The Chinese Consumer Market: Opportunities and Risks
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About this ebook
- The first book is in English made by Chinese researchers with a Chinese viewpoint of developments
- Provides the management implications in different sectors of the Chinese economy
- Predicts future trends
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The Chinese Consumer Market - Lei Tang
The Chinese Consumer Market: Opportunities and Risks
First Edition
Lei Tang
Chandos Publishing
Oxford · Cambridge · New Delhi
Table of Contents
Cover image
Title page
Copyright page
About the author
1: Chinese consumer trends
Introduction
Chinese traditional culture and its values
Some essential aspects of Chinese culture
The major consumer segments in China and their trends
Conclusion
2: The Chinese automobile market
A history of China’s automobile industry: three phases
The major Chinese automobile manufacturers
Local producers may copy designs, especially for spare parts
The current automobile market
Importing and exporting
Market opportunities and risks
Main regulations of the Chinese auto industry
The leading exhibitions of automobiles and parts in China
Understanding Chinese vehicle buying preference
Female consumer segments
Conclusion
3: The cosmetic sector in China
Introduction
Market overview
Competitive situation
Major cosmetic players by product sectors
Chinese cosmetic consumers
Market opportunities and risks
Distribution channels
What’s the challenge for newcomers?
How to access Chinese cosmetics market?
4: Chinese Internet consumer behaviour
Introduction
History of the Internet in China
Current market growth and statistics
Case study: main Internet companies
Why e-commerce works well in China?
Chinese Internet user characteristics
User behaviour and attitudes
China’s mobile Internet
Chinese Internet opportunities and risks
Conclusion
5: The Chinese mobile value-added services market
Introduction
Current Chinese mobile VAS market
Mobile VAS value chain in China
The significant role of Ministry of Industry and Information Technology (Bernhard, 2006; Tang, 2006)
Some main applications in the market
Opportunities and risks in VAS market
Case study: Rock Mobile (Peng Luo, 2005)
New trend in mobile VAS market in China
The future of the VAS market
Three key factors for the future
Conclusion
6: The Chinese media market
Introduction
Media structure in China
Current media market situation
Main factors driving growth and change
Advertising in transition
Opportunities and risks in China’s media market
Is mobile television ready in China?
7: The Chinese 3G market
Introduction
Current situation of 3G in China
TD-SCDMA: what happened exactly?
What is the difference between China and Europe in terms of 3G?
Restructuring of Chinese telecom sector
Where are 3G Chinese consumers?
Conclusion
8: The Chinese wine market
Introduction
History of grape wine in China
Chinese wine producers and their structure
Current wine market in China
Major wine regulation in Chinese market
Behaviour of Chinese wine consumer
How to enter the Chinese wine market
Constraints to selling wine in China
Conclusion
9: The Chinese real estate market
Introduction
Current real estate market in China
Legal issues in real estate development and investment
Opportunities and risks for foreign investments
Conclusion
10: The Chinese pharmaceutical products market
Introduction
Development history of the Chinese pharmaceutical industry
Current market situation
Opportunities and risks in Chinese pharmaceutical industry
New consumer trends in pharmaceutical industry
Conclusion
Note
11: The Chinese tourism market
Introduction
Current situation in tourism industry
Chinese traveller behaviour
Key outbound travel segments
Spending patterns of Chinese travellers
Opportunities and risks in tourism
Conclusion
Conclusion
Abbreviations
Index
Copyright
Chandos Publishing
TBAC Business Centre
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Station Lane
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Oxford OX28 4BN
UK
Tel: + 44 (0) 1993 848726
Email: info@chandospublishing.com
Chandos Publishing is an imprint of Woodhead Publishing Limited
Woodhead Publishing Limited
Abington Hall
Granta Park
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Cambridge CB21 6AH
UK
www.woodheadpublishing.com
First published in 2009
ISBN:
978 1 84334 332 5
© L. Tang, 2009
British Library Cataloguing-in-Publication Data.
A catalogue record for this book is available from the British Library.
All rights reserved. No part of this publication may be reproduced, stored in or introduced into a retrieval system, or transmitted, in any form, or by any means (electronic, mechanical, photocopying, recording or otherwise) without the prior written permission of the Publishers. This publication may not be lent, resold, hired out or otherwise disposed of by way of trade in any form of binding or cover other than that in which it is published without the prior consent of the Publishers. Any person who does any unauthorised act in relation to this publication may be liable to criminal prosecution and civil claims for damages.
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Printed in the UK and USA.
About the author
Dr. Lei Tang was born and brought up in China. After having received the bachelors degree in China, she moved to France.
She received the Ph.D. degree in science management from an accredited French public institution, Institut National des Telecommunications (www.int-evry.fr). Currently, she is working as an assistant professor in marketing and strategy department of a school of business in France.
Her education and research interests straddle between marketing management and telecom engineering, making marketing principles accessible to engineering and reaching out to practitioners in the chosen application fields.
Her current research goals mainly focus on Technology adoption and Innovation diffusion from an international comparative perspective – consumer behaviour with its technological, intercultural, anthropological and sociological aspects – that is mostly business-based. Her future work seeks to develop MVNO business models, mobile advertising, mobile payment and other killer mobile applications. Her interest in Chinese business (domestic and international) is attributed to her Chinese origin. She has undertaken consultancy work and research projects for many companies.
The author may be contacted via the publishers.
1
Chinese consumer trends
Introduction
The Chinese consumer market is huge and offers enormous potential opportunities. China has been the world’s leading producer of many industrial materials such as steel, copper, aluminium, cement and coal for several years. As a resource consumer, China surpassed Japan as the globe’s second largest importer of petroleum in 2005 and as the world’s second largest auto market in 2006, with total sales of 7.2 million vehicles and a production level of 7.3 million. In 2007, China also became the world’s top producer of merchant ships. Simply phrased, China is an economic superpower.
China’s rise as an economic superpower is likely to pose both opportunities and challenges for the world trading system. The rapid increase in consumer income is making China a huge market for a variety of goods and services, and its abundant low-cost labour is leading multinational corporations to shift their export-oriented, labour-intensive manufacturing facilities to the country. Meanwhile, developed and developing nations are concerned that China’s FDI is coming at the expense of FDI in their own countries and that they have not only lost domestic manufacturing jobs to China, but also have to face the economic pressures of pitting their products against cheaper Chinese products.
Chinese consumers are in the midst of an economic boom and a lifestyle revolution. The Chinese have emerged from prolonged global isolation and lack of consumer choice to becoming the world’s fastest growing economy. From affluent urban youths to mobile professionals to the rural elite, consumers are hungry for creative products and services to satisfy their emotional, intellectual and social needs (Figure 1.1).
Figure 1.1 Consumer price index in China Source: China Statistical Yearbook, 2007.
Several things will, or may, happen in the near future that will hasten the development of this huge consumer market. These include increased foreign interest in China’s retail sector; possible revaluation of the Chinese currency; the Chinese government’s efforts to shift the sources of economic growth from investment and exports towards consumer spending and the accelerated reform of China’s banking system, which will result in a bigger and more efficient market for consumer credit.
In China, consumption is currently only 50 per cent of its gross domestic product (GDP), which is way below the 65 per cent norm in most major economies. Put another way, 20 per cent of the world’s population accounts for only about 3 per cent of total global consumption. The potential of the Chinese consumer could well be one of the greatest opportunities for the global economy in the 21st century.
When doing business in China, it is important to understand traditional Chinese culture and consumption behaviour.
Chinese traditional culture and its values
Culture is of critical relevance to marketers in China because successful strategies cannot be developed without taking into account the specific features of the regional culture. Relationships and group orientation are deeply rooted in the culture that permeates all aspects of Chinese society. Confucianism, Taoism and Buddhism have shaped Chinese traditional cultures (Zheng, 1997), as these three doctrines were an important part of daily life in old China and are so even today.
Confucianism and its core beliefs
Confucianism, which developed from the teachings of Confucius or Kung-fu-tzu, was the most influential Chinese religion. It was the state religion from the start of the Han Dynasty in 202 BC to the end of the imperial epoch in 1911. Confucius, a Chinese scholar and political figure, lived during feudal times (over 2,000 years ago). He established an ethical and moral system that governs all relationships: father and son, ruler and ruled, husband and wife, elder brother and younger brother and between friends.
Confucianism views the family as the basic unit of society. Certain reciprocal relationships and responsibilities must be observed to preserve harmony. A specific hierarchy is pragmatic, and Confucianism places the greatest importance on rank and age in all interactions. Saving face and not causing shame to another are important. Since the family is the core unit, all the actions of an individual reflect on the family when the virtues of kindness, righteousness, propriety, intelligence and faithfulness are practised (Table 1.1).
Table 1.1
Confucianism and core beliefs
Confucianism is the philosophy of living rather than a religion and may guide one’s life while one practices other religions, such as Taoism and Buddhism, without contradiction.
Taoism
Taoism is the most important strain of Chinese thought after Confucianism through the ages. Although almost entirely different from Confucianism, it is not contradictory. The Tao does not concern with affairs of the state, mundane or quotidian matters of administration, or elaborate rituals; rather, it encourages avoiding public duty to search for a vision of the transcendental world of the spirit (Table 1.2).
Table 1.2
The way of Taoism
Taoism is based on the idea that behind all material things and all the change in the world lies one fundamental, universal principle: the way of Tao, which is the interplay between five elements (i.e. metal, wood, water, fire and earth), and the interdependence between the macrocosm and the microcosm (e.g. man’s relation to the universe). This principle gives rise to all existence and governs everything – all change and all life. The purpose of human beings is then to live life according to the Tao, which requires passivity, calmness and non-strife, known by Taoists as ‘Wu Wei’ (Table 1.3).
Table 1.3
Taoism and core beliefs
When Yin and Yang embrace each other, they reveal that they are not a world that can be divided into black and white, but black in white and white in black, forming a unity (Figure 1.2).
Figure 1.2 Yin: dark, moist, feminine and Yang: bright, dry, masculine
Taoism is not a religion; it is a philosophy – a way of looking at life and a way of thinking about things. Taoists believe that if one looks at life and thinks about things in the right way, then one will be much happier.
Buddhism
Buddhism, though introduced to China from India between 58 and 76 AD, began to flourish only in the third century. It evolved around the teachings of Siddhartha Gautama, or Buddha, a contemporary of Confucius.
Buddhism believes that desire is the source of all pain and that pain can be overcome by suppressing desire through meditation.
The main Buddhist values are love, wisdom, goodness, calmness and self-control. Buddhists believe that people should try to end suffering; all things should be seen as having no self or essential nature. Nothing should be seen as literally existing or ‘standing apart’ from all other things in self-sustained independence. On the contrary, all things should be seen as arising interdependently and as ultimately empty of any permanently abiding essence. In ancient China, people thought of Buddhism as a code of behaviour that they could follow to lead them to Nirvana (Table 1.4).
Table 1.4
Buddhism and core beliefs
To conclude, these three doctrines form the basis of Chinese culture: Confucianism is concerned with human society and the social responsibilities; Taoism emphasizes nature and what is natural and spontaneous in man and the contribution of Buddhism is particularly noticeable in developing conceptions of the afterlife.
Some essential aspects of Chinese culture
Group orientation
Chinese culture ‘regards people as members of colonies, not as individuals’. This concept is reinforced by Confucian doctrines that emphasize ties of kinship and close personal relationships (Xing, 1995). The need to exist in groups is emphasized; the relationships among group members and correspondingly some ethical and moral standards to regulate their interactions are thereby defined. One important rule is that group members ‘should adopt group goals and opinions in exchange for reciprocal care and protection’ (Xing, 1995).
■ Respect your family’s elders
Within the family, the rule was ‘filial piety’, which is the household equivalent of respecting those who are superior in society. The widespread Chinese respect for age and seniority comes from Confucian values: an older person is often seen as more experienced, wiser and in some not clearly defined way, superior to those younger.
■ The family comes first, but the group matters
It often helps if one considers a Chinese person as being part of his or her family and group, rather than as a single individual. Major personal decisions such as a suitable career, which in the West would be made by the individual, are often made on a family basis. The group is seen as a source of strength and comfort, and business decisions are generally made on a consensus basis, within the framework dictated by the top person, whether the owner of the firm or the entrepreneur.
■ Respect authorities
The importance of belonging to and identifying with a group has a strong impact on the tolerance of humour and criticism. The Chinese do not find jokes about their country’s political leaders or policy funny; indeed such irreverence shocks them. The visitor should make a point of not making jokes about these things, or even about their own government or its policies, which in Chinese eyes would demean both the visitor and their family or group.
In Confucian China, people were educated and trained to know their place and to be content with it; deviations, criticism and rebellious behaviour were not to be tolerated.
Guanxi is one of the secrets to success in China
Guanxi, based on personal connections, is an important factor in Chinese culture; it is an implication of the earlier-mentioned collectivism.
Good Guanxi can affect other situations, even those in business connections. Within a Guanxi network, a good exchange could be anything of value to the members concerned, irrespective of whether it is legal or illegal, corruptive or noncorruptive. Hence, Guanxi cannot be limited to some aspects of a relationship alone.
Guanxi involves reciprocal obligation (Leung, Wong & Wong, 1993). If a person receives a favour, he or she is obliged to return it when requested. With favours one can also strengthen one’s Guanxi. When doing favours, one should consider the cost of