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China’s emerging middle-class buyers were set to generate significant spending power in coming years as more people wanted to buy “affordable luxuries,” according to marketing advisers in Hong Kong.

The trend would be seen in not only first-tier cities like Shanghai and Beijing, but also their satellite towns and second-tier cities, the advisers told a recent business forum.

China’s emerging middle class has been “a reality,” especially over the past five years, and retail markets were already established and competitive in first-tier cities like Beijing and Shanghai, the Chief Executive Officer, Janet de Silva, of a Hong Kong-based Retail China marketing and branding firm said.

“I believe that the middle-class consuming market will do a lot to help stabilize what will be some offsets in China because of the slowdown in certain parts of manufacturing,” de Silva said, referring to the export sector.

She said consumer spending, though growing quickly, was contributing only about 20 percent to China’s GDP growth at present, compared to 35 percent contributed by exports.

But surveys have shown that China’s emerging middle class, many of whom are skilled technicians and white-collar employees working with multinational firms, “strongly associate international brands with tastes and success.” The middle-class buyers were obviously expanding beyond the first-tier cities into the suburbs and the second-tier cities, with some 10 satellite towns, each with a population of about 1 million, planned for Shanghai, for instance, she said.

Viveca Chan, whose marketing firm operates in Beijing, Shanghai and Hong Kong, said Chinese consumers were turning from shopping for “outward recognition to inner substance” of consumer goods.

But de Silva was also quick to warn that international retailers often run the risk of unrealistic expectations for the Chinese consumer market.

“One-point-three billion people does not mean 1.3 billion shoppers,” she said.

She cited a case to show that Hong Kong, with a population of about 7 million willing to pay HK$350 (US$45) on average for a mother and baby product, is a larger market than the city of Chongqing, with over 30 million people.

Chongqing would become “commercially viable” for the product by 2015, but Shanghai was soon expected to overtake Hong Kong.

Online Chinese shoppers spent 16.2 billion yuan (2.3 billion U.S. dollars) in 19 major cities in the first half of 2008, China Internet Network Information Center (CNNIC) said on recently.

The findings were based on a survey carried out in four municipalities directly under the central government — Beijing, Shanghai, Tianjin and Chongqing — and 15 developed cities such as Changchun, Dalian, Nanjing, Hangzhou, Jinan and Guangzhou, among others.

About 8.4 billion yuan (around 1.2 billion U.S. dollars) — more than half of the total — came from male consumers, while 3.1 billion yuan (450 million U.S. dollars) were attributed to students.

The consumer-to-consumer (C2C) site Taobao.com, a subsidiary of online portal Alibaba.com in which Yahoo! invested 1 billion U.S. dollars in 2005, was the nation’s dominant Internet retailer. It had an online shopping penetration rate of 81.5 percent.

Dangdang.com was second with 16.6 percent, followed by Joyo, Amazon’s China subsidiary, with 13.6 percent. Eachnet, owned by Tom Online and eBay, had 8.4 percent, while Tencent’s C2C site Paipai.com was 7.2 percent.

According to the CNNIC, 91 percent of online shoppers who had heard of Taobao had made purchases at the site, while 61.4 percent of those familiar with Joyo had shopped there.

Girl with a Mobile Phone
credits: nathaliebering.com

According to a recent report by the Ministry of Information Industry, at the end of November/2007, the number of China’s mobile phone users had increased by 78.3 million compared with the number at the end of last year. There are 7.1 million more users each month and now a total of 539 million mobile phone users.

One-way phone charges are being carried out nationwide, and the mobile phone fees are dropping. As a result, there has been a drastic increase in mobile phone use. And with such an increase, mobile phone text messaging increased to 535.1 billion by late November/2007 - 37.5 percent more than in the same period last year. Mobile phone access has reached 39.9 percent.

The cost of living in Shanghai is catching up with more expensive locations in the region such as Hong Kong and Taipei, according to the latest global cost of living survey.

The ECA cost of living survey listed Shanghai in 100th place among the top 300-plus most expensive cities in the world, up 23 spots from last year. Shanghai was also one position higher than Singapore among Asian cities, which ranked at 122nd place globally, according to the report.

This is curious, because a different survey suggested that Shanghai is supposed to be the 22nd most expensive. Of course, this was another consulting company researching with a completely different basket of goods.

ECA International, the world’s largest membership organization for international HR professionals, carries out the survey twice a year comparing a basket of 128 consumer goods and services commonly purchased by expatriates in more than 300 locations worldwide.

General manager of ECA International Hong Kong Lee Quane said that soaring food, oil and grain product prices, along with strengthening yuan against the US dollar pushed up the ranking. “The difference in living costs throughout China remains considerable,” he added.

For instance, Hong Kong is the highest ranked city in China, which remains at the 79th place in the world this year. It is followed by Taipei, which dropped back from 88th place to 94th this time.

Mainland Chinese cities, especially second-tier cities, reported rapidly rising living cost in the past 12 months: 95th-placed Beijing is the top-ranked city with a rise of 13 spots from that of last year. The cost of living for foreigners in Chongqing grew by about 12 percent, a figure which was double the rise in Beijing. Xiamen is in the 182nd place and is the least costly city for expatriates in China on the list, according to the report.

The survey also suggested that Seoul in South Korea beat Tokyo of Japan to be crowned the most expensive city in Asia.