China's Service-Based Spending Is The New Gold Rush For Western Firms
Economists have been advocating for Chinese consumers to increase their spending for years, but the country still has a way to go. Consumer spending as a percentage of GDP remains relatively low, at less than 50%, which is below the US average of around two-thirds.
However, according to John Quelch, executive vice chancellor at Duke Kunshan University in China, there's still plenty of room for growth – especially in services rather than finished goods. "Culture and heritage, media, entertainment, sports events, and travel are being encouraged by the government and delivering to consumers," he notes.
The shift towards service-based spending is evident, with 67% of the population now living in urban areas, compared to just under a fifth in 1980. This has resulted in limited space for large appliances and household goods, thus limiting consumption at home. China's Commerce Minister Wang Wentao noted that the country's growth of 6.2% in sales of retail services in 2024 exceeded the increase in sales of retail goods by three percentage points.
One promising area is travel, with young people gravitating towards experiences over material goods. Quelch cites his own weekend travels in China as an example – most passengers on flights are under 30 years old and traveling to visit friends or relatives, museums, landmarks, or concerts.
Western companies are benefitting from this shift, with foreign firms like Merlin Entertainments seeing success with the Legoland Shanghai Resort. Meanwhile, Shanghai Disney Report plans for a fourth themed hotel. However, savings rates in China remain relatively high due to limited social safety nets, and concerns around the Western model of economic development that prioritizes consumption over environmental sustainability.
Quelch emphasizes that there's good consumption, high-quality consumption, and low-quality consumption – with the latter aggravating carbon footprints. As China transitions to a more service-based economy, "increased consumer spending on services offers a great opportunity for Western companies," he says.
Economists have been advocating for Chinese consumers to increase their spending for years, but the country still has a way to go. Consumer spending as a percentage of GDP remains relatively low, at less than 50%, which is below the US average of around two-thirds.
However, according to John Quelch, executive vice chancellor at Duke Kunshan University in China, there's still plenty of room for growth – especially in services rather than finished goods. "Culture and heritage, media, entertainment, sports events, and travel are being encouraged by the government and delivering to consumers," he notes.
The shift towards service-based spending is evident, with 67% of the population now living in urban areas, compared to just under a fifth in 1980. This has resulted in limited space for large appliances and household goods, thus limiting consumption at home. China's Commerce Minister Wang Wentao noted that the country's growth of 6.2% in sales of retail services in 2024 exceeded the increase in sales of retail goods by three percentage points.
One promising area is travel, with young people gravitating towards experiences over material goods. Quelch cites his own weekend travels in China as an example – most passengers on flights are under 30 years old and traveling to visit friends or relatives, museums, landmarks, or concerts.
Western companies are benefitting from this shift, with foreign firms like Merlin Entertainments seeing success with the Legoland Shanghai Resort. Meanwhile, Shanghai Disney Report plans for a fourth themed hotel. However, savings rates in China remain relatively high due to limited social safety nets, and concerns around the Western model of economic development that prioritizes consumption over environmental sustainability.
Quelch emphasizes that there's good consumption, high-quality consumption, and low-quality consumption – with the latter aggravating carbon footprints. As China transitions to a more service-based economy, "increased consumer spending on services offers a great opportunity for Western companies," he says.
anyway western companies are already reaping the benefits and i think it's dope to see them diversifying their portfolio with these service-based ventures but at the same time we gotta consider the environmental impact of this new gold rush 
It's about time someone talks about this shift in China! I mean, have you seen the lines at Shanghai Disney Report? 
It's crazy how young people are prioritizing experiences over material goods. I'm not surprised that Western firms like Merlin Entertainments are reaping the benefits - who doesn't love Legoland?! 
But seriously, it's interesting to see how China is adapting to a more service-based economy. I do worry about the environmental impact, though... we need to make sure we're promoting sustainable consumption over just high-quality spending. 
Maybe Western companies can offer eco-friendly options that appeal to Chinese consumers? 
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. I think what's really happenin' here is that people are just startin' to get more money and want to experience life, you know? Travel, culture, stuff like that. So, yeah, it's a good thing for Western companies, but we need to keep an eye on the environmental impact, 'kay? 
I've been to Shanghai a few times and can attest that it's getting better and better in terms of attractions and shopping options 
let's keep supporting sustainable and eco-friendly consumption practices, but also enjoy the awesomeness that China is bringing to the table 
please... they're just using us as a cash cow 
... they're just taking advantage of china's gullible consumers who are desperate to upgrade their lives. it's like, we're not even seeing the big picture here. 
And did you hear about this travel thing? Like, most people under 30 are traveling just to visit friends and family or go see some concerts? That's so different from when I was young...
. I mean think about it - 67% of the population living in urban areas means they're always on the go and looking for things to do, see or experience. It's no wonder foreign companies are jumping at the chance to cash in 
. But at the same time, I'm a bit concerned about the environmental impact of this shift towards service-based spending 
but still, western firms are makin bank! 
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and i'm totally obsessed with shanghai now! i went to legoland with my family and it was literally the best day ever 
but what's crazy is how many people are traveling for experiences over material goods – it's like, so cool that young ppl in china are prioritizing fun over stuff 
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we were all about the 4-wheeler and a big backyard, but nowadays it's all about experiences 
Western companies are killing it with them Legoland and Disney resorts 
. The thing is tho, we gotta be mindful of the environmental impact 
. We don't wanna see China follow in our footsteps and end up with a carbon footprint that's, like, totally astronomical 
. Maybe they'll find a way to balance consumption with sustainability 
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- now it's time for them to show us what they've got 
they're trying their best to shift towards service-based spending & it's actually kinda cute how they're encouraging ppl to travel & experience stuff rather than just buying more material goods 
but at the same time, let's not forget about the environmental impact of all those planes & theme parks... we should be thinking about sustainable consumption too 
. Shanghai's got some sick resorts like Legoland and Disney 
. But, gotta be real, low savings rates & environmental concerns are still a thing. I don't know how sustainable this growth is in the long run...
But, savings rates in China are still pretty high due to limited social safety nets, which is concerning about that whole consumption vs environmental sustainability thing 
. Anyway, here's some more stats for you:
, and it got me wondering if the demand for such activities is really going to be huge in China... like, people are already raving about Legoland Shanghai Resort, but what about when they get bored with theme parks? 
. And speaking of travel, have you guys tried booking flights for less than 30 days in advance? It's always cheaper!