In China, Even Small Cities Spend Big

The Wall Street Journal China Real Time blog reports that it’s not just consumers in Beijing and Shanghai who spend big in China, but their Tier 2 neighbors as well:

Up to now, many global companies, especially luxury brands, have focused first on building a presence in China’s biggest cities such as Beijing and Shanghai — called Tier 1 in marketing-speak — that boast a population of 8 million or more. The thinking? The bigger the city, the higher the earning power and the more money there is to spend on luxury goods.

Part of that theory is true – people living in Tier 1 cities earn almost twice as much as those living in Tier 5, undeveloped small cities with a population of 600,000 or less, according to a recent survey by Synovate, a global market research firm. In Tier 1 cities, the average monthly income is 6,300 yuan (US$926) compared with an average 3,400 yuan (US$500) earned in Tier 5 cities.

But the report also shows that despite the income discrepancy, people in smaller cities spend just as much on clothes, food, entertainment and health and fitness as their big-city cousins.

“Tier 1 earnings are high but then so is the cost of living,” said Steve Garton, Synovate’s executive director. “Lower-tiered cities have a higher purchasing power.” The report surveyed more than 68,000 adults aged 15 to 64, in 66 Chinese cities across all five tiers.

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