Foreign Investors Look To China’s Underserved Interior For New Opportunities For Expansion, Tapping Vast Potential
China's coastal east has benefitted most from the country's 30 years of dramatic growth. But the inland west may be catching up (albeit slowly)
The images that many in the world conjure up when thinking of 21st century China are a mixed bag of glittering metropolises (concentrated in the coastal east) and ancient sites like the Great Wall and Forbidden City. But these two extremes really don’t paint an accurate picture of the country as a whole, which is both vast and by-and-large underdeveloped. Although the Chinese government has worked to improve infrastructure and build up the country’s inland areas through the ongoing “Go West” campaign and stimulus spending, many smaller urban areas in China remain untapped resources for domestic and foreign investors looking to build their brands or expand their current operations in China.
This week, the Global Supply Chain Council looks at several areas in China likely to become prime targets for foreign investment, as inland regions are further developed and median incomes grow. According to their findings, areas like the Midwest and even the restive Northwest are “blank slates” with real long-term potential:
Xinjiang, China’s largest autonomous region and a former key stop on the ancient Silk Road, has once again become a choice of investment in recent years despite simmering ethnic instability.
The giant French retailer Carrefour Group pioneered the trend, becoming the first multinational company in the region when it opened one of its supermarkets in Urumqi in 2004. Even as the region recovers from a recent ethnic clash on July 5, government newspaper People’s Daily reported that Jean Luc Lhuillier, vice-president of Carrefour China, said the group plans to invest more in Xinjiang.
Posted in Business, China, Economy, Investment
Tagged China, chinese, chongqing, go west, sichuan, stimulus, stimulus spending, xinjiang
All Eyes On Chinese Consumer Data, Particularly In The Luxury And High-End Segments, As Consumption In Other Markets Remains Sluggish
China's traditionally high individual savings rate is showing signs of easing somewhat, as middle-class and wealther consumers head back to stores
A number of outlets have given their thoughts on what it will take for Chinese consumers to cut back on their traditionally high savings rate and spend more of their disposable income, with some writing that it will take the creation of a bigger social safety net by the government and others advocating patience and still others defending high savings rates. Today, Susan Weerts writes in Seeking Alpha that data coming out of China this month suggests that consumers there are — without any major need for a socio-cultural shift, spending more on consumer items. This may mean that more confidence in the Chinese economy on the part of the consumer could be largely responsible for more spending in major cities and markets there.
As Weerts writes, the strongest growth in July retail sales was found in furniture, motor vehicles and building/decoration materials, which grew at 42.5%, 32% and 25% respectively, year over year. This massive growth, Weerts proposes, should give luxury brands some cause for (tentative) celebration:
Posted in Business, China, Economics, Economy, Luxury
Tagged China, chinese savings rate, consumers, consumption, GDP, Luxury, savings rate, seeking alpha, shopping, stimulus, stimulus plan, susan weerts
China’s 4 Trillion Yuan Stimulus Takes Hold, Picking Up Slack For Lower Export Figures
Slowing Exports, but growing domestic growth, may help China's recovery come sooner rather than later
Results coming out of China this week show that the government’s massive 4 trillion RMB ($586 billion) stimulus package — which is designed to boost domestic consumption, inland infrastructure construction, and earthquake reconstruction projects — coupled with a recent 30.5% boost in urban fixed-asset investment in the first four months of this year are helping the world’s third-largest economy get back on a solid growth track earlier than many other major world economies.
This is good news for China as well as the global economy, which pins much of the hopes of a relatively quick recovery on China’s domestic consumption. As Chinese consumers start to head back to shops, and manufacturers start to work their way up to higher capacity, demand for all kinds of products, both imported and domestically-produced, will help America, the EU, and Japan breathe slightly more easily. Bloomberg’s article today on China’s recovery progress gives encouraging signs that the country’s efforts to stem the financial crisis by investing huge amounts into infrastructure projects that should pay off in the long term should have a far-reaching ripple effect:
Posted in Business, China, Economics, Economy, Investment
Tagged associated press, bloomberg, China, Economy, europe, infrastructure, japan, nomura, recovery, stimulus, trade, US, wen jiabao
The Chinese Consumer Looks To Be One Of The Biggest Engines Of Global Growth In The Long Term
China's inland consumer is rapidly becoming the country's engine of change and growth. Image © New York Times
The Financial Times has an excellent article today about the rise of the Chinese consumer, once a virtually non-existent market but now the darling of the world’s multinationals.The article details how the Chinese government is trying to get consumers to make the shift “from export-oriented growth to a greater reliance on inner dynamism,” much like the United States did in the 19th century. Going along with observations I have made before, much of China’s current growth and transition is comparable to the same events in the US roughly 100 years ago — from the problems with quality control and political issues, consumer reluctance to spend, and business “grey areas.” The article is well-researched and focused, and includes many valuable insights into the monumental task ahead for the Chinese government — transforming the spending habits of over a billion individuals, who have been accustomed to high savings rates (for cultural reasons as well as China’s lack of a social safety net) and a lingering distrust of less established domestic brands (particularly since the reforms of 1978-79).
But the key to this article is its surprising (and incredibly significant) observation is its figures about the exponential growth of the inland, third-tier city consumer. This consumer segment has only now come to light, and as we have discussed before, inland Chinese cities look to be the future; not only for individuals, but for businesses and marketers as well.
Posted in Business, China, Economics, Economy, Investment, Luxury
Tagged China, chinese, consumer, financial, financial times, government, Investment, Luxury, spending, stimulus, united states
Additional Fiscal Stimuli Pave The Way To Recovery
Massive stimulus spending on industry and infrastructure projects are expected to transform the Chinese economy in coming years
CityWire reports today on China’s decision to allocate an initial four trillion RMB (£1.3 trillion) to spend on infrastructure products and consumer spending initiatives in coming years, looking to jumpstart its economy, which has lagged somewhat in recent months due to reduced demand for its exports in North America, Japan, and Europe. The author suggests that it is a good time to invest in several industries, as the potential for massive growth in certain sectors should pay off as these investments mature and China makes more progress in its transition from a state-dominated and export-led developing nation to a more consumer-led economy.
More People Shopping Amid Positive Signs From Economic Stimulus Plan
Businesses and Politicians alike hope China's stimulus measures kick-start the economy and drive consumer spending as consumers in developed economies hunker down. Illustration © The Economist
The Wall Street Journal just posted an informative story about increased spending amongst Chinese consumers, as savings rates drop in younger consumer segments and more first-time car buyers take advantage of small-engine subsidies and overall lower prices on big-ticket items. These habits, of course, turn tradition upside down, as consumers in developed countries save more and hold off on purchasing new automobiles or real estate as the financial crisis continues. Although Chinese consumer confidence is tentative and somewhat fragile, consumers are responding to discounts and other moves by retailers to entice potential customers. Interestingly enough, the macro-level improvements in consumer confidence are boosting sales for companies who have not received any direct benefit from the economic stimulus:
Posted in Automobile, Business, China, Culture, Economics
Tagged buyers, China, chinese, consulting, consumers, Economics, Economy, louis vuitton, stimulus
Stimulus Package Leads to Encouraging Signs From Consumers, Manufacturers, and Stocks
Interesting economic news coming out of China this week. It looks like the country’s economic stimulus plan has already started to effect positive developments in industrial output and bank lending. Although this does not mean that China’s economy is out of the woods just yet, naturally, it is a good sign that measures taken to combat the global recession are helping the situation.