Last December many applauded the Chinese Government’s liberalisation of its one-child policy, which allowed most families in China to have two children for the first time in 35 years. As a result, we have seen many businesses ramp up their forecasts and investments to cater for the anticipated boom – Shanghai’s Disneyland development, which added $800 million to its budget, was one of them.
China’s 1.04 birth rate in 2011 was less than half of the 2.10 rate needed to maintain the country’s population. Conservative analysts predicted the new policy would raise the birth rates to 1.8 per mother, or 19 million births every 12-months, with one of the more bullish commentators predicting a rabbit-style explosion of 48 million babies a year.
It’s been eight months since the changes were announced, and Chinese parents don’t appear to be rushing to their bedrooms. Although some research suggests 60% of Chinese parents would like to have a second child, a Weibo survey last November found that 52% of parents said the “economic pressure” of a second child would be too much.
The limited extra breeding is no surprise. Chinese parents invest heavily in their treasured offspring, with some spending as much as 30% of their annual incomes to educate their child. Add another to the mix, and there’s not a lot of money left to pay for the cars, home appliances, designer clothing and overseas holidays that urban Chinese are increasingly aspiring to. There is also much less societal pressure to have more than one child than in other countries.
Milk powder and educational toy companies shouldn’t write off big expansion plans though. The rising affluence of urban Chinese is driving soaring demand for premium goods and services for young ones, whether there are one or two.
It’s probably the Chinese Government who is most concerned, who need more income earners to support the ballooning pensioner population – 484 million in 2012, up 50.9% from 2007, and rising. But it’s early days and they still have plenty of tools in their belt, from legislation and incentives, to their far-reaching media channels to sway parents.
On the subject of baby and maternity consumer trends, China Skinny’s Sophie Lees will be presenting about China’s Little Treasures on 23 July in Shanghai. For Austcham members in the industry, it will be well worth attending. More info here. We hope you enjoy this week’s Skinny.
Hard Choices for Family Planners and Parents: With the loosening of China’s one-child policy, unexpected challenges are emerging. Eligible parents haven’t jumped into bed and bred at the rate expected and slow implementation of the law by some local governments has caused issues for parents who had a second child after the national-level decision. Former university lecturer, Cai Zhiqi, who was fired from the South China University of Technology for having too many children, predicts 48 million babies will be born every year.
Here’s What Investors Get Wrong About Chinese Consumers: Many businesses investing in China have a distorted view, thinking of Chinese consumers as one big market and over-relying on retail sales as a measure of consumption. It is also difficult to define China’s middle class.
Dos & Don’ts for Courting Chinese Consumers: While big data will provide some assistance, brands that connect emotionally with Chinese consumers will stand out. The key is to understand the landscape, not to innovate by sitting in an office, don’t export your brand – reinvent it, and become an educator.
A U.K. e-Retailer Gets an Education in Selling Online in China: UK retailer Asos only launched online in China. The social media campaigns had a 300:1 sales to marketing expenditure return. The company has found that Chinese consumers are much more likely to buy different clothes for different seasons that Europeans, but most Chinese choose one style for all occasions.
Hot Pot to Herbal Tea: Report Names China’s 10 Most Eye-Catching Companies: Boston Consulting Group has named Chinese companies finding success on their own and becoming formidable challengers to global companies, competing on innovation rather than lower cost.
Can WeChat Become A Major Advertising Platform?: WeChat is now allowing official verified accounts to place ads at the bottom of corporate pages with more than 100,000 followers. Advertisers can target viewers based on gender, age, location and personal interests.
Overseas Online Shopping: China’s Next ‘Blue Sea’: Online shopping from overseas sources through domestic platforms is estimated to top ¥70 billion (US$11.3 billion) this year. In 2012, overseas shopping via Alipay grew 117% versus 64.7% growth for domestic online shopping.
Chinese Consumers Warming Up to Xiaomi, Surpassing Apple on Engagement: Xiaomi users are 7% more engaged with apps on their smartphones than Apple users. They are also particularly popular with young urban professionals. Even 18 months ago, a lot of Chinese wouldn’t have thought a Chinese brand would rise to that.
Quality Still Our Ace in the Hole: Although Mainland consumer perceptions of Chinese brands on the whole are rising, it will be a long time until premium food and beverage produced in China can match the quality and safety standards of food produced in some Western countries.
Wine Becoming ‘Part of the Lifestyle’ for Chinese Urban Wealthy: The number of urban upper middle class consumers drinking imported wine hit 38m in 2014, double that of 2011 according to Wine Intelligence. Those surveyed drank imported wines almost 3 times more often in informal settings, such as at home, than formal occasions such as business dinners. 65% of consumers bought wine at hypermarkets, 62% at wine shops, 52% at department stores and 47% online. Imports have risen to 30% of the market, from 10% a decade ago, but eCommerce is driving some stiff price competition.
Alibaba Group Fights Fake Drugs with Scannable Codes: Alibaba has added the ability check the authenticity of drugs as part of their 2D code strategy. Using the Mobile Taobao or Alipay Wallet app, users can scan a bar code to check the authenticity, origin, usage instructions, ingredients and reasons not to take the drug. WHO estimated the global pharmaceutical counterfeiting industry was worth $75 billion in 2010, of which China was the biggest contributor.
Real Estate Pros Rank China’s Top Cities for Investment and Development: Tier-1 cities came out as the best Chinese cities to invest in property, with Shanghai, Shenzhen, Beijing and Guangzhou taking out the top spots and Nanjing rounding out the top five. Tier-2 cities are being treated with caution.
2 Percent Growth Forecast For China’s Luxury Industry Through 2015: Luxury products related to gifting have been hit the hardest following the Government’s clamp down on corruption. Men’s luxury watches, accounting for more than a fifth of the country’s total luxury consumption, saw sales plummet 11% in 2013. There is a shift in focus towards the female categories and fashion.
Shanghai to Look More Like London: The Chinese owners of London’s distinctive black cabs have signed a deal to supply 200 cabs for Shanghai streets, with the roll out starting in September. 1,000 cars have already been sold throughout China.
Well, that’s another week! One of the most productive things you could do this week is contact China Skinny to discuss how we could help with your marketing, online initiatives or research to take advantage of China’s opportunities. Just email us at firstname.lastname@example.org or call us at +86 21 3221 0273 so we can learn more about your objectives and let you know how we can help.
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