Chapter 6.13: Promotional Advertising

Li Yong, Deputy Secretary General, China Association of International Trade

An overview

Advertising as an industry has developed in parallel with the opening up and economic reform in China since 1978. In the early stages of its development (1979 “ 1981), advertising revenue totalled only RMB118 million. The increased awareness of modern marketing techniques and intensified competition in the domestic market have made advertisers spend increasing amounts on advertising, which has spurred the industry to develop at a dramatic pace. Over the last 20 years , the industry has been growing at an average annual rate of 38.49 per cent (see Table 6.13.1). By 2001, the total advertising spend had reached RMB79.5 billion, making China one of the 10 largest advertising markets in the world.

Table 6.13.1: China's advertising spend over the last two decades (RMB millions)

Year	Total spend	Year	Total spend
1979 “1981	118	1992	6,787
1982	150	1993	13,409
1983	234	1994	20,026
1984	365	1995	27,327
1985	605	1996	36,663
1986	845	1997	46,196
1987	1,112	1998	53,783
1988	1,493	1999	62,205
1989	1,999	2000	71,266
1990	2,502	2001	79,488
1991	3,509	Jan “Jun 2002	37,965

It is clear that the average annual growth rate in China's advertising industry has well surpassed that of the GDP and of many other industries. It is also easy to see that such a high average growth rate is largely due to the development of the small denominator in the initial stage of the advertising industry. It is true that in the early 1990s the advertising industry hit a year-on-year growth rate as high as 97.57 per cent (1993). But the year-on-year growth rate started to slow down from there. The advertising spend in 2001 was only an increase of 11.54 per cent on 2000; however, the net gain was RMB8.22 billion.

Table 6.13.2: Year-on-year growth rate

Year	Advertising spend	Year-on-year growth
1991	3,509
1992	6,787	93.42
1993	13,409	97.57
1994	20,026	49.35
1995	27,327	36.46
1996	36,663	34.16
1997	46,196	26.00
1998	53,783	16.42
1999	62,205	15.66
2000	71,266	14.57
2001	79,488	11.54

Although the growth rate has slowed, the increase in the advertising spend is still in double figures and has convinced more investors, particularly private investors, to enter the industry and cash in on this development. The number of advertising companies by 2001 reached a total of 78,339, an increase of 10.73 per cent. This increase was chiefly caused by the increase in the number of privately owned advertising agencies, which was 22.58 per cent up on 2000.

The advertising industry employed 709,076 people in 2001. With 78,339 advertising companies, the average staff size for each company was 11.59, a reflection of the fragmented nature of the industry.