* Several consumer indices use different methodologies
* Consumers expected to play more important role in driving
* Rural, urban areas vary widely in outlook, patterns
(Adds Shanghai to dateline)
By Lucy Hornby and Anita Li
BEIJING/SHANGHAI, June 6 Fashion-conscious
Shanghainese Xing Chunhui spends her weekend window shopping,
pausing for meals or tea with friends, before going online to
see if she can get the same clothes cheaper.
Tracking her consumer behaviour and determining whether she
will do the same next weekend is a growth industry in China,
where public and private surveyors are battling to develop an
authoritative consumer confidence index.
Getting to know Xing -- and millions of shoppers like her --
is already a necessity for CEOs trying to sell into the China
market. If and when investment slows and China tips into
consumer-led growth, understanding her outlook could become the
key to calling the Chinese economy.
"Consumers are not the main driver of the economy now, but
at some point they will be," said Andrew Polk, economist for the
Conference Board in Beijing, which includes a Consumer
Expectations Index in its leading economic index for China.
"Even if consumption doesn't increase as a proportion of GDP
the level of consumption is going to grow, so it is something
worth understanding and tracking."
Graphic: NBS consumer confidence link.reuters.com/kyz58s
Graphic: PBOC confidence indices link.reuters.com/dab68s
Reuters Insider: China's shoppers link.reuters.com/nac58s
In the United States, consumer confidence indices, compiled
for decades, are closely watched as an indicator for spending
plans and also as a political barometer.
In China, consumer behaviour has altered dramatically,
depending largely on the generation and on geographical locaion
-- rural or urban.
While her grandmother stuffed every cent she saved into
Xing's piggybank, the younger woman spends more than half her
$10,000 annual salary on shopping, travel, beauty and eating
"I think the money I have is enough, so I may as well spend
it. I don't bother to save," Xing told Reuters. "Even if home
prices come down I can't afford to buy, but for everything else,
prices are going up, so there's no reason to hold back."
Xing's curious mix of free spending and bargain-hunting will
become more relevant as China's top-down, debt-driven focus on
investment yields to an economy driven by people like her.
The most official measure of consumer sentiment is a monthly
figure produced by the China Economic Monitoring & Analysis
Center, affiliated with the National Bureau of Statistics.
The NBS has tracked expectations since the 1990s, enlarging
its telephone survey to include rural consumers and a broader
base of city dwellers. An official at the centre declined to
specify how many people were captured in each survey.
The consumer confidence survey gives greater weight to a
consumer expectations component than to consumer satisfaction,
which gives it a forward-looking value. However, its relatively
late release to the public offsets that advantage.
The lack of full information about NBS methodology has left
the field open for rivals.
Corporations with their eye on the China market are not
waiting around for any one index to become established. Many
simply gather their own data.
China UnionPay has the simplest approach. Its Bankcard
Consumer Confidence Index, jointly compiled since 2009 with the
state-backed Xinhua News Agency, analyses spending as shown in
its customers' bank card bills. That naturally biases the sample
towards urban dwellers who use bank cards.
Marketing firm Aegis goes to more lengths. It interviews
66,000 Chinese in 88 markets, including all sizes of cities and
some in the country.
The quarterly survey tracks trends for its clients, often
global brands names. Second-tier cities, where multinationals
are making headway, account for about one-third of respondents.
"So far, there's no major trend emerging other than a
growing frustration with the rising cost of living," said Seth
Grossman, head of Vizeum Asia Pacific, an Aegis subsidiary.
Another favourite is a survey by the People's Bank of China,
which tracks six measures of current and future price
expectations and satisfaction. Fans of these surveys say they
are useful in anticipating inflation data.
Household consumption only accounts for a third of GDP,
which means that consumer confidence is drowned out by other
factors. Household consumption accounted for 71 percent of U.S.
GDP in 2010.
Most economists now rely more heavily on indicators of
investment activity. They argue that since investment accounts
for the lion's share of growth, that is still the data to track.
"Although we hope that consumption will become more
important, it's not the thing driving growth, not the most
volatile factor," said Patrick Chovanec, economist at Tsinghua
University in Beijing.
"Growth in consumption won't offset a collapse in
investment. It's a long-term story, but not what people watch
The NBS survey seems to capture something of the national
mood. It sank when the SARS disease spooked the public in 2003
and correctly reflected rockiness in the economy in early 2008,
long before the global financial crisis became a watchword.
NBS adjusted its survey last year to formalise a base effect
-- reflected in a sharp upward jump in March of last year.
Attempting to capture China's many regions and rural and
urban spenders -- each of which forms its own economy hundreds
of millions strong -- also makes it hard to correlate consumer
confidence with other national indicators, said Zhang Wentong,
technical director for market research firm Intage in Shanghai.
Intage produces a consumer confidence index published by
Market News International, focusing on 30 coastal cities, where
consumers are most likely to have extra cash. It asks 30
questions to 1,000 people in 15-20 minute telephone interviews.
Intage's narrower focus means results correlate well to
retail sales, stock market surges, real estate prices and auto
sales, Zhang said, although the lead time fluctuates between
three and six months.
"It's true that Chinese consumers are relatively optimistic
compared with other countries," Zhang said.
That has been the main finding of U.S. market research firm
Neilsen. It quarterly index of consumer confidence shows a
steady progression in optimism, though it says rural residents
have a brighter outlook than city folk.
Neilsen surveys 2,500 people though a mix of face-to-face
and online interviews.
ELBOWING OUT INVESTMENT
Investment accounted for a disproportionate amount of growth
over several years, as China frantically built roads, bridges,
mines and factories to make up for decades of stagnation.
That will someday give way to consumption patterns of a more
mature economy. Fixed asset investment hit its lowest level
since 2002 in the first four months of 2012, a "mere" 20.2
"At first glance, China is still a long way from having
consumption as a key growth driver," Peng Wensheng, an analyst
at investment bank China International Capital Corp., wrote
recently. He noted that household consumption fell to a record
low of 34 percent of GDP in 2010.
Still, a turning point could be near, he said. Consumption
accounted for 77 percent of GDP growth in the first quarter,
gaining as investment slowed. In wealthier eastern China, the
overall consumption ratio is starting to tick up, although waves
of new investment in central and western China are pushing the
consumption ratio there to further lows.
"This may indicate that China's long-term consumption
cycle has reached, or is close to, its inflection point," Peng
That should make economists want to get to know Xing better.
"This is the story of China for the next decade," said Polk,
of the Conference Board. "Either it's a story of the consumer,
or it's a story of collapse."
(Additional reporting by Gabriel Wildau and Jane Lee in
Shanghai; Editing by Ron Popeski)