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China Briefings

Reports on China issued by Samsung Economic Research Institute

Purchasing Power of Rural Residents

Purchasing Power of Rural Residents

Samsung Economic Research Institute Beijing Office

Nov. 11, 2011

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The income of rural residents has grown steadily since the 1990s. As their spending increase compared to income growth far exceeds that of urban residents, the income growth of rural residents will contribute to raising the country's consumption. With the basic demand met, consumption patterns of rural residents have changed, spending increasingly for their well-being which includes housing, transportation, communication, entertainment and education.

For the growth of the entire rural economy, the government needs to provide support with improvements in policies. It has announced the establishment a mechanism to raise rural income in the “12-5 Program,” implementing policies to favor rural residents with the purpose of raising their wages, transfer and property income. Such efforts are expected to bear fruit from the end of the 12-5 Program, narrowing the income inequality between urban and rural areas.

The most notable characteristic of rural consumers is that they seldom replace their belongings and are not loyal to brands. The most influential factor in consumption is price, followed by quality, while new features or brand recognition are not of great concern. Also, rural consumers make purchases mostly based on the opinions of their neighbors, relatives and friends.

To increase rural consumption, companies must understand the market, providing products catered to the needs of rural consumers with the focus on affordability and practicality, instead of brand value. Meanwhile, the government needs to introduce favorable policies while providing support to raise income, and nurturing the agricultural industry and abilities of rural residents.

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