CHINESE CONSUMER CUSTOMS AND BEHAVIOR

CHINESE CONSUMER CUSTOMS AND BEHAVIOR

20080314-woman shoping for elctronics.jpg
Woman shopping for
electronics in Shanghai
Cash is used for most transactions. Credit cards and even checks are not widely used. Most Chinese don’t even have bank accounts. Money is often stashed away in a closet or under blanket or some such place. Although disposable income is rising, most households remain obsessed with saving because the social safety net is so flimsy. Individuals must shoulder most of the expense for their own healthcare, education and retirement.Chinese can’t change their yuan into foreign currency and have limited options on what they can do with their money: other than putting it in the bank, buying insurance or government bonds or investing in stocks.

Haggling, bargaining and making deals are fixtures of economic life: between businessman and client, vendor and customer, boss and employee. The direction and outcome of the haggling goes often depends on who has the power. Chinese like to bargain and squabble over even small purchases. The government regulates the price for many consumer goods and service to avoid social unrest. Until the 1990s, people needed to ration coupons to purchase things like sugar and cooking oil.

The Chinese are still not big consumers, spenders or buyers. The average Chinese household consumes one fourteenth what the average American household does. In the 1990s, household income accounted for 72 percent of China’s GDP, By 2007 it had fallen to 55 percent.China only consumes about half what it produces. Private household consumption accounts for only about 37 percent of China’s GDP---the smallest share of any major economy. It fell to 36.4 percent of GDP in 2006 form 37.7 percent in 2005 and 49 percent in 1990. In the United States and India household consumption rates are 70 percent and 61 percent respectively. Low consumption makes the economy too reliant on investment and government spending to maintain growth. Household savings are as high as 50 percent. People save money n part to compensate for meager pensions and poor health care.

Large numbers of people that couldn’t before can now afford televisions, refrigerators, and personal computers and even air conditioners and cars. But at the same time people who didn’t worry and education and health care costs in the past can be pushed into debt sending a child to high school or university or paying for descent medical care for a loved one in a hospital.

Among the worries that ordinary Chinese have are the high cost urban housing, education and future jobs for their children and inflation. Many complain about the conspicuous consumption of the nouveau riche and corruption among party officials. David Pierson wrote in the Los Angeles Times, “Chinese households are already famously frugal---and with good reason. A flimsy social safety net means tens of millions must save for their own education, healthcare and retirement. And while consumer spending has been rising along with China's prosperity, it has done so almost in spite of an economic model geared almost exclusively toward production rather than domestic consumption.”

John Howkins wrote in The Australian, “Old-fashioned communist attitudes lurk. Until a few years ago, students were forbidden to wear jewelry. The Government said it was ostentatious and a waste of money. Modesty was all. Even today, many students feel obliged to give any spare cash to their parents. [Source: John Howkins, The Australian July 28, 2008]

Good Websites and Sources on Consumer Customs and Behavior: TNS China blog on Consumer Insight blogs.tnsglobal.com ; Paper on Chinese Consumer Behavior pdf file fransgiele.be ; McKinsey Annual Consumer Study mckinsey.com ; Ogilvy Mindshare Power Point Presentation on Chinese Consumers authorstream.com ; Business Customs, Manners and Etiquette: Negotiating and Building Relationships with Chinese by Sidney Rittenberg cic.sfu.ca ; Understanding Chinese Business Culture legacee.com ; China Britain Business Council Tips cbbc.org/china_guide Kwintessential Kwintessential.co.uk ; Etiquette Tips exportinfo.org ; Book: Chinese Business Etiquette, Manners and Culture in the People’s republic of China by Scott Seligman (Warner Books, 1999).

Links in this Website: BUSINESS CUSTOMS IN CHINA No. 1 Factsanddetails.com/China ; BUSINESS CUSTOMS IN CHINA No. 2 Factsanddetails.com/China ; CONSUMER CUSTOMS IN CHINA Factsanddetails.com/China ; CHINESE CUSTOMS Factsanddetails.com/China ; BAD MANNERS IN CHINA Factsanddetails.com/China ; EATING AND DRINKING CUSTOMS IN CHINA Factsanddetails.com/China

Love of Money in China

20111106-Wikicommonssleepin fruit stand.jpg
In the Mao era Chinese prides themselves on their frugality and desire to serve the people but that sentiments seems to something that existed in the distant past. One Chinese man told the New York Times, “The things we care about most in China now are money, money, and money.” Another said, It’s all money-grubbing. Many Chinese have lost their sense or morality and ethics.”

In a poll in the 1990s, 68 percent of the Chinese said their attitude towards like was---work hard and get rich." Only 4 percent said it was "never think of yourself; give everything in service of society." In a 1997 survey by the Leo Burnett ad: 64 percent of Chinese agreed that making money is most important part of career, compared to 27 percent of Americans. In a survey in 2005, nearly three quarters f those asked sad that money was the most important thing.

A desire to make money is not something that is deeply rooted in Confucianism. See Confucianism

Chinese have a strong entrepreneurial spirit and powerful desire to succeed in business. If they fail at one thing they try something else. A history professor told Theroux, "the Chinese are interested only in two things in the world---power and money." Yang Yo, a singer who is sometimes called the Bob Dylan of China, told the International Herald Tribune, “Few people in China think about a simple life of following dreams, ideals and knowing who you are. The just sit around talking about how to make more money.”

One woman told the New York Times, "Chinese people never talked so much about money before. Now they are always talking about salaries and stocks and joint ventures." One Chinese woman told the Washington Post, “People here don’t want any more Cultural Revolutions or war. We like material things.” Seeking wealth has become an end to itself to a point that for many people nothing else matters and many people are spiritually adrift.

"Chinese people will always want a bargain," said Wang Da, who sells Coach bags on the popular e-commerce site Taobao. "More and more people are traveling and telling their friends they can get things cheaper overseas." Wang has a network of 30 runners who travel to the U.S., visiting California, New Jersey, Florida and other states, and bring back purses, clutches and wallets. He said almost all of these goods were manufactured in Chinese factories. "Yes, I realize it's ironic," Wang said.

Chinese and Business. See Tibet

Materialism and the Pursuit of Money in China

Mark Kitto wrote in Prospect Magazine, “Modern day mainland Chinese society is focused on one object: money and the acquisition thereof. The politically correct term in China is “economic benefit.” The country and its people, on average, are far wealthier than they were 25 years ago. Traditional family culture, thanks to 60 years of self-serving socialism followed by another 30 of the “one child policy,” has become a “me” culture. Except where there is economic benefit to be had, communities do not act together, and when they do it is only to ensure equal financial compensation for the pollution, or the government-sponsored illegal land grab, or the poisoned children. Social status, so important in Chinese culture and more so thanks to those 60 years of communism, is defined by the display of wealth. Cars, apartments, personal jewellery, clothing, pets: all must be new and shiny, and carry a famous foreign brand name. In the small rural village where we live I am not asked about my health or that of my family, I am asked how much money our small business is making, how much our car cost, our dog. [Source: Mark Kitto, Prospect Magazine, August 8, 2012]

The trouble with money of course, and showing off how much you have, is that you upset the people who have very little. Hence the Party’s campaign to promote a “harmonious society,” its vast spending on urban and rural beautification projects, and reliance on the sale of “land rights” more than personal taxes. Once you’ve purchased the necessary baubles, you’ll want to invest the rest somewhere safe, preferably with a decent return---all the more important because one day you will have to pay your own medical bills and pension, besides overseas school and college fees. But there is nowhere to put it except into property or under the mattress. The stock markets are rigged, the banks operate in a way that is non-commercial, and the yuan is still strictly non-convertible. While the privileged, powerful and well-connected transfer their wealth overseas via legally questionable channels, the remainder can only buy yet more apartments or thicker mattresses. The result is the biggest property bubble in history, which when it pops will sound like a thousand firework accidents. [Ibid]

In brief, Chinese property prices have rocketed; owning a home has become unaffordable for the young urban workers; and vast residential developments continue to be built across the country whose units are primarily sold as investments, not homes. If you own a property you are more than likely to own at least three. Many of our friends do. If you don’t own a property, you are stuck. [Ibid]

When the bubble pops, or in the remote chance that it deflates gradually, the wealth the Party gave the people will deflate too. The promise will have been broken. And there’ll still be the medical bills, pensions and school fees. The people will want their money back, or a say in their future, which amounts to a political voice. If they are denied, they will cease to be harmonious. [Ibid]

Meanwhile, what of the ethnic minorities and the factory workers, the people on whom it is more convenient for the government to dispense overwhelming force rather than largesse? If an outburst of ethnic or labour discontent coincides with the collapse of the property market, and you throw in a scandal like the melamine tainted milk of 2008, or a fatal train crash that shows up massive, high level corruption, as in Wenzhou in 2011, and suddenly the harmonious society is likely to become a chorus of discontent. [Ibid]

Chops

Instead of signing their name, Chinese stamp their name on forms, bank withdrawal slips and letters with a chop, or signature stamp). Without a chop one can't open a bank account in China or register for a university class. One professor told the Los Angeles Times, "I don't exist in this society without my chop." [Source: Mark Magnier, Los Angeles Times, November 28, 2001]

Chops are cylinders about the size of a piece of chalk. They have the person’s name carved at one end in Chinese characters and they leave an imprint after being stamped in ink Everyone from the President to a homeless man living in a park has a chop, and they are used for everything from finalizing a multi-million-dollar business deal to signing for packages delivered to one’s house. At some businesses if you forget your chop, no problem, they’ll let you use someone else’s.

The average Chinese has five chops but only one is registered with the government to certify ownership and it is only used on important documents. Since these seals are considered too valuable to carry around, people have other seals to use for things like bank transactions and taking deliveries. Many government documents have several chop stamps. According one estimate a typical bureaucrats puts his chop on 100,000 documents in a 25 year career.

Chops have a 5,000 year history. Signature seals, which operates according the same concept, were used in ancient Mesopotamia and China. Japan's oldest example of writing is a solid-gold chop dated to A.D. 57.

Thousand of years ago Chinese used the imprints of fingers as a way of signing contracts.

Consumption and Shopping in China

Personal consumption accounts for about 40 percent of GDP in China, compared with about 70 percent in the U.S. Nevertheless consumption in China is growing---at a robust 8 percent a year. Crowds at Apple stores and Pizza Hut outlets in the country's biggest cities point to pent-up demand. China's newly minted millionaires are attracting luxury brands including Porsche and Cartier. Young urbanites are often the biggest spenders in China. On American marketing specialist told the Los Angeles Times, “It’s weird economics. In China, the 50-year-olds aren’t the ones with the money, it’s the 25-year-olds.” Disposable income in the cities was up 17.2 percent in 2007. [Source: David Pierson, Los Angeles Times, August 16, 2011]

Chinese officials have repeatedly said they intend to promote greater domestic consumption. Peter Hurst, a broker with Sterling International Brokers in London, says he’s concerned China will struggle to complete the transition. “Yes, there are 1.3 billion people in China,” he says. “But are they rich enough to become consumers?” Although disposable income is rising, most households remain obsessed with saving because the social safety net is so flimsy. Individuals must shoulder most of the expense for their own healthcare, education and retirement.

Many shopping malls in China are empty or occupied by people who are not buying. David Pierson wrote in the Los Angeles Times, “The country may be better able to weather any global recession when ordinary citizens such as Cheng Yaohua start opening their wallets at the Care City Shopping Mall instead of using it as a place to cool off on summer afternoons.A migrant from central Henan province, Cheng earns $300 a month. He admired the styles on display in the window of the Gap store. But he shops in flea markets instead. "The clothes over there cost a tenth of my monthly salary," said Cheng, a 22-year-old cellphone salesman, nodding at the multi-story Gap. "After I paid for rent and food, I'd have nothing left if I bought something there." [Source: David Pierson, Los Angeles Times, August 16, 2011]

Difficulty Getting Chinese Consumers to Spend

Keith B. Richburg wrote in the Washington Post: “The Chinese government “is looking to Chinese consumers to drive future expansion. But a tradition of thrift and a historic mistrust of officialdom is thwarting efforts to persuade the Chinese to spend more, experts say. And with China’s economy in the midst of a major slowdown, the government has not yet moved away from restrictive policies that also discourage spending. [Source: Keith B. Richburg, July 5, 2012]

“Chinese are the world’s stingiest consumers. Household consumption in China accounted for a paltry 35 percent of the overall economy in 2010, compared with 71 percent for Americans and 57 percent for Europeans. Chinese also save far more than others, with an average household savings rate of 38 percent in 2010, compared with just 3.9 percent for Americans and 28 percent for Japanese, according to figures compiled by Bloomberg Businessweek magazine, using statistics from the World Bank and the Organization for Economic Cooperation and Development, along with other data. [Ibid]

“And while younger Chinese have begun to buy more, save less and take advantage of credit more often than their parents, the old habits appear to be eroding slowly and may change only with a new generation. “I don’t see the need to consume that much,” said Patrick Zhou, 36, a married Shanghai lawyer with a 2½-year-old son. Zhou said he and his wife each save about half their income every month, which still leaves them with enough money to eat out regularly and take a yearly vacation. “We have our house. I have my car. We travel every year,” he said. [Ibid]

Chinese Women Consumers

20080314-woman shopping in in Beijing.jpg
Shopping in Beijing
Women are among the biggest consumers and the important forces propelling the economy forward. A 2009 survey by Women Of China magazine fund that Chinese women in 10 cities spent 63 percent of their income shopping, a large jump from 26 percent in 2007. They spent most of their money on clothes (30 percent), followed b electronic products (11 percent) and travel (10 percent).

Ben Cavender, of the Shanghai-based China Market Research group told the Strait Times, “Chinese women, especially in the past couple of years, have emerged as the dominant spending force...Where China used to be different from other markets in that men here dominate the luxury market, Chinese women are fast catching up, contributing half of luxury spending now compared with just 20 percent in the 1990s.” Their spending power and influence on the economy is also growing as they earn more.”

Young working women are increasingly become major forces in the Chinese economy. Those with good salaries, by Chinese standards, of few a hundred dollars a month think nothing of plopping down $400 for a new cell phone with the latest 3G and MP3 features or $700 a new snowboard and gear to go with it even though they have yet to tried the sport. A 28-year-old female hotel clerk told the Strait Times she had spent $590 for a Nokia smart phone and $1,180 for a gold necklace and shopped for clothes and in online. “Sometimes I see a blouse that I really like and it comes in three colors,” she said. “I can’t decide so I buy them all. Since I can earn that money again anyway, why not spend it?”

An economic advisor for MasterCard told Reuters, “Urban women consumers will be spending much of their hard-earned cash on personal travel and related cultural and recreational activities, dinning out shopping, as well as buying cars and pursuing urban leisure lifestyles.” Their spending habits, economists hope will offset the conservative spending habits of most Chinese and make the economic less reliant on investment. Favored brands by female consumers include LVMH, Christian Dior, Valentino, Swatch, Nokia and Coca-Cola.

Superconsuming Chinese Single Women

Single women  or xiaobailing (white-collar princesses) are arguable the fastest-growing consumer class in China, perhaps the world. Jonathan Watts wrote in The Guardian, “They have high levels of disposable income and a craving for designer labels. For marketing moguls, they are the future face of consumer power. State planners forecast that half the population will be middle class by 2020.”[Source: Jonathan Watts, The Guardian, June 26, 2010, , edited from When A Billion Chinese Jump by Jonathan Watts Faber, 2010 ]

In his book When A Billion Chinese Jump Watts introduces us to Emily Zhang Huijia, a connoisseur of consumption in Shanghai. A fashionista since her teens, she has worked for Gucci, Yves Saint Laurent and Chanel, and says she was brought up on Vogue, Glamour and OK! magazines. [Ibid]

“By western standards, her childhood was not privileged,” Watts wrote. “In 1985, when she was three, her family got its first color television. In 1992, around the time the first Barbies went on sale in China, they bought their first air-conditioner; so did everyone in the neighborhood. The Zhangs had their first fixed phone line installed when Emily was six. By the time she was 16, they were connected to the internet. My family in the UK had a phone three generations before Emily's, but her parents went online four years earlier than mine.” [Ibid]

“Most of her friends are in the industry and they share information about discounts and sample sales. At her first sale, she blew a third of her salary on Fendi sunglasses. “It is like a fever,” she says. “The price is so low, you cannot refuse...Like many a proud shopper, Emily lists how much she saved rather than how much she spent. She is wearing a half-price Dior watch reduced by 2,900 yuan (£286). In her 40 sq m flat near Fuxing Park, she has dozens of other bags, accessories and clothes, including an Armani coat for 999 yuan (£98), discounted from 9,900 (£976). Compared with friends, she says, she is restrained.” [Ibid]

“In the last three years, Emily's monthly salary has increased from 3,000 yuan to just under 20,000, putting her firmly in the middle-class bracket. She eats at restaurants at weekends, has a French boyfriend, plays poker every Thursday. Business and pleasure are mixed. Her favorite after-hours hangout, she says, is the building where she works. “Bund 18 has the coolest nightclub in Shanghai, so it's probably also the coolest in China.”[Ibid]

Young Chinese Consumers

The spending habits of 350 million Chinese aged 18 to 35 are seen as crucial to boosting the world's recovery from recession and to, one day, vaulting China past the US as the world's largest consumer market. That could come as early as 2020, according to Goldman Sachs, the investment banking giant. "This isn't your grandma or a housewife cutting out Sunday newspaper coupons in her kitchen. They [the coupon users] are the future," said Leeon Zhu, a senior planner at the advertising firm Young and Rubicam's Shanghai office. "And they're at the forefront of retail consumption growth in this country." [Source: Chi-Chi Zhang, The Independent, January 9 2011]

The biggest target is the 18-35 age bracket, born after the chaos of radical Maoism. They have largely known steadily rising incomes. "Young Chinese consumers love to spend and rarely save because they are optimistic that they'll always have money," said Fu Guoqun, a marketing professor at Beijing University. Ms Shan, 23, concedes that discounts get her to buy more than she would otherwise. Her bag is stuffed with McDonald's coupons and other discount cards. "I'm obsessed," she said. "Whether it's at work or home, I'm dreaming of the next deal."

Young Chinese Spend More Than Older Chinese But Still Save

Keith B. Richburg wrote in the Washington Post: “The high rate of savings contrasts with the increasingly visible consumerism in cities such as Beijing and Shanghai, which are filled with Ferraris, shopping malls and luxury boutiques. Chinese older than 50 cling to more conservative spending habits than those in their 30s and 40s, said Shaun Rein, managing director of the Shanghai-based China Market Research Group and author of a new book called “The End of Cheap China.” But the exception to the savings-first rule appears to be the 20-something generation, veritable spendthrifts compared with older Chinese, with “an effective savings rate of zero,” Rein said. These Chinese were born after their country’s opening to the world in 1978, grew up with relative affluence and want the latest iPad and iPhone. [Source: Keith B. Richburg, July 5, 2012]

“The reasons Chinese save more and spend less are complex, stemming in part from tradition and in part from government policies that discourage consumption. People older than 50, who save more than 60 percent of their income, remember a period of economic hardship and political chaos: the “bitter years” of the Great Famine, from 1958 to 1961, and the violence of the Cultural Revolution, from 1966 to 1976. [Ibid]

“Some younger Chinese have carried on that tradition of thrift. Tony Ren, a 30-year-old married Shanghai accountant, saves about half his $2,600 monthly salary but says he doesn’t feel he is wanting for anything. “Maybe I’m too busy to have a lot of time spending money,” he said. But there are other very practical reasons that people in China save. Buying a home typically requires a down payment of at least 25 percent and more often 30 percent, an astronomical sum of money for many. Also, many here have their first, and often only, child in their 30s, which is when they begin saving for future education expenses. [Ibid]

Young Chinese Bargain Hunters and Coupon Cutters

Chi-Chi Zhang wrote in The Independent,”Ding Can is obsessed with bargains. Her purse is crammed with more than 30 discount cards and dozens of coupons. Her apartment is packed with freebies, from cosmetic samples to key chains. She often lines up before dawn for tickets to discounted movies. Her yen for savings isn't out of necessity.” The software testing engineer, 32, is relatively well off. She says, simply, "I've never come across a good deal I didn't like." More than a craze, discount shopping is becoming a way of life for young Chinese. Known as the "coupon generation", they are changing the way business is done in the world's second largest economy. [Source: Chi-Chi Zhang, The Independent, January 9 2011]

Companies as global as Nike and as local as the Yonghe fast-food chain are courting the bargain hunters. The eagerness for deals has spawned discount clubs, online group-buying and pavement kiosks that dispense coupons. A planned three-week campaign by Mercedes-Benz for its two-seat Smart car was over in less than four hours when more than 200 cars were snapped up from China's most popular online retailer for 135,000 yuan (£13,000) each, a 20 per cent discount.

It's a relatively new and youth-oriented phenomenon in China, where consumerism has taken off as the country has shifted from central planning to capitalism. People in Western countries have been clipping coupons for years---Coca-Cola began offering discounts around the start of the 20th century. But in China, the trend has implications for the global economy.

Ms Ding and other members of "Discounts for Singles", an online forum, traded war stories at a spicy Chinese restaurant recently. Ms Ding showed off a sports watch she earned by taking photos of herself in front of a Lenovo computer store during a promotional event. A dining partner regaled the others with her latest steal: two dozen half-priced cartons of fruit juice at 4 yuan a carton. "How are you going to drink all the juice?" one asked. "I'll give it away to friends and family as gifts," said Shan Yunfei, who makes about £320 a month as an administrative assistant at an architecture firm. "They love it when I bring home new products."

Even the dinner is free. New eateries looking for publicity offer meals to people such as Ms Ding and Ms Shan, who are frequent reviewers on Dianping.com, China's most popular restaurant listing site. Frugality is highly valued in China, a legacy of generations of poverty. Savvy consumers are applauded by friends and family. Television shows such as Beijing's popular Managing Money broadcast interviews with Chinese who made big savings through group-buying events and promotional deals.

There are coupon kiosks in subways, shopping centres and supermarkets, and almost every major brand offers a discount card. Eyeball China, a Beijing-based company, prints 170,000 coupons every day for restaurants, car rentals and other goods and services and places them in about 200 kiosks across the capital. "The market is so saturated with brand names that a small discount makes a huge difference, helping the brand stand out with their target consumers," said Xie Dehui, Eyeball China's vice general manager.

Amy Yu, an estate agent, stopped to collect more than a dozen coupons for Yonghe restaurant's noodles and McDonald's chicken burgers at a kiosk outside French hypermarket Carrefour in southern Beijing. Ms Yu looked like a pro. She pecked furiously at the kiosk's touch screen, scanning for the best deals. The machine, which is in front of a Yonghe shop, spews out coupon after coupon for up to 16p off meals priced between £1 and £2.50. "I work and eat around here, so I usually print a lot of coupons that look good regardless of whether or not I use them," she said. "It's also thoughtful to give them out to colleagues and friends, too.

Chinese Government Effort to Get People to Spend

Keith B. Richburg wrote in the Washington Post: “Getting people to spend more has become the government’s latest mantra. “Expanding domestic demand, particularly consumer demand . . . is essential to ensuring China’s long-term, steady and robust economic development,” Premier Wen Jiabao told the legislature in his annual work report in March. “We will improve policies that encourage consumption.” [Source: Keith B. Richburg, July 5, 2012]

“But changing the policies that discourage private consumption could prove difficult, requiring China’s Communist Party rulers to adopt a host of reform measures they have long resisted, such as freeing interest rates to rise and letting the Chinese currency float freely. The policies introduced so far have been largely symbolic, according to experts. The policies include subsidies to allow people to purchase more energy-efficient home appliances such as air conditioners and flat-screen televisions. There also have been proposals for cutting import taxes on some consumer goods. A pilot program in Shanghai replaced a business tax with a value-added tax. [Ibid]

“Chinese consumers who were interviewed agreed that the government could take several more decisive steps that would have a dramatic and direct impact on spending and savings habits. For example, credit could be made more available, and interest rates could be allowed to rise to reflect market rates. [Ibid]

“Michael Pettis, a finance professor at Peking University and a senior associate at the Carnegie Endowment for International Peace, said the real problem is not that Chinese consumers spend so little, but that they have so little to spend. Household income accounts for just 50 percent of China’s gross domestic product, Pettis said, compared with the United States, where it accounts for 80 percent. That means, essentially, that the government’s share of the economy is far too large---or, as some Chinese say, the country is rich but the people are poor.So while domestic consumption is growing, it accounts for only a small share of the overall economy because the state sector still looms so large. “I think the cultural explanations of thrift miss the point,” Pettis said. “They’re spending too little because they own such a small share of GDP.” [Ibid]

Chinese Shopping Habits

20111106-Wikicommons drink supermarket.JPG
drinks in a supermarket
The Chinese really haven’t been consuming very long. In the Mao era there wasn’t much to buy. Now conspicuous consumption is fashionable, particularly in the coastal cities in the east and south and in Shanghai, and many urban Chinese spend their free time on the weekends at Western-style shopping malls.

Consumer spending is highest among this between 20 and 49. The people born after 1980, when the economic reforms began ti take shape, are the “real driving force” of the consumer economy in China,

Chinese often shop at several different places---a vegetable stand, a meat vendor and egg seller, for example---buying small quantities at each stop and putting what they buy into a different plastic bag at each place. Customers sometimes ask shop keeper to provide a bag for each thing they buy, in some cases for each individual egg.

Small store owners often sells items like rice, peanuts, eggs and sugar by weight and gave them to customers in flimsy plastic bags. In the Mao era, customers had their purchases wrapped in paper and carried them home in cloth or net bags. The practice continued until the 1980s when people began shopping more and more at supermarkets and carrying their purchases home in plastic bags. By the mid 2000s, three billion were being even out everyday, with many Chinese thinking nothing of tossing them to wind, creating a gargantuan litter problem. See Recycling, Environment, Nature

Because of a lack of refrigeration, the Chinese have developed the habit of keeping a potential meal alive as long as possible. Fish and lobster at restaurants are kept in tanks and ducks and pigs are slaughtered shortly before they are sold. When transported, pigs are inhumanely placed in cramped cages and stacked on three-decker vans. Thirty or forty are sometimes tied together and carried on the back of a bicycle.

Wal-mart appeals to local tastes by offering popular Chinese products like live frogs and eels and turtle blood. Some stores offers live river fish, eels and turtles that are slaughtered right on the spot. Sometimes customers catch them in fish tanks with nets, watch as a clerk guts and cleans them and takes them home in plastic bags along with the bloody organs. Shoppers turned up their noses at the idea of buying dead fish wrapped in plastic and Styrofoam.

By 2010, seven of the 10 largest shopping malls in the world will be in China.

High Prices Chinese Pay for Made-in-Chinese Exported Products

Chinese consumers pay $2,760 for a laptop computer at the Apple flagship store in Beijing, about 20 percent more than an American buyer would spend at an Apple in the United States. David Pierson wrote in the Los Angeles Times, “The premium prices aren't limited to foreign-branded computers. Kobe Bryant's Nike sneakers with the Made in China label go for $165 in the U.S. But at an official Nike store in China---$190. A flat-screen Sony TV assembled by Chinese laborers runs about $800 at a Best Buy store in the U.S. But you'd pay 30 percent more at the popular Chinese appliance chain Gome. The same goes for that Maclaren Techno XT infant stroller. It's also manufactured here, but you'll typically pay 40 percent more for one at a Beijing mall than you would in the U.S. [Source: David Pierson, Los Angeles Times, July 13, 2010]

“It's a paradox of life here in the world's factory floor. The place known for delivering low-cost goods to Western consumers doesn't always do the same for its own people....Products made in China often cost more there than in the West The premium prices frustrate shoppers as well as those who see getting Chinese consumers to open their wallets as crucial to balancing the global economy.

“Then there are taxes and levies. That Apple laptop is made at a factory that's granted a rebate on China's 17 percent value added tax, as long as those computers are exported and sold abroad. Chinese buyers aren't so fortunate. Before that same machine can be sold domestically, it is first sent to Hong Kong, a special administrative region of China, then returned to the mainland with a 20 percent import tariff, industry experts said. The price penalty is frustrating to savvy Chinese consumers who know what things cost elsewhere thanks to the Internet and their own shopping trips abroad.” "When I saw the prices at an outlet mall in New York, I thought it was crazy how much we were paying in China," said Joanna Tong, 22, a Beijing native who has vacationed in the U.S. "It's not fair. Now that I know the prices in the U.S., I've been reluctant to shop here at all."

Still, some foreign companies have made a conscious decision to raise their prices in China, or they've adopted a strategy of marketing their products as luxury items to make up for the higher cost of doing business. That might seem counterintuitive in a nation where the typical urban resident last year earned about $2,800. But high-priced goods carry cachet here, while China's consumer class is burgeoning. High prices can boost the prestige of some products while fattening the manufacturer's bottom line.

Take Budweiser. The beer that Joe Six-pack drinks in the U.S. is considered a premium brand in China. A can sells for about 25 cents more than local suds in grocery stores, even though it's brewed locally. Buick's LaCrosse sedan is seen by some here as a rival to the BMW 3-series. It's priced about 23 percent more than in the U.S., even though it's assembled in China by laborers earning a fraction of their U.S. counterparts. And Haagen-Dazs ice cream, a staple of U.S. convenience stores, can fetch $12 a pint in some upscale cafes in China.

"In China, people equate high prices with high quality," said Shuan Rein, managing director of China Market Research. "Brands know that if their products are too cheap it will push consumers away." The psychology, analysts say, is about making aspiring consumers feel like they're buying a piece of the middle class. The pull can be even stronger when Chinese purchase gifts to show respect. "If I'm buying for friends or clients, I could never buy a Chinese brand," advertising agent Liu Hao said. "It's about face."

The painstaking task of moving goods around the country is another factor driving up prices. Logistics companies rarely consist of more than a handful of employees and a single truck, said William McCahill, vice chairman of Pacific Epoch, a Shanghai-based research firm. Freight carriers often are reluctant to cross provincial borders because of local fees, meaning that goods often have to pass from one distributor to another, depending on geography. "There is no national logistics system," McCahill said. "Dell has a plant in Xiamen where all the suppliers have to be a bicycle ride away."

In the meantime, resourceful Chinese shoppers are finding ways to skirt the higher prices. Although knockoffs are common, the so-called gray market is also thriving, particularly online. There sellers peddle discounted luxury handbags, Apple gadgets and other authentic brand-name consumer goods acquired abroad.

Shanghai, Consumption Central

20111106-Wikicommons drink supermarket11.JPG
drinks in a supermarket
Shanghai is ground zero for consumer culture in China . By 2006, the average person in Shanghai owned two mobile phones, 1.7air-conditioners, 1.7 color television sets, more than one fridge and spent 14,761 yuan a year (around £1,455), some 70 percent more than the rest of the country. They use almost twice as much toilet paper as the average in developed nations and have a bigger carbon footprint than people in the UK. The city is consuming beyond the planet's means, and its appetite is growing by the day.[Source: Jonathan Watts, The Guardian, June 26, 2010, , edited from When A Billion Chinese Jump by Jonathan Watts Faber, 2010 ]

Shanghai has been the beachhead for foreign companies hoping to sell stuff in China. Jonathan Watts wrote in The Guardian, “While information firms and political lobbyists headed to Beijing and manufacturers flocked to Guangzhou, retail giants almost invariably chose Shanghai for their China headquarters and their first showrooms. From Kentucky Fried Chicken, McDonald's and Starbucks to Louis Vuitton, Gucci and Chanel, international brands made the city a giant shopping mall.” [Ibid]

“The rest of the country has some way to go to catch up with Shanghai, which is what the government wants. This will require a great deal more energy and raw materials. To provide everyone with a Shanghai lifestyle, factories will need to churn out an extra 159 million refrigerators, 213 million televisions, 233 million computers, 166 million microwave ovens, 260 million air-conditioners and 187 million cars.” [Ibid]

Retail markets have become less diverse as they have grown. Paul French, a Shanghai-based marketing consultant, told The Guardian the problem is that the shopping malls designed to create the image of a good life do not reflect reality for most people: “They are building more and more malls filled with luxury brands. Like the power stations in Soviet-era Russia, they are being built not because of demand but because of prestige. Every official in China wants one to show their city is on the international map.” [Ibid]

“These emporiums are designed to generate desire, not meet needs,” Watts wrote. “Many are dismissed by locals as gui gouwu zhongxin (ghost malls) because they attract so few customers. Yet in Shanghai they are everywhere. Xujiahui intersection, for example, is ringed by six department stores. Among them is the Orient Shopping Mall, boasting Estée Lauder cosmetics, Rolex watches, Cartier pens and Dior lipstick. Passing through the revolving door one weekday morning, I see not a single customer. Not even a window shopper.” [Ibid]

Global Impact of Chinese Shoppers

The consumer market in China is expected to grow from $1.53 trillion in 2008 to $5.58 trillion in 2020. Jonathan Watts wrote in The Guardian: “Until recently, China was living within the planet's means. If everyone in the world consumed what the average Mr or Mrs Wang did in 2007, we'd just about stay within the sustainable resources of our planet. Humanity would have a balanced ecological budget. But, understandably, Mr and Mrs Wang wanted to keep up with Mr and Mrs Jones on the other side of the Pacific. That was human nature. It was also bad news for the environment, because if we all ate, shopped and traveed like those average Americans, we'd need 4.5 Earths.”[Source: Jonathan Watts, The Guardian, June 26, 2010, , edited from When A Billion Chinese Jump by Jonathan Watts Faber, 2010 ]

“In recent years, the planet's largest corporations have become dependent on the Wangs catching up with the Joneses. The US had shopped until its economy dropped. Sinking in debt, plagued by obesity and increasingly dependent on military might to protect its lifestyle, the world's superconsumer was groaning with indigestion. Europe was too decrepit and conservative to take up the slack, so global manufacturers, retailers and restaurant chains were desperate to stimulate the Chinese appetite.”

“To feed its growing livestock, China imports huge quantities of soya, much of it from Brazil, which has resulted in accelerated clearance of Amazonian forest and Cerrado savanna. Like many other wealthy cities, the high-protein, high-octane, jet-set lifestyle is being paid for elsewhere.”

“Earthwatch Institute estimates that if China's 1.3 billion people were to consume at the same rate as Americans, global production of steel, paper and cars would have to double, oil output would need to rise by 20m barrels a day and miners would have to dig an extra 5bn tons of coal. If it followed the US appetite, China would chew its way through 80 percent of current meat production and two-thirds of the global grain harvest. “China is telescoping history,” says Lester Brown, president of Earthwatch. “It forces us to focus on what happens when huge numbers of low-income people rise rapidly in affluence. Chinese consumption shows the need to reconstruct the world economy.”

“Instead of relying on an ever greater consumption of resources to generate growth, Brown says mankind needs to move to a fairer, more sustainable model. Yet the opposite seems to be happening. Global corporations and the communist government are trying to make China the greatest shopper of them all. In Shanghai, that goal is already being realized. By one estimate, the average carbon dioxide emissions of its residents have already overtaken those in Tokyo, New York and London. If there is a glimmer of environmental hope, it is that even in Shanghai people have not yet fully embraced western levels of throwaway consumption. Many still prefer flasks of hot tea to cans of Coke, and in the supermarkets the average basket of goods is smaller than in the west and profit margins are lower. This thrift is not inspired by environmental concerns, but by a traditional desire to live within one's means.” [Ibid]

20080314-wal mart picasaweb.jpg
Wal-Mart's live food section

Tipping in China

Tipping has traditionally been frowned upon. Beijing University psychology professor Wang Dengfeng told the Los Angeles Times that the whole process of tipping is considered dehumanizing. “If you ask for extra money its kind of offensive,” he explained, “because the other person will think you are not a good person. You are doing the extra work just for the extra money. It’s not polite.”

Decades of Communist rule have indoctrinated Chinese with the belief that everyone is equal and the idea of paying little extra for good service smacks of corruption. “It’s almost like you are going back to feudal times,” a Chinese culture consultant told the Los Angeles Times. Ironically when Chinese travel abroad they often tip.

In the mid 2000s, an effort was made to get Chinese to tip more. The practice was encouraged in the tourism industry so that guides could make money from tips rather than commissions earned by steering their customers onto souvenir shops. In the service industry tipping it being suggested as a way to get service staff to work harder and be more attentive to the needs of their customers.

Services and a Lack of Service in China

Yale’s Stephen Roach wrote in the Christian Science Monitor, “Services account for just 43 percent of Chinese GDP---well below global norms. Services are an important piece of China’s pro-consumption strategy---especially large-scale transactions-based industries such as distribution (wholesale and retail), domestic transportation, supply-chain logistics, and hospitality and leisure. Over the next five years, the services share of Chinese GDP could rise above the currently targeted four-percentage-point increase. This is a labor-intensive, resource-efficient, environmentally-friendly growth recipe---precisely what China needs in the next phase of its development.

As was the case in the Soviet bloc, bad service was a fixture of life in Communist China. Friendship stores, for example, were famous for their sullen, slow sales people. In hotels, the staff often seemed to were more intent in spying on you than helping you.

Some foreign complain that things have improved much. Customers at banks at train stations routinely have to wait in long longs and when the reach the window they are told to wait in another line. Sometimes things are not much better in restaurants. A Taiwanese-born American told the Los Angeles Times, “I’ve always had bad experiences with restaurant servers’ in Beijing. “They just get basic salaries and so they don’t do much. Unless you complain.”

Workers are often reluctant to perform tasks assigned to someone else out of fear of being blamed for making a mistake. This causes problems for tourists, because usually there is one person assigned to one task and one task only: one person who changes money, another who rents bikes, one person who takes care of maintenance and another who checks people into the hotel. If the person assigned to the task isn't there no else will do the task, which means that tourists have to wait around for the person to come back.

Things are improving. Now with China generally trying to improve is reputation among foreigners---there is more emphasis on service and pleasing the customer. Courses in etiquette and service teach shopkeepers to use polite language, wear socks to work, respond in a timely fashion and not cheat and follow customers around. Part of the training involves driving home the point treating customers well and developing long term relations are ultimately good for business.

In February 2007, regulations went into effect that banned shopkeepers in Beijing from getting angry at customers, acting impatiently, making sarcastic comments, grabbing customers or offering vague explanations. The rules were part of the effort to improve manners and address complaints about poor service in Beijing in preparations for the Olympics in 2008. There was no mention of the penalties for breaking the rules.

Shopowners complain that customers are the ones that need the politeness lessons. They complain about customers damaging goods in their stores and not paying compensation and agreeing to a price after a lengthy bargaining process and then walking away without buying anything.

Gray Economy in China

A lot of business is conducted on the gray economy but it is difficult to accurately ascertain how much.

Image Sources: 1) Cgstock http://www.cgstock.com/china ; 2) Nolls China website http://www.paulnoll.com/China/index.html ; 3) Cgstock; 4) Picasaweb ; Others Wiki Commons

Text Sources: New York Times, Washington Post, Los Angeles Times, Times of London, National Geographic, The New Yorker, Time, Newsweek, Reuters, AP, Lonely Planet Guides, Compton’s Encyclopedia and various books and other publications.

Page Top

© 2008 Jeffrey Hays

Last updated December 2012

This site contains copyrighted material the use of which has not always been authorized by the copyright owner. Such material is made available in an effort to advance understanding of country or topic discussed in the article. This constitutes 'fair use' of any such copyrighted material as provided for in section 107 of the US Copyright Law. In accordance with Title 17 U.S.C. Section 107, the material on this site is distributed without profit. If you wish to use copyrighted material from this site for purposes of your own that go beyond 'fair use', you must obtain permission from the copyright owner. If you are the copyright owner and would like this content removed from factsanddetails.com, please contact me.