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Many companies are looking for ways to cut costs and maintain profitability, while most consumers are choosing lower-cost items over luxury goods. The new “buy green” trend. Because environmentally friendly products tend to cost more to produce, businesses and consumers often forego making or buying green products, especially during tough economic times. Despite the higher initial costs, however, China – its government and people – is beginning to embrace a more sustainable development model. The economic downturn has affected business operations and consumer preferences significantly.

Recent research and studies show that Chinese consumers are becoming more interested in environmentally friendly practices and products. The Greendex Survey, sponsored by the National Geographic Society and Globescan Inc., measures green consumer behavior by scoring people’s responses about their consumption of housing, transportation, food, and goods. Compared to 2008, more Chinese are repairing rather than replacing broken items, using their own shopping bags, avoiding excess packaging, buying green products, and recycling. China ranked third on the list with a Greendex score of 56.7, up 1.5 points from the previous year. According to the survey, Chinese consumers are among the most concerned about the environment. The 2009 results showed an increase in green consumer behavior in 1 3 of the 1 7 countries surveyed. Eightyone percent of respondents are willing to pay more for energy- saving products, and 69 percent say they try to reduce their environmental impact.

Consulting LLC surveyed industry leaders and more than 600 consumers throughout China to examine the change in consumer attitudes toward environmentally friendly products. Seventy-five percent of Chinese respondents would pay no more than a 10 percent premium for green products now and no more than a 15 percent premium if economic conditions improve. The survey also showed that price is still the deciding factor when it comes to buying green. Consumers in third-tier cities showed less interest in buying green products than those in wealthier cities, perhaps indicating that as incomes rise, so will the demand for green products. More than 80 percent of respondents said that they would be willing to purchase energy-saving products, and two-thirds of those who were unwilling to pay more for green products said that they would be willing when economic conditions improve. Also in 2009, L.E.K.

Roland Berger Strategy Consultants GmbH had a slightly different take on consumer preferences. The firm’s 2009 report surveyed Chinese consumers across the country – from “megacities” down to third-tier cities – and found that roughly 85 percent of respondents in all locations said they try to avoid buying products made by companies that they know harm the environment. The report also showed a high level of willingness to choose green products across different age groups (ranging from 91 percent to 93 percent of respondents from ages 1 8 to 64). The report concluded that concern for the environment is equally widespread across all demographics of Chinese consumers.

The “home appliances to the countryside” program gives farmers a 1 3 percent subsidy on purchases of certain home appliances and has recently expanded to include items such as DVD players, electric bikes, and electric cookers. The State Council announced last December that it would continue to offer subsidies it had introduced in early 2009 to encourage purchases of new home appliances such as air conditioners, computers, refrigerators, televisions, and washing machines. (The subsidy amount depends on the product’s energy-efficiency level.) China will expand the number of cities that participate in the subsidy programs in 2010. The PRC government provides various subsidies and preferential tax policies for consumers who trade in old products for new, energy- efficient models. In particular, the government is focusing on boosting sales in rural areas.

(Though definitions of “middle class” vary, most are based on income, occupation, and education level.) The majority of China’s middle class falls between the ages of 25 and 44, is better educated than the rest of the population, and spends a higher percentage of its income on nonessentials. As China – and the rest of the world – puts greater emphasis on sustainable living, the country’s middle class is the largest consumer base for green products. As consumers, they are willing to pay more for higher-quality goods and more inclined to try new, trendy products (see the CBR, January- February 2009, p.38). The Chinese Academy of Social Sciences recently reported that China’s middle class makes up 23 percent of the country’s urban population. The rise of green consumer behavior appears to be related to the growth of China’s middle class, itself boosted by rapid urbanization and rising incomes.

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