Household Consumption in China: An Examination of the Utility of Urban-Rural Segmentation

China is rapidly moving towards becoming a market economy. Unlike its earlier communist era, China is experiencing increasing inequality in income distribution (see, e.g., Fang et al. 2002, Khan and Riskin 2001, Meng et al. 2005). In 2003, the per capita income averaged RMB2,622 for people living in rural areas and RMB8,472 for those living in cities (National Bureau of Statistics 2005). Consequently, many researchers have focused on the urban Chinese consumer for their research. Urban households are reputed to constitute the major portion of the Chinese “middle class” and to have disposable incomes that enable them to enjoy the fruits of economic development and industrialization much more than their rural counterparts. Research addressing these urban consumers has tended to consider urban China as a homogeneous market segment, contrasting it with rural China (see, e.g., Cui and Liu 2000, Sun and Wu 2004, McEwen et al. 2006). Other researchers have examined the dynamics of urban China (Yusuf et al. 2006) or particular products in the urban China market segment (Dickson et al. 2004). While the importance of these authors’ findings is not disputed, it is valuable to note that it is not necessarily correct to assume that the distinction between urban and rural consumers is static. This paper seeks to address this issue, first by reviewing the distinction between urban and rural Chinese consumers in terms of their demographic, socio-economic characteristics, secondly, by comparing the income, expenditure and savings patterns of urban and rural households, and thirdly, by ana- lyzing their expenditure and savings patterns and ownership of selected consumer durables, using income and urban-rural location as the basis for segmentation.