Chinese consumer confidence drops in cities, rises in rural areas

The report, jointly released by the China Economic Monitoring & Analysis Centre (CEMAC) of the National Bureau of Statistics and The Nielsen Company, is the result of a survey of 3,500 shoppers across the country.

Overall, consumer confidence increased one point to 109 after five quarters of continuous increase in China.

In the rural area, the index is 117, up six points from the last survey, which is attributed to the central and local governments' stimulation policies and an increase in income levels for farmers and migrant workers.

On the other hand, consumer confidence fell in urban areas. The index for tier one cities dropped five points to 101, and seven points to 98 for tier two cities. For tier three and four cities, the index was 100 and 104 respectively.

"After several consecutive quarters of increasing consumer confidence in China, it was inevitable that we would eventually see a pullback like the one we see this quarter with consumers in China's upper city tiers. Confidence cannot increase indefinitely. There is a limit," said Mitch Barns, Greater China president for Nielsen.

Increasing consumer prices and stock market volatility are believed to be two of the reasons for the drop in confidence in tier one and two cities.

Broken down by income, the confidence index rose with two and three points among low and mid income groups respectively, but dropped by seven points among consumers in a higher income bracket.

The report also finds that Chinese consumers are most concerned about their income, followed by health and education for their children. Other key concerns include rising food prices, healthcare, job security, parents and career development.