Chapter 1.7: China s Consumer Market

Li Yong, Deputy Secretary General, China Association of International Trade, and Liu Baocheng, Professor, University of International Business and Economics

Introduction

When one thinks globally in terms of market expansion, China is a market that no business would ignore. One simple reason is that China is the largest single market that has yet to be developed. The population size , increasing consumer affluence and a strong momentum of economic growth make China an attractive marketplace in which many foreign companies have attempted to gain a foothold. In fact, many have. Most Fortune 500 companies have had operations of one kind or another in the marketplace . 70 per cent of the world's top 50 retailers are already active in China. These facts demonstrate that China is of significant strategic value for corporate growth and globalization. Indeed, manufacturing in China should mean reduced costs and increased competitiveness . Marketing in China should mean new sources of profit and additional gains in global market share.

Often, people tend to think of China in terms of a simplistic arithmetic calculation “ if each of the 1.3 billion people spent one dollar or used a product once in a year, what enormous sales that would bring. It does not hurt to generalize on the market size with such a calculation, but to approach the market in such an arithmetic manner would satisfy only the desires of wishful thinking. In fact, no one should be so naive as to think of the market in these terms. It is true, however, that many marketers in China have overestimated market prospects by underestimating the complexity of the market. This introductory chapter on China's consumer market does not intend to provide solutions for market success, but aims to paint a picture of what the market looks like, particularly for those who have not yet stepped out of their national boundaries but are already planning international strategies that include China.