Posts tagged ‘Democratic Progressive Party’

08/10/2016

Chinese consumers: Revisiting our predictions | McKinsey & Company

In 2011, we tried our hand at predicting the ways in which, in the decade to come, Chinese consumers would change their preferences and behaviors.

This article takes stock of those predictions.

Why check in now? One reason is we’re about halfway to 2020. Another is a comprehensive new McKinsey survey, which follows nearly ten years of previous research that includes interviews with more than 60,000 people in upward of 60 cities in China. Along the way, we’ve bolstered our own team’s data on consumer preferences and behavior with a number of complementary analyses and models, including McKinsey’s macroeconomic and demographic studies of Chinese urbanization and income development. We’ve also interviewed academics to draw out the major trends shaping the course of the Chinese economy, such as its rapidly aging population, the growing independence of women in society, and the postponement of critical life milestones, such as marrying and having children.

We’ve done it all with the abiding belief that companies getting ahead of the trends can build their brands and offerings to fit a rapidly evolving set of consumer needs in China. Deeper and more nuanced understanding of Chinese consumers can help reveal fresh opportunities—for new entrants and incumbents alike—and signal those areas where established players may need to be more wary.

Looking back nearly five years on, it is plain that Chinese consumers are evolving along many, though not all, of the lines we’d predicted. While geographic differences persist, Chinese consumers are, on the whole, more individualistic, more willing to pay for nonnecessities and discretionary items, more brand loyal, and more willing to trade up to more expensive purchases—even as their hallmark pragmatism endures.

Evolving geographic differences

Much of the research we described five years ago highlighted the vast differences we found among consumers in China’s various cities and regions. Just as it was then, generalizing about Chinese consumers continues to be almost as difficult (and maybe as foolish) as it is to generalize about European consumers.

We predicted these differences would remain—and even grow more significant, especially in the consumption patterns and tastes that relate to discretionary items. To help companies better tailor their go-to-market approach, we grouped most cities in China into clusters based on their similarities, including their geographic proximity and the transportation infrastructure that connects them.

As the economic structure in each of the 22 biggest city clusters has evolved—and as each of them has been affected differently by the recent slowdown of China’s economy—significant differences, for instance, in consumer confidence, do indeed persist between these clusters.

For instance, some 70 percent of consumers in the Fuzhou–Xiamen city cluster, which lies on the coast across from Taiwan, said in our latest report that they are confident their income will significantly increase over the next five years. In that same report, the Byland–Shandong city cluster, which lies on the coast between Beijing and Shanghai, was comparatively pessimistic, with only 33 percent of its consumers expressing such confidence.

Furthermore, when our latest survey compared the consumers in the Shanghai area to those around Beijing and Hangzhou, certain spending attitudes also showed marked differences. For example, brand loyalty increased much faster in Shanghai (24 percent increase in three years versus just 7 percent in Beijing and 9 percent in Hangzhou), as did the willingness to pay for better or healthier products.

Growing discretionary spending

Despite geographic differences, there are broad similarities among Chinese consumers. These mirror the general trends economists have found among consumers around the world as economies develop. The general tendency is for consumers, as they earn more, to spend a lower percentage of their income on food, a little more on healthcare, and even more on travel and transportation, as well as on recreational activities. It was no great stretch then, in our report five years ago, to predict a significant shift in consumption from necessities and seminecessities into discretionary categories.

Sure enough, our new survey shows Chinese consumers following the anticipated pattern. When we asked how they plan to increase spending as their income increases, dramatically fewer consumers said they will increase it on food (46 percent in the latest survey, compared to the 76 percent who said they would do so three years earlier).

Responses trended slightly up for healthcare products (from 16 percent to 17 percent), and increased for travel (from 14 percent to 23 percent) and leisure (from 17 percent to 25 percent).

Aspirational trading up

In our previous predictions, we also argued that as the income of Chinese consumers grew, they would aspire to improve their quality of life by not only spending more on discretionary items, but also by shifting their spending to more expensive items in the same categories.

In necessity categories such as food, for example, we predicted consumers would be willing to spend more for healthier versions of the same products—for instance, that olive oil would grow much faster than less healthy (and less expensive) oils. In semi-necessity categories like apparel, we predicted people would buy more special-occasion and premium brands. We anticipated that the strongest beneficiaries of these changes would be in the more discretionary and aspirational categories, such as skincare and automotive. So what has happened so far?

Premium categories have really accelerated. Comparing cosmetics purchases between 2011 and 2015, 44 percent of consumers have traded up their purchases, compared with 4 percent who traded down. Even for rice, 25 percent of consumers traded up versus 3 percent who traded down. Automotive was not included in our survey, but sales data from the Traffic Management Bureau of the Ministry of Public Security in China suggest significant trading up. In 2011, 51 percent of the renminbi spent on cars by Chinese consumers were for autos cheaper than 100,000 RMB. These sales accounted for only 43 percent of the market. Cars selling for 100,000 to 250,000 RMB grew twice as fast with a compound annual growth rate (CAGR) of 19 percent versus 9 percent. And cars with price tags between 250,000 and 400,000 RMB grew the fastest of all, with 23 percent CAGR.

Emerging senior market

In 2011, we observed a big generational difference between consumers in their late 50s and early 60s, who were very conservative spenders, and all of the age cohorts younger than them.

We predicted that by 2020, as the needs of consumers over the age of 55 changed along with their economic confidence, their spending habits would follow suit, making this age group worth pursuing by consumer-product companies. If anything, we underestimated the speed and force with which this trend would unfold.

By 2015, the 55–65 age group had started to shift even faster than the rest of the population. For example, 52 percent of the people in this age group showed a preference for premium products, compared to just 32 percent in 2012. They leaped from being the most conservative age group to the one most likely to trade up. Similarly, the preference for famous brand names among these older buyers jumped by more than 20 percent, fully closing the previous difference among cohorts. As Exhibit 1 shows, these older consumers don’t shy away from indulgences, and they have grown more likely to use the Internet to research their purchases, even if they still do so less often than younger consumers.

Chinese consumers in their late 50s and early 60s are shifting their buying behavior.

That said, the upper age group has remained more pragmatic and cost conscious than any other age group, as we discuss in the following section.

The still-pragmatic consumer

Back in 2011, even as we were predicting changes in the behavior and preferences of Chinese consumers, we also saw ways in which their essential pragmatism would likely stay the same. For instance, we anticipated that impulse buying would remain lower than in other countries and that value for money would continue to be an important consideration when choosing products and services. Interestingly, Chinese consumers across all age groups have, in some ways, become even more pragmatic. They’re now even more likely to compare prices across multiple stores, to be more price aware, and to stock up on promotions. That said, they’re now willing to buy more often on impulse (Exhibit 2).

The pragmatism of Chinese consumers has increased slightly across all age groups.

The individual consumer

We also predicted that as Chinese consumers aspire to a better life and trade up their purchases, they would become more discerning and gradually more individualistic. This would lead, for example, to a shift toward more healthy choices, more user-friendly products, and products and brands that better fit their personality. This could be a big opportunity for niche brands—and a threat to the mass-market brands that had won big in previous years by using scale and ubiquitous availability, supported by the trust gained by heavy advertising.

Our latest research certainly shows a decrease in consumption in categories deemed less healthy and a willingness to spend significantly more on health and more environmentally conscious categories. It also shows consumers are more likely to spend more to indulge themselves and more likely to try new technology. While their consumption choices have become more individualistic, though, it is important to note that family values continue to be at the top of their priorities (Exhibit 3).

Chinese consumers’ needs and values continue to center around family.

One area our predictions missed, however, was by anticipating that consumers, as they became more individualistic in their choices, might focus less on basic product reliability and safety. Perhaps in part because of a number of more recent food scandals, however, consumers seemed more concerned with these issues in 2015 than they were before.

The increasingly loyal consumer

When our team first started researching Chinese consumers, nearly ten years ago, many of us were surprised by their fickle attitude toward brands. Fewer than half of consumers tended to stick with their favorite brands, compared, for example, with almost three quarters of US consumers.

As we debated this tendency while making our predictions, we wondered if, in the clash between pragmatism and individualism, brand loyalty would stay low, increase, or even decline. Ultimately, we decided it would increase as the emotional benefits of brands became more important to consumers and as increased choice and availability of branded products (online and off) would allow consumers to optimize for price and convenience without changing choices too often.

Our recent research confirmed the changes we anticipated. Consumers are now significantly less likely to buy a brand that is not already among their favorites, continuing the upward trend we observed in 2011 (Exhibit 4).

Chinese consumers are increasingly brand loyal and focused on just a few brands.

The modern shopper

Our 2011 predictions were bullish on e-commerce, predicting that Chinese consumers would adapt their channel choices even faster than has occurred in developed markets.

We estimated that by 2020, online consumer-electronics purchases would jump to 40 percent, from about 10 percent. More mainstream categories would rise to 15 percent, and some categories, such as groceries (now below 1 percent), could reach about 10 percent. These changes are occurring even as the enduring pragmatism and diligence of the Chinese consumer continue to be in place. Our latest research shows that consumers of all age groups are much more likely to collect information online, even on fast-moving consumer goods, than they were just three years ago.

In 2015, online food and beverages sales (excluding fresh) reached 7.2 percent: reaching our predicted 10 percent in five years looks very likely. The online share of consumer-electronic purchases, meanwhile, has reached a whopping 39 percent in 2015, and it now looks possible that by 2020 it will be about 50 percent of overall sales.


Looking from today’s perspective at our 2011 predictions, it is impressive to see the evolution of Chinese consumers—even as their most characteristic traits endure. Certainly, we’ll check in on their progress as we get ever closer to the year 2020. Making predictions may be difficult, especially about the future—as US Baseball Hall of Famer Yogi Berra famously observed. But they can still provide valuable foresight for executives.

Source: Chinese consumers: Revisiting our predictions | McKinsey & Company

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14/01/2016

Xi’s new model army – The Economist

Xi Jinping reforms China’s armed forces—to his own advantage

CHINA’S biggest military shake-up in a generation began with a deliberate echo of Mao Zedong.

Late in 2014 President Xi Jinping went to Gutian, a small town in the south where, 85 years before, Mao had first laid down the doctrine that the People’s Liberation Army (PLA) is the armed force not of the government or the country but of the Communist Party. Mr Xi stressed the same law to the assembled brass: the PLA is still the party’s army; it must uphold its “revolutionary traditions” and maintain absolute loyalty to its political masters. His words were a prelude to sweeping reforms in the PLA that have unfolded in the past month, touching almost every military institution.

The aim of these changes is twofold—to strengthen Mr Xi’s grip on the 2.3m-strong armed forces, which are embarrassingly corrupt at the highest level, and to make the PLA a more effective fighting force, with a leadership structure capable of breaking down the barriers between rival commands that have long hampered its modernisation efforts. It has taken a long time since the meeting in Gutian for these reforms to unfold; but that reflects both their importance and their difficulty.

The PLA itself has long admitted that it is lagging behind. It may have plenty of new weapons—it has just started to build a second aircraft-carrier, for instance—but it is failing to make effective use of them because of outdated systems of command and control. Before any substantial change in this area, however, Mr Xi felt it necessary to strengthen the party’s control over the PLA, lest it resist his reforms and sink back into a morass of money-grubbing.

The reforms therefore begin with the main instrument of party control, the Central Military Commission (CMC), which is chaired by Mr Xi. On January 11th the CMC announced that the PLA’s four headquarters—the organisations responsible for recruiting troops, procuring weapons, providing logistics and ensuring political supervision—had been split up, slimmed down and absorbed into the commission. Once these were among the most powerful organisations in the PLA, operating almost as separate fiefs. Now they have become CMC departments.

Power to the party

The political headquarters was the body through which the party kept an eye on the ranks and ensured they were up to speed on Maoist texts and the party’s latest demands. The loss of its autonomous status may suggest that the party’s role is being downgraded. Far from it. Now the party’s CMC (there is also a state one, which exists only in name) will be better able to keep watch. The body’s 15 new departments will include not only departments for politics but also for logistics, personnel management and fighting corruption. Mr Xi has already turned his guns on graft, imprisoning dozens of generals.

The second reform has been to put the various services on a more equal footing. The land forces have hitherto reigned supreme. That may have been fine when the PLA’s main job was to defend the country against an invasion across its land borders (until the 1980s the Soviet Union was considered the biggest threat). But now China has military ambitions in the South China Sea and beyond, and wants the ability to challenge American naval and air power in the western Pacific. A recent editorial in the Liberation Army Daily, a PLA mouthpiece, berated the armed forces for their “army-centric mindset”.

In addition to those for the navy and air force, a separate command has now been created for the army, which had previously run everything. On December 31st the CMC also announced the formation of a command responsible for space and cyberwarfare, as well as one for ballistic and cruise missiles (previously known as the Second Artillery Force, part of the army). There is also a new joint command with overall control of the various services, a little like America’s joint chiefs of staff.

Big changes are also afoot in regional command structures. China used to be divided into seven military regions. These were powerful and relatively self-contained; sharing or swapping troops and equipment was rare. Now, according to reports in the South China Morning Post, a newspaper in Hong Kong, the number will be reduced to five. Troops will be recruited and trained by the various services before regional deployment. This will ensure greater central control over the regions.

China has been talking about military reform for decades, but change has been glacial. Opposition within the armed forces has been intense. “If [reform] is not done properly,” wrote Sun Kejia and Han Xiao of the PLA National Defence University last month, “it could affect the stability of the armed forces or even all of society.” (The article was promptly removed from the Liberation Army Daily website.) Demobbed soldiers could make trouble—Mr Xi wants the number of troops to be cut by 300,000. State firms have been ordered to reserve 5% of jobs for laid-off veterans.

The recent reforms are more extensive than most Western observers had expected after the Gutian conference. But even so, they are incomplete. The army still holds sway over some appointments (all five chiefs of the new regional commands are army generals, for instance). The PLA has traditionally given higher status to combat units than to those providing communications, logistics, transport and the like, a misplaced emphasis in an age when information and communications are crucial in warfare. The reforms do little to correct that bias. Moreover, many details about them remain unclear. No one knows, for example, where the troop cuts will come from or what units will go into the new space and cyberwarfare command.

The first result of the reforms is likely to be confusion in the ranks, until the new system settles down. Dennis Blasko, an American observer of the PLA, says no one can be sure of the results until they are tested in battle. Amid the murk, only one man clearly seems to have got his way: Mr Xi.

From: http://www.economist.com/news/china/21688424-xi-jinping-reforms-chinas-armed-forcesto-his-own-advantage-xis-new-model-army

01/01/2016

‘The Miraculous History of China’s Two Palace Museums’ – China Real Time Report – WSJ

In late 1948 and early 1949, toward the end of the Chinese civil war, Nationalist leader Chiang Kai-shek transported across the Taiwan Strait hundreds of thousands of valuable Chinese artifacts which are now stored in Taipei’s National Palace Museum. Along with its Palace Museum counterpart in Beijing – more famous as the Forbidden City – the museums serve as one of the most poignant reminders of the division of China.

Beijing’s Palace Museum, which celebrated its 90th anniversary in October, was established shortly after the last Chinese emperor, Pu Yi, was forced from his palace, where he had been allowed to stay even after the Chinese republic was founded in 1911.

Intellectuals at the time wanted to set up a Chinese museum along the lines of the great museums in Europe.

Today, millions visit both museums each year, crowding around artifacts such as the Jadeite Cabbage and the Meat-Shaped Stone in Taipei.

Among the visitors are huge tour groups of mainland Chinese tourists, as the Taipei government continues to liberalize travel policies for its neighbor amid a broader detente.

This week, a branch of the National Palace Museum housing exhibits from around Asia was inaugurated in the southern Taiwanese city of Chiayi.

In his book “The Miraculous History of China’s Two Palace Museums,” Hong Kong-based writer Mark O’Neill details the treacherous history of how some of China’s most precious artifacts were rescued from the invading Japanese imperial army in the 1930s and later transported to Taiwan, and the powerful symbolism of the museums.

Source: Writing China: Mark O’Neill, ‘The Miraculous History of China’s Two Palace Museums’ – China Real Time Report – WSJ

07/11/2015

Oppose Taiwan independence, China’s Xi says at historic meeting | Reuters

China and Taiwan must not let proponents of Taiwan’s independence split them, China’s President Xi Jinping told Taiwan’s president on Saturday at the first meeting between leaders of the two sides since China’s civil war ended in 1949.

Ma Ying-jeou, president of self-ruled, democratic Taiwan, where anti-Beijing sentiment has been rising ahead of elections, called for mutual respect for each other’s systems and said Taiwan people were concerned about mainland missiles pointing their way.

The talks, at a luxury hotel in the neutral venue of Singapore, lasted less than an hour but were heavy with symbolism.

The two leaders shook hands and smiled in front of a mass of journalists when they met, with Xi wearing a red tie, the color of the Communist Party, and Ma a blue one, the color of his Nationalist Party.

Moving into a meeting room, Xi, speaking first and sitting opposite Ma, said Chinese people on the two sides of the Taiwan Strait had the ability and wisdom to solve their own problems.

“No force can pull us apart because we are brothers who are still connected by our flesh even if our bones are broken, we are a family in which blood is thicker than water,” Xi said.

In response, Ma said he was determined to promote peace across the Taiwan Strait and that relations should be based on sincerity, wisdom and patience.

Ma also asked Xi indirectly to respect Taiwan’s democracy.

“Both sides should respect each other’s values and way of life to ensure mutual benefit and a win-win situation across the straits,” he said.

China’s Nationalists, also known as the Kuomintang (KMT), retreated to Taiwan after losing the civil war to the Communists, who are still in charge in Beijing.

The mainland has never renounced the use of force to bring what it considers a breakaway province under its control.

Speaking to reporters after the talks, Ma said he hoped Xi could pay attention to China’s missile deployment – the island has long fretted about batteries pointed its way – to which Xi replied that was not an issue about Taiwan, he said.

“I at least raised the issue, and told him that the Taiwanese people have questions and concerns about it, and hope he will treat it with importance,” Ma said.

Zhang Zhijun, the head of China’s Taiwan Affairs Office, said Xi told Ma that the biggest threat to the peaceful development of relations was pro-independence forces. “The compatriots on both sides should unite and firmly oppose it,” Zhang said.

Source: Oppose Taiwan independence, China’s Xi says at historic meeting | Reuters

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