How demographic cycles are changing China's consumption patterns
From 2010 to 2022, the 20-39 age group was both the largest contributor to consumption growth and the primary factor in the consumption slowdown, research shows.
Many of you have probably heard enough about "boosting consumption," but bear with me — this consumption-focused piece might still offer fresh insights.
Today's newsletter features a research titled "Who Are the 'Main Driver' of Consumption: How Demographic Cycles Are Changing Consumption Patterns in China" (谁是消费“领头羊”：人口周期改变消费模式”) conducted by Dr. Lu Zhe 芦哲 and his team.
Dr. Lu is Chief Economist at Soochow Securities and Co-Director of the Institute for Financial Markets and Policy Research at Renmin University of China. He has worked at the World Bank's Washington headquarters.
The research breaks down income and expenditure across China's age groups and reveals how demographic shifts—whether viewed broadly or through structural lenses—are set to reshape consumption patterns.
Key takeaways:
The dual role of the 20-39 age group: This cohort represents the largest share of China's household consumption, driving growth from 2010 to 2018 (accounting for 30.3% of the total increase), but became the primary contributor to the consumption slowdown from 2018 to 2022 (contributing to around 44% of the decline).
This drop, particularly among the 20-30 group, correlates with rising youth unemployment, triggering a feedback loop of "employment → income → youth consumption → overall consumption".
Drawing from South Korea's experience, the narrowing educational gap between generations and the rising importance of work experience will shift China's highest-income age group to older cohorts. As a result, the peak of consumption will move to the 40-54 age group.
In the past decade, China's demographic peak and consumption peak have not moved in tandem, with demographic peak shifting right, but consumption peaking earlier. However, with the proportion of people aged 40-49 rising from 13.8% to 15.9% in 2025- 2030, the alignment of demographic and consumption peaks could boost overall consumption.
As consumption shifts from youth to middle-aged and elderly groups, the main consumer cohort over the next decade will shift from those under 40 to those over 40. However, the leading generations—those born in the 1970s, 1980s, and 1990s—will remain the same.
Below is the translation of the research's key conclusions. Please note that the translation has not been reviewed by Dr. Lu, and all bolded text was added by his team.
谁是消费“领头羊”：人口周期改变消费模式
Who Are the 'Main Driver' of Consumption: How Demographic Cycles Are Changing Consumption Patterns in China
Drawing on data from the China Family Panel Studies (CFPS) spanning 2010 to 2022, we have calculated income and expenditure across various age groups in China. Our analysis reveals that demographic shifts in the future — whether examined in aggregate terms or through structural lenses — are likely to exert some unexpected impacts on consumption trends. The key findings are as follows:
1. From 2010 to 2022, the age profile of household consumption in China generally exhibited an inverted U-shape, peaking between ages 30 and 40 before subsequently declining.
2. Two primary factors explain why consumption peaks between ages 30-40.
Major expenditures predominantly occur within this age range, including marriage-related expenses (at an average age of 30.2), home purchases (33.3), and vehicle purchases (30.5).
Consumption is largely driven by income. Chinese residents typically reach their highest lifetime earnings between ages 25-45, enabling greater discretionary spending. This aligns with patterns observed in the U.S., where income and consumption also peak between 45–54.
3. In China, the age profiles of household consumption expenditure and the average propensity to consume (APC) are inversely shaped: Consumption follows an inverted U-curve, peaking at ages 30-40, while the APC follows a U-curve, with higher propensities at both ends and lower rates in middle age.
This divergence stems from a lifecycle mismatch between consumption capacity and willingness to spend.
Ages 30–40: Despite a lower APC, higher earnings compensate for reduced spending propensity, driving elevated consumption.
Older adults: Conversely, retirees exhibit a higher APC but face sharply diminished incomes post-retirement, leading to lower absolute expenditure.
4. Aggregate consumption share: Individuals aged 20–39 accounted for the largest share of total household consumption in China, despite not being the most populous cohort. In 2022, while this group represented 26.7% of the population, it contributed 29.1% of total consumption—making it the highest-spending demographic.
5. Growth rates: The 20–39 age group has significantly contributed to the slowdown in consumption observed in recent years.
2010–2018: As the primary driver of consumption growth, this cohort contributed 30.3% of the total consumption increases, outpacing all other age segments.
2018–2022: A sharp reversal occurred, with this cohort accounting for ~44% of the consumption slowdown. The decline was concentrated among 20–30-year-olds, whose reduced spending aligns closely with rising youth unemployment. This suggests a clear transmission mechanism: "Employment → Income → Youth Consumption → Overall Consumption"
6. Consumption preferences vary by age group. Based on these differences, we categorize seven types of consumption into three groups:
Expenditures on clothing, transportation, communication, and household equipment and services. Consumption within this category follows an inverted U-shaped curve, peaking at ages 20-39 before declining.
Expenditures on educational, cultural, and recreational, as well as housing expenses. This category is featured by its non-monotonic trajectory following its peak. Educational, cultural, and recreational spending exhibits a dual-peaked pattern, with peaks at ages 15–19 and 40–44. The earlier peak corresponds to high school and early college years, while the later aligns with parental spending. Housing expenditure rises between ages 20–24, peaking at 25–29, when young adults entering the workforce focus on rental costs.
Expenditures on food and healthcare, characterized by elevated spending in the later stages of life. Food consumption is highest among children and the elderly, while healthcare follows a U-shaped pattern, steadily increasing with age throughout adulthood.
7. From "Left Shift" to "Right Shift": The Transition of Income and Consumption from Youth to Middle Age
In recent decades, China's income peak has shifted notably to the left. In the 1980s, the peak age was around 55; by 2012, it dropped to 35, and by 2022, it had moved to 25-29. Mirroring this income shift, the consumption peak shifted left, from 40-50 years old in 2010 to 25-29 years old by 2022. This shift largely occurred before 2020, making younger demographics the primary drivers of consumption growth in the years leading up to then.
The leftward shift is due to younger generations benefiting from higher education and opportunities in emerging internet industries. Meanwhile, in a rapidly evolving economy, the returns on traditional work experience for older generations have diminished, leading to higher incomes for younger cohorts.
Following South Korea's example, as educational gaps narrow, work experience will gain importance. This suggests China's income peak will shift rightward, leading the consumption peak to move toward middle age, with the 40-54 age group likely becoming the highest-spending cohort.
8. When the population peak aligns with the consumption peak: a more optimistic consumption outlook for 2025–2035. In the past decade, China's population and consumption peaks have shifted in opposite directions. While aging and declining birth rates have pushed the population peak to older age groups, the consumption peak has moved to younger cohorts. This misalignment hinders overall consumption growth, as the largest population group no longer aligns with the highest per capita consumption. However, from 2025 to 2030, the proportion of people aged 40-49 is expected to rise from 13.8% to 15.9%. If consumption peaks in this group as well, it will align with the population peak, leading to more optimistic consumption prospects. The same trend is expected from 2030 to 2035, offering significant growth potential for total consumption in the 2025-2035 period.
9. Beyond total changes, demographic shifts will also alter consumption patterns:
Expenditure categories favored by older adults—such as food and healthcare—are likely to increase their share within overall consumption.
Certain consumption categories may perform better during demographic "window periods." For example, between 2025 and 2030, the 15-24 and 40-49 age groups will see population growth, which could boost cultural and recreational spending, especially on education-related services like tutoring and vocational training.
As consumption shifts from youth to middle-aged and elderly groups, the main consumer cohort over the next decade will shift from those under 40 to those over 40. However, the leading generations—those born in the 1970s, 1980s, and 1990s—will remain the same.
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Risk Disclosures
Data Timeliness: Our analysis relies on CFPS survey data, which are currently available only through 2022. Because 2022 represented China’s second-lowest consumption trough (after 2020) due to external shocks, these figures may not fully reflect consumption patterns under more typical economic conditions.
Data Precision: Since official age-specific consumption and income statistics are unavailable, the current data are derived from CFPS survey results processed through appropriate econometric models. While these figures can reliably reflect broader trends, they may contain some measurement inaccuracies at finer granularities. Accordingly, this analysis focuses primarily on identifying major trends to minimize potential distortions. Nevertheless, as with any sample-based research, certain data reliability limitations remain inherent.
Scope of Analysis: Although this piece concentrates on the demographic determinants of consumption, many other factors—such as changes in the macroeconomic environment, fiscal and monetary policy, or the international landscape—also shape consumer behavior. Significant shifts in these areas could lead to deviations from the projections and conclusions presented here.