Selected markets in China

Automotive market

Now the fastest growing market lies in the private sector. According to a recent sample survey by North-West Information News, among 22,800 people in 57 Chinese cities, 12 per cent planned to buy a private car in 2002 and 29 per cent expressed their intentions to buy cars with bank loans. The State Development and Planning Commission expects private cars to account for 70 per cent of China's annual auto sales within the next 10 years . A detailed account of the expanding automobile market and opportunities for foreign companies to participate is given in Chapter 6.1.

Real estate market

Housing and home furnishing have become the top priority for Chinese people. At present, in China, the average urban dwelling space is 9.6 square metres per person. This figure varies in different regions . In some cities it is below 5 square metres. Economic growth is the engine of real-estate development with demand geared-up for residences, office buildings and factory space. Huge market potential remains to be tapped as the real-estate industry accounts for only 3 per cent of China's GDP, compared with 10 “20 per cent in developed countries . It is estimated that the annual expansion of the real-estate industry will exceed 10 percentage points. If China is aiming at a two-bedroom apartment for each family of three, it will mean the average dwelling space will be at least 10 square metres per person. By 2020 the urbanization level of China is expected to reach 51.4 per cent, which means that China's urban population will increase to 630 million. To meet this standard, China needs to build residential housing of 5.2 billion square meters within the next two decades.

The ratio of annual personal income to commercial house prices is 5.8:1.With the implementation of various state housing policies, and improvements in all kinds of housing systems such as low rent houses , economy dwellings, commercial housing, reforms policy houses, the ratio of personal incomes to house prices will drop down to 3:1. Since 1998 the sales revenue for commercial houses has been increasing at more than 20 per cent while in 2001 it exceeded 30 per cent.

Credit card market

The consumer market is experiencing restraint in credit card use. For example, in Shanghai, the most financially developed city, the use of debit and credit cards accounted for only 2.7 per cent of all consumer spending in 2001 and only 3 per cent of retailers will accept them ( Far Eastern Economic Review , Hong Kong, 14 Feb 2002).

In major cities, average spending through the use of credit cards is 1,779RMB per family, which is 5.7 per cent of total family expenditure. There are three likely reasons. First, the consumer may think that it is too difficult to obtain a credit card; second, the credit card may actually be a debit card; third, many places do not accept credit cards and overdrawing a debit card is simply impossible .

Communications market

In 2001 post and telecommunications registered total revenue of 437 billion yuan with 24 per cent increase over the previous year. Telecommunications is an area of exponential growth. The mother switchboards reached a total capacity of 200 million by the year-end. Of the 179 million handset users, 111 million were in the cities and 68 million in rural area. In terms of mobile phones, China overtook the United States and boasted the biggest market with 144.8 million users. These add up to present-day China having 26 phones per hundred people. The government continues to invest 84 million yuan each year for the installation of optical fibres. Therefore, this momentum will be maintained for quite a long time to come as the potential is realized. Handset users in China are expected to exceed 260 million by 2005, and mobile phone users will grow at more than 20 per cent annually.

The Internet is another nascent area of rapid growth. Internet users exceeded 30 million by the end of 2001. Internet application in business is surging. It is estimated by eMarketer, a firm specializing in Internet and e-business research, that business-to-business e-commerce revenues in China will grow from US$1.5 billion this year to US$21.8 billion by 2004.

In the telecom equipment market, foreign- funded enterprises now account for over 70 per cent of the country's total production capacity. There are more than 20 Sino-foreign joint ventures in the production of mobile phones, with Nokia, Motorola and Ericsson commanding more than 75 per cent of the Chinese market. The fibre- optic transmission equipment market is mainly dominated by joint ventures with investment from well-known foreign manufacturers. Satellite communications systems, facsimile machines and microwave communications equipment are mainly imported from abroad; very few joint ventures engage in the production of this equipment in China.

Cosmetic market

Being part of the fashion industry, the cosmetics market in China first took shape in the 1980s but its rapid development occurred in the 1990s, with growth at an annual rate of 35 per cent. The startling contrast: in 1980 people only spent RMB0.2 yuan on cosmetics, but in 1999, it had grown to RMB28 yuan. There are more than 3,000 factories and 600 organizations in the cosmetics market employing more than six million persons. At present, more than 1,000 kinds of cosmetics are displayed on shelves once a week. The sale of cosmetics has reached more than RMB16 billion yuan and continues to increase at the rate of 15 per cent every year. It is predicted that by 2010 total sales of this market will be RMB80 billion yuan. The concentrated market segment for cosmetics is the 6,850,000 women in cities within the age range of 20 to 40. If each woman in China spends 50 yuan per year on cosmetics, they can generate RMB13.3 billion yuan to the market. China's cosmetics market still has plenty of room for growth since annual consumption of cosmetics is only 10 per cent of the world's average level. At the same time, purchasing power is concentrated in the cities. It is estimated that there are more than 1.1 million consumers in Beijing and Shanghai, and 0.4 million in Guangzhou. The consumption level in Chinese rural area is only 10 per cent of the cities'.

Consumer confidence

Consumer confidence in the overall performance of the economy and their future income is very much an indicator of consumer willingness to spend . The Report on Economic Performance in China 2001 offered the following observations:

Compared with 2000, in terms of the economic performance in 2001:
45 per cent of consumers feel that the year's economy is better;
46 per cent of consumers feel that it is basically the same;
9 per cent of consumers feel that it is worse .

Compared with 2000, in terms of family income in 2001;

32.5 per cent of consumers felt that their family income increased;
47.5 per cent of consumers felt that their family income remained basically the same;
19.9 per cent of consumers felt that their family income dropped;
0.1 per cent did not respond.