By Andrew Nelson

Chinese consumerism is on the march despite the spectre of rising inflation in the world's most populous country. A recent survey of Chinese consumers conducted by McKinsey & Co shows Chinese consumers are more confident this year than last and that consumerism is on the rise.

Increasing inflation levels are taking a bite, with McKinsey noting real growth in retail consumption has slipped to 8.5% in 2010, which is down from 9.4% in 2009. However, the survey still found that consumers are more confident about their financial future.

The survey indicates that 58% of respondents are expecting their incomes to rise next year, compared with 39% in 2010. And it's not a long stretch to think that this expectation of higher income will most likely affect buying behaviour in a positive manner.

Last year's data show that consumers offset higher spending in one category by spending less in others. This year, however, McKinsey notes the number of Chinese that are spending more, buying greater quantities, buying more often and purchasing more expensive items is holding steady.

About half of the Chinese surveyed said they were spending more because things were more expensive, a sure sign of the creeping level of inflation. Yet a solid 35% indicated they were trading up and buying bigger, better, stronger and faster.

In past years, one of the main drivers of the Chinese consumer economy was first time entrants into the market. First time toothpaste buyers, first time Nike buyers, first time Coke buyers, first time computer buyers and so on.

Personal electronics make for a good example, with 23% of respondents saying they had bought such goods for the first time in 2010. At the same time, if you look at developing regional centres like the Chengdu area, McKinsey notes that 15% of respondents said they had just this year started buying personal care items like skin care products, hair care products etc.

In more developed areas, the personal care new buyer number was at just 3% in 2010. This clearly shows that first time buyers, while important, are increasingly taking a back seat. More importantly, the data show that last year's first time buyers are now becoming ongoing consumers and this number of ongoing consumers is continuing to grow.