One key demographic in China seemingly not affected by the economic slowdown are Chinese classified as "young free spenders" that account for 60% of spending growth this year.
A new report from global U.S. management consulting firm McKinsey & Company released Thursday estimates these big spenders account for a quarter of China's population of 1.4 billion persons.
While young free spenders keep on spending, a new category of Chinese consumers given the name "frugal consumers" slashed their spending across the board. Frugal consumers accounted for 10% of those surveyed. People in this demographic were more likely to have lower incomes and live in tier-one and tier-two cities said the report.
Chinese that said they weren't interested in spending rashly, even if they felt "rich," increased to 60% from 52% in 2017. Other consumer segments studied by the survey were spending less than they did before.
The overall slowdown in spending, however, has slowed retail sales growth this year to 8% compared to the 9% improvement in 2018, according to official government figures.
The McKinsey report said these young free spenders "have significantly boosted their purchases" from 2018 in nearly every category tracked by the report. Young free spenders helped boost the sales of the top 10 product categories.
Topping this list are fresh milk, skincare, yogurt and sportswear, all of which are in mostly bought by young people. Young free spenders are also driving the increase in spending, especially in categories focused on health and lifestyle.
McKinsey defines the young free spender demographic as young people that mostly live in China's less developed, lower-tier cities. These cities have cheaper living costs while placing less work stress on employees compared to peers living in major urban centers like Beijing and Shanghai. This advantage also gives young free spenders more time to kill and more disposable income to spend.
"What we do see clearly is increase in spending, particularly in categories that are focused on health and lifestyle," said Felix Poh, one of the McKinsey partners who wrote the report, to CNBC.
He said this trend goes beyond young free spenders, but they're clearly a big driver of this trend. Poh noted there are an increasing demand for personal trainers, more interesting classes that focus on the latest trends, Zumba, and others.
"What is clear ... you absolutely have to double down on this segment," said Poh. "They're likely going to be core to a company's marketing and sales growth going forward."
