Consumers remain confident in first quarter

"Chinese consumers' strong purchase intentions also contributed to the increasing importance of the service industry to China's overall GDP, which is essential for the ongoing restructuring of the economy from investment-led to domestic consumption-driven," said Yan.

A study by Australia and New Zealand Banking Group Ltd and Melbourne-based Roy Morgan Research Pty Ltd showed similar trends: Chinese consumer confidence is strengthening in small and medium-sized cities and remaining stable in large metropolitan areas.

Consumer confidence soars in Nielsen index

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By 2020, China's consumption will account for 44 percent of its GDP, the joint study found. It also said that the Chinese consumer market will be 70 percent of that of the United States by then, compared with 40 percent now.

The fast-growing middle class will also help boost retail sales, with about 100 million middle-class households entering the consumer market, according to Liu Ligang, economist with ANZ.

Meanwhile, Nielsen's survey indicates convergence among cities of various sizes and in different regions.

Lower-tier cities are catching up with first-tier cities in terms of consumer optimism, Nielsen said. From a regional perspective, consumer confidence levels are rising fast in the western region of the nation, in particular, the city of Chongqing and the provinces of Sichuan, Guizhou, Yunnan and Shaanxi, and the Guangxi Zhuang autonomous region.

For 17 FMCG categories measured by Nielsen, sales growth in China's midwest is at least twice as fast as the national average. In certain categories such as juice and toner, the gap is even wider.

"As consumers move up the consumption ladder, they are ready to spend more.

"The key to gain their wallet share lies in manufacturers and retailers finding the right products, at the right time, and through the right channels to reach these new and eager consumers," Yan added.

Zhu Wenqian contributed to this story.

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