Archive for ‘Affluence’

19/04/2014

Audi expects to sell half million cars in China this year | Reuters

Volkswagen‘s (VOWG_p.DE) luxury division Audi plans to sell about half a million cars this year in China, the world’s biggest auto market, and raise the number of its Chinese dealers to 500 by 2017.

The company logo is seen on the bonnet of a Audi car during the media day ahead of the 84th Geneva Motor Show at the Palexpo Arena in Geneva March 5, 2014. REUTERS/Arnd Wiegmann

The German automaker hopes its car sales will exceed 500,000 this year, executives told reporters on Friday before the Beijing auto show, which opens on Sunday.

Foreign auto makers, such as General Motors Co (GM.N) and Toyota Motor Corp (7203.T), and domestic players such as SAIC Motor Corp (600104.SS) have been competing aggressively in China, where rising affluence is boosting car ownership.

“This country has an increasing number of mega cities,” Audi Chief Executive Rupert Stadler said, naming Beijing, Shanghai and Guangzhou as examples. “In these three areas, there are as many people as, for example, in Germany.”

In 2013, Audi sold 488,000 vehicles in China and a total of 492,000 including Hong Kong. Executives said it aimed to take advantage of the increasing popularity of SUVs and rising demand for compact premium cars.

China’s auto market is expected to grow 8-10 percent this year, easing from last year when it expanded 13.9 percent to 21.98 million vehicles.

Audi is stepping up efforts to unseat German rival BMW (BMWG.DE) as global luxury-car sales leader.

via Audi expects to sell half million cars in China this year | Reuters.

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11/04/2014

All you need to know about business in China | McKinsey & Company

A lot of people view China business as mysterious. Relax. Consumers behave pretty much the same everywhere. Competition is pretty much the same everywhere. You just need to ignore the hype and focus on the basic fact that in China today, there are six big trends (exhibit). That’s it. Six trends shape most of the country’s industries and drive much of China’s impact on the Western world. They are like tectonic plates moving underneath the surface. If you can understand them, the chaotic flurry of activity on the surface becomes a lot more understandable—and even predictable.

Coauthors Jeffrey Towson and Jonathan Woetzel discuss China’s six megatrends with Nick Leung, the managing partner of McKinsey’s Greater China office.

These trends move businesses on a daily basis. They’re revenue or cost drivers that show up in income statements. Deals, newspaper headlines, political statements, and the rising and falling wealth of companies are mostly manifestations of these six trends, which aren’t typically studied by economists and political analysts. In fact, we happen to think that Chinese politics or political economics are wildly overemphasized by some Westerners in China. So let’s tell a story about each of these megatrends, with some important caveats. They’re not necessarily good things. They’re not necessarily sustainable. For every one of them, we can argue a bull and a bear case. Most lead to profits or at least revenue. Some may be stable. Some lead to bubbles that may or may not collapse. We are only arguing that they are big, they are driving economic activity on a very large scale, and understanding them is critical to understanding China and where it’s headed.

via All you need to know about business in China | McKinsey & Company.

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26/03/2014

Foreign Brands Shift Focus to China’s Second-Tier Cities – Businessweek

On March 15, luxury retailer Lane Crawford held a soft launch for its new store in Chengdu, a fast-growing metropolis in southwestern China. A few years ago, major fashion brands were concentrating on China’s leading first-tier cities: Beijing, Shanghai, Guangzhou, and Shenzhen. But today many are focusing on China’s second-tier and third-tier cities—which McKinsey Global Institute predicts will be home to 45 percent of China’s middle-class and high-income earners by 2022.

Chunxi Road shopping street in Chengdu

Hong Kong-based Lane Crawford is in good company in Chengdu. In 2010 the spacious Yanlord Landmark mall opened there; its current tenants include Burberry (BRBY:LN), Dior (CDI:FP), and Louis Vuitton (MC:FP). Of its 47 stores in mainland China, Louis Vuitton has already opened 36 in second-tier and third-tier cities. Tommy Hilfiger even has outlets in the western territories of Xinjiang and Tibet. Estée Lauder (EL) has more than 100 counters in more than 40 Chinese cities.

Domestic luxury brands looking to establish themselves as national chains are also focusing on second-tier cities. Guangzhou-based fashion label Nisiss, which sells breezy trousers and $900 cocktail dresses, opened two stores last year in Chengdu. This year it plans to open stores in Qingdao, Dalian, and Suzhou, among other cities.

via Foreign Brands Shift Focus to China’s Second-Tier Cities – Businessweek.

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21/03/2014

China Wants Its People in the Cities – Reuters

From: http://www.businessweek.com/articles/2014-03-20/china-wants-its-people-in-the-cities

Thirty-five years ago, when paramount leader Deng Xiaoping launched gaige kaifang, or “reform and opening,” China was a much more agricultural country, with less than a fifth of its people living in cities. Since then hundreds of millions of rural residents have left the countryside, many seeking jobs in the export-oriented factories and construction sites that Deng’s policy promoted.

Commercial and residential buildings stand in the Luohu district of Shenzhen, China, on Dec. 18, 2013 In 1978 there were no Chinese cities with more than 10 million people and only two with 5 million to 10 million; by 2010, six cities had more than 10 million and 10 had from 5 million to 10 million. By the following year, a majority of Chinese were living in urban areas for the first time in the country’s history.

Now urbanization has been designated a national priority and is expected to occur even more rapidly. On March 16, Premier Li Keqiang’s State Council and the central committee of the Communist Party released the “National New-type Urbanization Plan (2014-2020),” which sets clear targets: By 2020 the country will have 60 percent of its people living in cities, up from 53.7 percent now.

What’s the ultimate aim of creating a much more urban country? Simply put, all those new, more free-spending urbanites are expected to help drive a more vibrant economy, helping wean China off its present reliance on unsustainable investment-heavy growth. “Domestic demand is the fundamental impetus for China’s development, and the greatest potential for expanding domestic demand lies in urbanization,” the plan says.

To get there, China’s policymakers know they have to loosen the restrictive hukou, the household registration policy that today keeps many Chinese migrants second-class urban residents. China will ensure that the proportion of those who live in the cities with full urban hukou, which provides better access to education, health care, and pensions, will rise from last year’s level of 35.7 percent of city dwellers to 45 percent by 2020. That means 100 million rural migrant workers, out of a total 270 million today, will have to be given urban household registration.

To prepare for the new masses, China knows it must vastly expand urban infrastructure. The plan calls for ensuring that expressways and railways link all cities with more than 200,000 people by 2020; high-speed rail is expected to link cities with more than a half million by then. Civil aviation will expand to be available to 90 percent of the population.

Access to affordable housing projects funded by the government is also expected to rise substantially. The target is to provide social housing (roughly analogous to public housing in the U.S.) to 23 percent of the urban populace by 2020; that’s up from an estimated 14.3 percent last year, according to Tao Wang, China economist at UBS Securities (UBS) in Hong Kong. That means providing social housing for an additional 90 million people, amounting to about 30 million units, over the next seven years, Wang writes in a March 18 report.

The urbanization plan appears to face several big challenges. First, the government wants to maintain restrictions on migration to China’s biggest cities, which also happen to be its most popular. Instead, the plan calls for liberalizing migration to small and midsize cities, or those with less than 5 million. Whether migrants will willingly flock to designated smaller cities, rather than the megacities including Beijing, Shanghai, Guangzhou, and Shenzhen, is an unanswered question.

Another obstacle to faster urbanization is that the plan doesn’t propose how to reform China’s decades-old land tenure system. Changing the system could allow farmers more freedom to mortgage, rent, or sell their land.

Finally, one of the most daunting problems is figuring out how to pay for implementing the ambitious urbanization targets. The cost of rolling out a much more extensive social welfare network will be substantial (today, most Chinese in the countryside have far lower levels of medical and pension coverage, as well as far inferior schools); building the new urban infrastructure will also be expensive.

 

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28/02/2014

Made-in-USA Luxury Brands Win Fans in China – Businessweek

Corina Su would love to own a handbag or shoes from luxury brands such as Louis Vuitton (MC:FP) or Gucci (KER:FP). For now, Kate Spade (KATE), Michael Kors (KORS), or Coach (COH) will do. “We call these the ‘American trendy brands,’ ” says Su, a 25-year-old who works in advertising in Shanghai. She prefers Kate Spade’s bright colors and bold designs to the more muted styles offered by big European luxury houses that tout their heritage to justify charging more. “I might eventually buy an LV or Gucci bag,” Su says. “But it won’t be until I’m much older, I suspect.”

A Kate Spade handbag

As Chinese shoppers such as Su get better acquainted with American luxury brands, they’re discovering a designer wardrobe doesn’t have to cost months of pay. That’s helping U.S. labels that offer fashions with a foreign pedigree but price tags in the hundreds of dollars even as European luxury-goods makers raise prices for some bags to more than $4,000 to combat slowing growth. “The Chinese market is developing into a middle-class market, looking a bit less elitist and a bit more American,” says Luca Solca, an analyst at Exane BNP Paribas.

via Made-in-USA Luxury Brands Win Fans in China – Businessweek.

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25/02/2014

Property remains top wealth driver in China-Hurun list | Reuters

Real estate remained the most lucrative road to riches in China last year, according to the Hurun Global Rich List, despite Beijing’s repeated efforts to cool red-hot property prices.

A labourer works at a construction site in Beijing, January 20, 2014. REUTERS/Kim Kyung-Hoon

Six of world’s 10 top real estate tycoons are now from China and Hong Kong, according to Hurun Report Inc, which released its Global Rich list on Tuesday.

Hong Kong property tycoon Li Kai-shing claimed the top spot in the Greater China area with his fortune rising 3 percent to 200 billion yuan ($32.80 billion).

Wang Jianlin, chairman of China’s largest commercial property developer, Dalian Wanda Group, and Lui Che-Woo, founder of casino operator, Galaxy Entertainment Group Ltd (0027.HK), were the runners-up with personal wealth of 150 billion yuan ($24.60 billion) each.

Wang’s fortune doubled last year, while Lui’s wealth jumped 108 percent, the report said.

Wang bought UK luxury yacht maker Sunseeker for $1.6 billion and is planning billion-dollar luxury hotel developments in London and New York.

Home prices in many Chinese cities continued to set records last year despite a four-year government campaign to cool the housing market, official data showed.

via Property remains top wealth driver in China-Hurun list | Reuters.

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14/02/2014

Chinese luxury spending drops 19% during festival[1]- Chinadaily.com.cn

Chinese people spent $6.9 billion overseas on luxury goods during the Spring Festival holiday (Jan 31 – Feb 6), a drop of 18.8 percent from last year, according to World Luxury Association.

Austerity drive among factors taking toll on luxury market

Luxury outlets lure Chinese at Lunar New Year

And domestic sales of luxury goods were only $350 million, a 57.8-percent drop from 2013 and 80 percent drop from 2012.

The European area tops the destinations by receiving nearly $3.6 billion of total overseas spending during the festival.

Meanwhile the domestic luxury goods consumption also saw a sharp drop in five major cities (Beijing, Shanghai, Guangzhou, Shenzhen and Chonagqing), standing at $350 milion, down 57.8 percent from the same period of last year and 80 percent from 2012.

Insiders said the results were due to the Chinese central government‘s cracking down on corruption, which led to dramatic decrease in government-paid junkets and officials accepting gifts.

via Chinese luxury spending drops 19% during festival[1]- Chinadaily.com.cn.

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05/02/2014

China’s New Year market booms, luxury gift sales down – Xinhua | English.news.cn

China\’s consumer market boomed during the first days of the Lunar New Year holiday despite falling luxury gift sales, according to the Ministry of Commerce (MOC) on Wednesday.

In the first four days of the week-long Spring Festival holiday, the most important traditional holiday in China, consumer market sales expanded steadily and quickly, the MOC said in a statement on its website.

Without giving nationwide figures, the MOC said consumer market sales in the cities of Beijing and Chengdu had risen by 9.2 percent and 13 percent year on year respectively. According to the MOC, sales in Shaanxi, Anhui and Henan provinces grew by 14.3 percent, 11.2 percent and 10.4 percent respectively.

Online business and the catering, tourism and entertainment sectors have also prospered during the holiday, according to the MOC.

China\’s consumer market has boomed in spite of falling sales of luxury goods purchased as new year gifts, according to the MOC.

Sales of luxury gifts such as expensive alcoholic beverages and rare seafood, which are sometimes sent as gifts to officials during the holiday, have fallen sharply. Experts have viewed the drop as a direct result of the central government\’s anti-graft and frugality campaign.

via China’s New Year market booms, luxury gift sales down – Xinhua | English.news.cn.

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05/02/2014

Scooter boom: Young women find gusto on India’s roads | Reuters

\’Plush pink\’ and \’burgundy bliss\’ scooters are the new buzz on India\’s roads, even as the rest of the autos market is sputtering amid an economic slowdown.

Honda Jazz scooter

Honda Jazz scooter (Photo credit: Wikipedia)

The scooters go by names such as \”Pleasure\”, but marketing aside, this new fleet of women-friendly bikes reflects a deeper change in attitude and society in India, and has captured the attention of foreign manufacturers such as Japan\’s Honda Motor Co Ltd and Yamaha Motor.

Young, well-heeled and independent-minded women, who are also conscious of the perils of using public transport, are helping to propel a boom in sales of scooters.

The rising popularity of the scooter comes at a time of nationwide protests against the prevalence of rape and sexual assault in India. In one case, a young female student died after she was gang-raped on a bus in Delhi.

Weighing convenience as well as safety, some young women, and their parents, see the scooter as the best solution for commuting to work, going to college or simply going out to meet friends.

Scooter sales were up nearly 20 percent in the nine months through December, according to Society of Indian Automobile Manufacturers data, easily outpacing the 2.5 percent sales growth of full-size motorcycles. Sales of cars, trucks and buses all fell.

Still, scooters accounted for only 20 percent of India\’s 14 million-unit two-wheeler market in the last financial year. Two wheelers are the most common mode of transport for millions of middle-class Indians.

Both Honda and Yamaha have identified the growth potential in scooters, and are building models designed for women and adding new plants to keep up with demand.

\”College-going girls and working women are really creating this demand-wave in the scooter segment,\” said Abdul Majeed, a partner at PricewaterhouseCoopers India.

\”Housewives are also using scooters to drop (off) kids and buy vegetables,\” Majeed said, adding that he expects strong sales growth to continue and for companies to launch more scooters geared towards women.

Yamaha launched its first Indian scooter designed for women, the Ray, in 2012. The bike sells for around about 47,000 rupees ($750) and comes in colors such as \’starry white\’, \’plush pink\’ and \’burgundy bliss\’. About 70 percent of the women who buy it for themselves are under 30, the company says.

\”They don\’t want to trouble their parents or brothers. They want personal mobility,\” said Roy Kurian, vice president of marketing and sales at Yamaha in India. \”If a guy had to ride then he would have gone for a motorcycle,\” he said.

via Scooter boom: Young women find gusto on India’s roads | Reuters.

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11/01/2014

China parents count cost of sending children to overseas universities – FT.com

Jack Ma, one of China’s best-known entrepreneurs, thinks business success in China has nothing to do with prestigious foreign degrees: “When you want to judge whether a person . . . is excellent or not don’t look at whether they went to Harvard or Stanford,” he is famous for saying.

More and more Chinese parents apparently disagree with the co-founder of internet company Alibaba: they are increasingly spending three or four years’ annual family income to send their only child for foreign study. Some are now asking whether it is worth the investment.

The number of Chinese studying overseas has more than tripled in the past decade and continues to shoot up. The rise has been particularly dramatic among lower-middle-class families: according to a report from the Chinese Academy of Social Sciences, up to the end of 2009 students from such families made up only 2 per cent of all those who studied overseas, but by the end of 2010 the proportion had risen to 34 per cent.

For many Chinese families with children overseas, money is no object. But many lower middle-class and working-class families are counting on their only child to support them in their old age.

Foreign universities also increasingly rely on fees from Chinese students to ​boost their income. But is it worth spending Rmb1m-2m ($165,000-$330,00) on preparing for and completing an overseas degree, only to return to a job market where seven million graduates cannot find jobs?

According to Chinese recruitment agencies and human resources professionals, people who have studied overseas – known as “haigui”, or sea turtles, because they have one foot on land and one in the sea – command little if any salary premium when they start entry-level jobs back in China.

via China parents count cost of sending children to overseas universities – FT.com.

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