Trends and challenges in China

China is massive. It is roughly the size of the US but with a population more than four times larger. It consists of 22 provinces, has eight official languages, a population of 1.3 billion people and 25 cities with a population of more than three million. Diverse in terms of economics development, culture and living conditions, to say China is a complex market is something of an understatement.

 

Traditionally, global companies looked to China only as a source of cheap labour and a centre of production for their goods, which would then be exported to other countries for sale. But the scenario is now changing. Global companies are turning their eyes toward China as a new market opportunity, whose population is becoming wealthier and already enlarging its spending on consumer goods.

It is time to stop calling China an emerging market - it has emerged.

From a marketing communications perspective, the complexity of China - and how to effectively target Chinese consumers, from Shanghai to Datong - is one of the biggest challenges of the industry.

This post covers some trends and challenges that await marketers in China.

Trade inside China

China is purposefully shifting its economy away from exports of cheap goods. To deliver sustainable growth, the government needs to encourage domestic consumption, and this was the emphasis of the five-year economic plan announced in 2011. Companies need to sell into China, rather than just produce there. Already, China has become the second-largest market for Apple and Dell. It will become the biggest for Intel in 2012 and is poised to become the largest market for Porsche and Ferrari.

Focus on innovation

Historically, Chinese firms have not focused on innovation. Currently multinationals' biggest concern is the improvement of domestic firms. Chinese firms are still a few years away from being global innovators on a par with Google, but they can compete head-to-head with Western brands on quality.

Building trust

Trust has been a huge issue for brands in China, especially in the food industry. Many consumers say they eat at KFC because they consider it healthy compared with food sold by street vendors. In general, consumers trust foreign brands more than domestic ones, but multinationals should not think that Chinese brands cannot react and gain ground.

Impact of social media

The rise of online social platforms in China and the impact it is having, not just on business but on politics, is astonishing.

Micro-blogging is incredibly popular in China and shifts public opinion like a tidal wave. Because there are so few outlets for self- expression in traditional media, younger Chinese people turn to online stores for information and to share their thoughts.

For example, furniture retailer Da Vinci cause a scandal in 2011 when it was caught describing Chinese- made furniture sets as imported. Within minutes, the entire country knew about the allegations via micro-blogging sites.

Western firms have been slow to tap into Chinese social media's marketing power. Most multinationals spend 3% of their marketing budgets online in China, compared with 11% in the US, despite younger Chinese people spending about twice the amount of time online as their US counterparts.

Most probably there will be another post(s) about changing demographics in China. Keep in touch :)