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Top Trends in China for 2017

Internet Users in Small Cities and Rural Areas Will Grow

No. 1. The Rise of the Rural Consumer

As internet user growth reaches its saturation point in urban China, future growth will come from rural areas. The Chinese government has made the development of rural infrastructure one of its highest priorities to hasten more equitable income distribution and fuel domestic consumption. The Ministry of Commerce reports that the rural online market nearly doubled to RMB353 billion ($51 billion) in 2015. According to JP Morgan, the tier 1 cities of Beijing, Guangdong and Shanghai will only count for 10.6 million of the 159.9 million new internet users expected between 2015 and 2018. The balance will come from smaller cities and rural areas.

No. 2. Virtual Reality Will Make Gains

In 2016, virtual reality demos attracted large crowds at shopping malls. Consumers experimented with the technology at "VR cafes." In 2017, the pace of commercialization will pick up. GfK forecasts that retail sales of virtual reality (VR) device retail sales in China will grow from RMB650 million in 2016 to RMB1.6 billion in 2017. Virtually all key domestic internet firms like Alibaba, Tencent and LeEco will continue to invest heavily in VR in 2017. As hardware technology improves, competition will shift to content.

No. 3. Luxury Goods Will Rebound

Luxury product sales are likely to continue to rebound from a slowdown in 2014 and 2015. Still, brands will continue to tinker by offering more understated designs to suit the changing taste of Chinese consumers, who have become more discerning and seek more unique and personal products. Chinese consumers will continue to travel overseas for luxury goods, partly for cheaper prices. But local shopping for luxury goods is likely to rise, too, as price differences fall and the government levies higher cross-border taxes.

No. 4. No Pause for Cross-Border Ecommerce

Thanks to an increase in disposable income and demand for high quality and authentic products among consumers in China, cross-border ecommerce will continue to grow. As consumers in China gain making cross-border purchases look for them to increase, especially with platforms offering an ever-increasing variety of product offerings.

No. 5. Domestic Brands Make Their Mark

In the past year, domestic smartphone manufacturers like Huawei, Oppo and Vivo saw dramatic increases in shipments and ate into the market share of foreign competitors like Apple and Samsung. Chinese consumers now believe that locally manufactured smartphones are just as good as their foreign counterparts, and sometimes offer a better value. This change in perceptions is not limited to just smartphones. A McKinsey study conducted in 2016 found that Chinese consumers believe that homegrown brands from certain product categories are already a match for overseas competitors. However, international brands still rule in categories like food and beverages, dairy, and personal care and beauty products.

No. 6. Travel Won't Always Mean Crossing Borders

Domestic travel within China will be more in vogue as local infrastructure improves and government policies help to increase consumption. China's state planner, the National Development and Reform Commission, recently announced that the country aims to inject RMB2 trillion ($290 billion) into the domestic travel industry by 2020, with some help from private investors.

— Man-Chung Cheung

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