China’s anti-bling consumers

There aren’t many places in this town to spend money. Jiayuguan is in the Gobi desert, an outpost on the ancient Silk Road that linked Europe with the Orient. In the 1950s, some 50,000 construction workers nearly starved to death building the town’s steel mill, part of Mao Zedong’s Great Leap Forward.

Now this city of 200,000-odd people – about the size of, say, Milton Keynes and surroundings – has just got its first department store and fast-food chain. KFC, as it happens, which often goes where fast food has never been before in China.

It’s all part of the grand plan shared in Beijing and in company boardrooms around the world: to spread the habit of spending money to the farthest reaches of the Middle Kingdom. Let a billion shoppers bloom. The aim is to substitute consumption-led growth for the investment boom that has powered the Chinese economy for decades.

China’s newborn middle class is definitely establishing a foothold in small cities such as this. But will they behave like their big-city brethren, who are famous for spending all – if not more than – they earn each month? Will the habit of profligacy come as easily to consumers raised in a deep-rooted culture of thrift?

We’ve gathered an impromptu focus group of Jiayuguan’s new middle class at a local restaurant where diners jostle to get to the bowls of fish and fowl, sauces and condiments, used to flavour an each-man-for-himself hotpot. The restaurant is on the top floor of the new East Parkson department store, the first modern retail development in the city, next door to KFC.

At the table are four young professionals. Some are married and some single; some have flown the nest, others still live at home. All are confronting the challenges of getting ahead in 21st-century China. They grew up in Jiayuguan but most have spent several years working in big cities, where they learned how the profligacy thing is done. And most of them don’t want any part of it.

Jing Xi is a civil servant, engaged to be married and no fan of the materialistic lifestyle he witnessed during four years working in Shanghai, whose population of 23 million is more than 100 times larger than that of his home town. “I’m not the kind of person to spend all my money,” he says. “I’m saving for a house.”

Salaries are lower in Jiayuguan than they are in Shanghai, where Jing earned between Rmb7,000 and Rmb9,000 (£727-£937) per month as a software engineer. But there are benefits, too. “The cost of an apartment is cheaper,” says Jing. “So although our salary is only half or even less than half of that in coastal cities, our disposable income may be higher.”

He goes one better by living at home, where his parents cover all his costs – leaving Jing, who is 30, with enough savings to pay for one square metre of his dream property every month. “In Shanghai I could never do that.”

That’s because in China’s biggest cities, property prices have risen beyond the point where saving part of your salary each month is enough to get a foot on the property ladder. It’s no wonder some prefer handbags.

In Jiayuguan, where property prices remain affordable for ordinary people, the habit of thrift that Jing’s generation learnt from their parents – a habit shaped by decades if not centuries of deprivation – still makes sense.

Even new parents, like Zhi Hui, a 29-year-old employee of the local Jiugang steel company, find ways to save most of their salary – unlike parents elsewhere in China, who find the high cost of imported milk formula and other necessities can cost up to half their salary each month. Zhi lives with her parents, who pay for most of the baby’s things, so she can put half her income into savings – mostly corporate bonds, she says.

This cautious attitude produces the first slightly surprising conclusion around our dinner table: despite China’s penchant for western luxury brands, no one is holding their breath for Chanel to open a boutique in Jiayuguan anytime soon.

Wu Qingqing is 27, married, a civil servant and an avid bargain hunter on Taobao, the Chinese version of eBay. “I try to control myself to spend no more than Rmb1,000 (£104) on Taobao per month,” she says. But even with the Taobao outlay – which doubtless provided some of Wu’s outfit of sparkly blue T-shirt, pink baseball cap with gold-toned studs, and a Fendi lookalike handbag in royal blue and shocking pink pleather – she still saves Rmb3,000 (£312) every month.

“Personally, I don’t buy luxury goods, and very few of my friends would consider eating bread and water for months just to buy a luxury item that is barely used,” she says.

In China’s out-of-the-way cities, there simply isn’t much status to be gained by wearing the right labels. “People will all assume it is fake,” Wu says. In Shanghai, on the other hand, “people will buy them even if they cannot afford them.”

Even some of those who could shell out for Fendi or a Ferrari will not do so for subtle cultural reasons, says Wang Chunlei, another returnee from Shanghai. Conspicuous consumption is just that: it marks people out from the crowd.

“About 20 per cent of the population has reached the level where they could consume luxury goods,” Wang reckons. “But since it’s such a small population, and people around them don’t have luxury goods, then they will not want to assume a high profile among their peers. So the population that is actually willing to buy luxury goods is very small,” he says.

Despite a general wariness towards the getting-and-spending of their big-city counterparts, one trend catching on around our small-town dinner table is so-called “green” consumption. Jing Xi says that one brand he is willing to spend money on is The Body Shop, “because it has few chemical additives”. He prefers handmade soaps, which he buys online, because they are purer.

It’s still early days in Jiayuguan: the consumer revolution has only just begun. The town doesn’t even have a shopping mall yet – never mind a Prada. Small cities like this are where the future of western brands in China will be decided, retail analysts say, as it becomes harder and harder to make profits in the retail-saturated big cities.

But to judge from our diners, China’s unglamorous middle class is not exactly aching for the day the brands arrive. “I think we have a strong sense of happiness, living in a small city like Jiayuguan,” says Wu, the bargain hunter. “The consumption level is moderate, and what you can’t get in local stores is available on Taobao. There are no traffic jams. It takes only 10 to 20 minutes to get to the office, and house prices are acceptable for young people.”

In China these days, happiness is about more than handbags.

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Additional reporting by Zhang Yan.

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