I am a Canadian who has done consulting and training work in China. These are my observations of my most recent trips.
China is in the midst of rapid growth that will continue to transform the country into an economic powerhouse throughout this century. China can make quick moves, to create technology or transform cities, but with 1.2 billion people, it will take a long time for everyone in China to catch up. There are many layers of complexity within China, whether cultures, tiers of cities or the stark differences in generations. The older adults are living the simple lifestyle they learned in the 20th century. It is common to see 50 year olds riding basic bicycles to work or eating at small local eateries that do not look or feel safe in western standards. However, young adults are not only modern, they appear to be living in the future, beyond western standards. Everything is app based, e-commerce driven, global payments and QR codes for purchasing or learning more. While we have the odd retailer specific payment app here in the West, we do not yet have globally accepted pay apps that stretch across all retailers. On my two most recent trips to China, I have noticed a huge decline in retailers, restaurants or even or taxis that take Visa. Everyone is using Alipay, linked closely to the Alibaba e-commerce giant (market capitalization of $350B) who could take on Amazon (market capitalization of $450B) on the world stage. As much as we in the west are fascinated with Amazon, do you think you understand Alibaba enough to learn from them? Alibaba’s market capitalization has gone from $200B up to $356B in the last 12 months. A 78% gain in 12 months. Wow. The social media app of choice is WeChat with almost a billion active users. WeChat provides text messaging, hold-to-talk voice messaging, broadcast messaging, video conferencing, video games, sharing of photographs and videos, and location sharing. You can even exchange contacts with people nearby via bluetooth. Like Alipay, WeChat has a payment service that wants to be considered the digital wallet. When will these global payment systems become mainstream in the west? And who will own it?
Income disparity is vast, but signs of improving
In the last ten years, the average income for China has tripled. The problem is that it is still under $10,000 USD, compared with over $45,000 for many of the western nations it competes with. Within any statistics in China, there are layers of complexity. The biggest layer of complexity is around the dispersement of income levels. While people of the west are trying to figure out solutions of rich versus poor, the evidence is even more overwhelming in China. Yet with a high growth economy, they are starting to see the trickle down impact as wealth, helping the creation of a real middle class in China. It is expected that from 2012 to 2022, those in China making more than $34K US will increase from 3% currently up to 9%, and those in the growing middle class ($16K to $34K) will increase from 14% up to 54%. These are huge jumps that will likely continue for the entire century.
The growing professional workforce will be the biggest force of transformation of the economy. Reminiscent of America in the 1950s, Chinese parents are investing in the education for their children, as they realize their children will be richer 20 years from now than they are today. This was the root of the American dream.
The rapid growth of cities appears well planned
I loved my recent trip to Shenzhen, just across the water from Hong Kong. On a daily basis, thousands and thousands of Hong Kong residents stream across the border to work in Shenzhen. It’s not an easy commute going through border patrols and customs, to and from work each day.
Shenzhen is quickly transforming into a beautiful city. One of the most underestimated elements of China are the trees throughout the streets. When a westerner would think about cities of 25-30 million, we would normally think it must be a concrete jungle. Shenzhen in China is lined with gorgeous and rich trees. Similar to Shanghai of the french concession area. Keep in mind, Shenzhen did not even exist 20 years ago and today, it is home to 20-25 million people. This city is benefiting from smart urban planning.
Within the city, they have created neighborhoods for the rich, with some of the nicest malls you will find. Evidence of the disparity of income is everywhere. I went through a clearly affluent shopping mall in Shenzhen that would rival any high end mall in America. Hugo Boss, Coach, Sephora, Rolex, Lululemon. You name a brand and this mall had it. I browsed for prices and could not find any deals. Imported goods in China are a sign of prestige, yet you will have to pay for it through higher prices. There are 2,600 Starbucks throughout China. If these high-end items are considered badge brands in the west, imagine what a badge it is to confirm your social status as one who has made it in China. Further evidence was the cars on the road including Mercedes, BMW’s, Range Rovers, Ferrari’s and Audi’s. While China has recently become the #1 car market in the world, only those in the elite class are driving cars.
Most cities have bike rentals, where you slide in your visa and take a gentle ride to see the sights. In Europe and North America, it’s something tourists would use. In China, these bikes offer a much more functional need state and this is seen as a business that has been a disruption to transportation, so people can get to and from work. The bikes are not locked and they do not accept Visa. People here use WeChat or Alipay payment apps on their phones, to scan in the bar code on the bike and then pay and go where you need to go.
5 Questions for the future
As I look at the next 80+ years for China, here are the questions in my mind
- Will China make the shift a product driven economy to a brand driven economy?
- Can locally grown brands begin to push back against the influx of the imported brands?
- How will China close the gap on Marketing talent, to be strong on strategy, analytics, brand positioning, brand planning and creative marketing execution?
- Will China be able to move some of their successful platforms such as WeChat or Alibaba into the western markets? Will we ever see a global battle between Alibaba and Amazon?
- How long can China sustain such a growth mode before they need to make adjustments, and how will they handle the normal ups and downs of growth and recessions?
Here’s a Powerpoint presentation on how to get how to create a beloved brand, something for China to consider as they shift from product-driven economy to a brand-driven.
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