth in marketplace demand, even in discretionary categories.”

 

That even translates to clothing purchases, according to the Chinese Consumer Survey; the majority of Chinese consumers have purchased at least as many clothes as last year. Six of 10 are buying the same amount as a year ago, 22% are buying more, and just 18% are buying less. Those living in tier 4 areas are significantly more likely than other consumers (31% vs. 18%) to buy more clothing than a year ago.

 

Further, the Chinese Consumer Survey found 22% of shoppers are buying higher priced or higher-end apparel than they did 12 months ago, and those living in tier 3 regions are significantly more likely than those living in the other tiers (29% vs. 19%) to buy higher priced apparel.

 

The Consumer Survey found Chinese consumers dedicate about 10% of their budgets to apparel and home textiles. Chinese consumers shop for apparel about once every four months, spending about $264 annually on clothing for themselves. In this respect, they lag behind their Western peers in the U.S., where consumers shop for apparel twice a month in stores and once per month online, and spend about $678 annually.

 

The Chinese may well catch up, though. As the McKinsey Quarterly recently pointed out, China will account for about 20%, or $27 billion, of global luxury sales in 2015. The firm’s research reveals that even during the global recession in 2009, sales of luxury goods in the mainland rose by 16%. This figure was down from 20% growth in previous years, but far better than the performance of many other major luxury markets.

 

On the other hand, there could be a potential snag in the growth of luxury: April ushered in a new suppression on luxury advertising in Beijing. It forbids terminology like “royal,” “luxury” or “high class” in outdoor billboards, and words that “promote hedonism or the “craven worship of foreign products.” The aim is to conceal the widening gap between China’s wealthy and poor.

 

These mandates, though, have not deterred the many Western-based luxury brands that have expanded into China in recent years. Louis Vuitton, Chanel and Gucci were the three most desired labels in China last year, according to a Bain & Co., survey. The Chinese also seek out goods that emphasize their own culture, so brands like Richemont Group’s Shanghai Tang and Hermes’ Shang Xia may have a lead in that regard.

 

Today, China’s consumers prefer to shop at department stores (43%), specialty stores (36%), chain stores (26%), independent shops (25%) and hypermarkets/warehouse clubs (22%), according to the China Consumer Survey. Women are significantly more likely than men to visit department stores (45% versus 39%) and independents (31% versus 18%).

 

Shaun Rein, founder and managing director of the China Market Research Group, says women have become a major driving force behind China’s economic and political growth. “Not only are they exerting influence on decision-making in their own homes, they’re also making purchase decisions for their parents.”

 

Rein adds that women prefer to buy premium brands out of concern for quality, and that translates to fiber content, too.

 

The Consumer Survey reports 78% of Chinese say cotton and cotton blends are their favorite fibers to wear. And 76% say cotton and cotton blends are the fibers best suited for today’s fashions. In comparison, just 11% say that about wool, and a mere 4% about silk.

 

With more disposable income and an eye for quality and natural fibers, Chinese consumers are well-poised to bring about a retail revolution.

 

“Chinese consumers are resilient,” Nielsen’s Barns says. “While their confidence may have been initially shaken by inflation, they have accepted the new higher prices on certain daily items and adjusted quickly.”