Chapter 35 China: Unique Changes in Consumer Culture

As the core of the new urban consumer groups, young people have particularly strong brand awareness.A loyal female reader of a popular fashion magazine in China might own "at least one Louis Vuitton handbag, a pair of Gucci shoes, at least seven Estee Lauder and Lancome lipsticks. A male reader might wear Armani ready-to-wear and Hermès." tie, with a Zippo lighter."In a consumer survey conducted by the magazine, readers surveyed indicated that "they are willing to spend more on international brands".This obsession with the material world has pervaded Chinese urban culture since the beginning of the new century.If Chinese consumers in the 1990s were mainly concerned with electrical appliances and decorations used in modern Western homes, then the past few years have witnessed a significant change in the consumption focus of Chinese consumers, who have begun to focus on products and services , about fashion, about trendy bars and restaurants, about accessories.

Indeed, currently in China, only a relatively small number of people can afford this kind of consumption.These are mainly urban elites who have benefited directly from China's accelerated economic development.They may only account for 10% or less of China's total population, but even so, it means that at least 100 million Chinese have consumption desires similar to those of the rich around the world, and their purchasing power is getting stronger and stronger. The more able to satisfy their consumption desires.However, although from the perspective of purchasing power, China's per capita income is much higher than the actual per capita income, but after all, China's annual per capita income is still only US$1,000.If calculated according to purchasing power parity, even in the region with the highest level of purchasing power in China, its per capita income in the early 21st century was only 4,000 to 5,000 US dollars, which was significantly lower than that of almost all regions in the United States or Europe. Compared with the annual income in US dollars, there is still a big gap.

Most economists believe that a family can live like a middle-class family when it has an annual income of $5,000 or the equivalent in purchasing power.This pattern of life is familiar: At this income level, people start buying things that middle-class households everywhere buy, from computers to televisions, cell phones to clothing, they start eating out, and eventually they buy their own cars. .They can afford more than just necessities.In China, the per capita purchasing power of $5,000 is misleading, because China has hundreds of millions of poor rural people, and many more rich urban people, and this number is calculated on average.However, this figure at least reflects a reality: in the early 21st century, China has achieved a major leap forward.Although a large part of China's population lives in poverty and has not been integrated into the global economy, due to China's large population, a small group of rich people is already a large group in terms of absolute numbers. In continuous improvement, it can be regarded as a real potential consumer.

The growth of consumer demand may be beneficial to the development of enterprises, but it is not necessarily conducive to the long-term stability of society.In the past 20 years, Chinese society has not remained static, but has developed rapidly.China's development has its own reasons, goals and priorities.Moreover, it is not difficult to get the Chinese to consume, they are experts in consumption. The consumption tendency of Chinese people is very important for us to understand the reasons and process of "Central America". In the 1990s, Avon succeeded in one fell swoop in China, which shows that it is not difficult to arouse Chinese people's buying enthusiasm.But at that time, although Chinese wages were already rising, mass consumption was constrained by low income levels, so the first Western companies to succeed in China were those selling low-end products.Their products are both foreign and affordable, so they will be welcomed by the Chinese.For most middle-class families in China at that time, Avon products and KFC food were considered luxuries.But 10 years later, the variety of goods on the market has increased significantly.

In 2003, when the growth of China's economic strength became a clear fact, many people suggested that China's development was just a replica of Japan's development in the mid-1980s. In the mid-1980s, Japan's economy was growing rapidly, and its growing wealth and thirst for all things Western had aroused suspicion in these countries as well as the attention of established Western economic powers.When people started to compare China with what Japan used to be, China quickly attracted more media and public attention.For a brief period in the late 1980s, there was a clear concern in American society that Japan would overtake the United States as the dominant power in the world economy.In addition to occupying the American market with automobiles and electrical appliances, the Japanese also bought Rockefeller Center and Pebble Beach Stadium in the United States, which sounded the alarm for the global status of the United States.Japanese companies appear to be more efficient and market-competitive than U.S. companies, and Japanese banks are better capitalized than U.S. banks, crowding out U.S. competitors.But then Japan's economy slumped almost as fast as it grew.Soaring house prices and a flood of bad loans crushed Japan's banks, and the Japanese government's failure to respond quickly to the situation sent the Japanese economy into a downward spiral of stagnant growth, deflation, and, in the 1990s, It has been so for most of the time and for the first few years of the 21st century.

In the fall of 2003, I was preparing for the launch of an investment fund.The fund focuses primarily on Chinese and American companies that play an important role in China's economic development.During my work, I have spoken with potential investors and listed many reasons why China has a unique set of development opportunities.And they always bring up the old Japan.They want to know, why is China different from Japan?The answer is simple: China has a consumer culture that Japan does not. That's not to say Japanese consumers don't have spending appetites.Of course they have, and every visitor to Tokyo will marvel at Japan's high-end malls, luxury goods, and emerging gaming culture, anime culture, and creative merchandise.However, a vibrant consumer culture has both good and bad sides.You can distinguish levels of consumer culture by one very simple thing - speculation.Japan is a conservative society, and most people like to save money rather than invest.Brand-name products have had some success in the Japanese market because they cater to the conservative culture and appreciation of hierarchy in Japanese society, and brands are attractive to Japanese people because they represent "the best."China also has a high savings rate, reaching nearly 50% in recent years, but this is because before the 1990s, the Chinese had very little to consume.Even now, Chinese have few avenues to invest their disposable income, China's bond market is not well developed and the stock market is seen as a place to gamble.

The only country in the world that can rival America's status as a "gambling safe haven" is China.Yes, Monaco can also be counted as one, or the Bahamas, but these small countries cannot compare with China and the United States with their large populations.At the turn of the century, China's gaming industry was limited to Macau, a former Portuguese colony not far from Hong Kong.Macau is famous for its gaming industry. Many people crowded in the casino for all kinds of dice and card games. The air was filled with the smell of sweat and smoke.It's a lot like what Las Vegas and Atlantic City casinos looked like earlier.For years, the most famous casinos in Las Vegas have provided villa accommodation and private jet transfers for free in order to attract gamblers and speculators, but now, American casinos have the idea of ​​​​opening in Macau.

As soon as the news came out, the competition to build new hotels and casinos in Macau was frantic.Steve Wen and Sheldon Adelson all want to be the first to open the Chinese market.Steve Wing was in charge of the transformation of Las Vegas casinos in the 1990s, while Adelson came from Las Vegas Sands.Both have comparable casinos and both face competition from Wynne's old club, MGM Corp.MGM Resorts, in partnership with local billionaire Stanley Ho, has an advantage in opening up the mainland Chinese market.Their salespeople are well-connected in Shanghai and the Pearl River Delta region, and their casinos have long been attractive to Hong Kong's wealthy.And as newcomers, Steve Winn and Adelson's casinos also have the advantage of attracting the rich who have long been drawn to American casinos.The more competition there is, the more casinos there are. In 2006, Macau surpassed Las Vegas to become the world's largest gambling city, with an annual gaming revenue of nearly US$7 billion.During the economic crisis of 2008-2009, the gambling markets in Macau and Las Vegas both declined, but the situation in Macau was better.

Although it is unscientific to use gambling to measure consumption, the link between the two is undeniable. In the 1990s, companies like Yum! Brands and Avon invested in China because they believed that China would become a huge consumer market. In the 2000s, their efforts have paid off.The arrival of this day may be a bit long, during which these companies may not see hope, but the growth of China's consumption power has exceeded all analysts' expectations, and its speed is faster than the most optimistic analysts predicted. The proportion of personal consumption expenditures is still low. In the late 1990s, some optimists said that within 20 years, the income of Chinese people would reach a certain level, and China would become an important global market.In fact, it took less than 10 years for this day to come, and the pace of China's development is still accelerating.

Opponents of China's entry into the World Trade Organization do not view China's development in a positive light, nor do some in China and the United States who express doubts about the sustainability of the insatiable desire to consume in modern consumer culture.There are still some people in China who continue to criticize extreme materialism.Many Chinese (whether young or old) admit that behind the great prosperity of the commodity economy, they are faced with cultural confusion and feel that life has become dull with material abundance. Since 2003, with the further popularization of the Internet in China and the emergence of a large number of Internet cafes, online games, especially multiplayer games, have become popular.Like other developers, online game developers are also trying to develop more perfect games to attract consumers.The main consumer groups of online games are urban teenagers, college students and young men whose parents have relatively high incomes."Fantasy Westward Journey" developed by NetEase is one of the more popular online games.The game is based on Chinese classics and takes players to an unreal past.Some people are addicted to playing games, playing games for 60-70 hours a week.This situation has already attracted attention and criticism at a time when online games have just entered other countries in Asia.I once went to an Internet cafe in Shanghai. This Internet cafe is along a busy and lively street, but it was very quiet inside. More than 100 people sat in front of the computer with headphones and stared at the screen. Most of them were silent, or Sipping soda.Here, the only thing that can be heard is the sound of typing the keyboard and clicking the mouse.What is displayed on the computer screen is a world without pollution. In this world, the goals and values ​​are very clear, there is a vast world waiting for players to explore, and there is fresh air to breathe.People's boredom with real life is not a phenomenon unique to China, but the huge contrast between China's cultural development and the game's theme is striking and worrying.

However, nothing can stop the pace of change.Whether it's online games, or people's complaints about online games, it doesn't mean that the development trajectory will change.Games are nothing more than a way of escaping from the world.In short, game development companies have noticed people's boredom and worries about real life, and developed games to cater to people's needs.Whether it is online games, magazines discussing the ills of modern urban life, or other things for people's entertainment, they all fill the gap in consumer culture to a certain extent. The improvement of Chinese people's consumption level has enabled Nike to strengthen its marketing and product sales in China.It first cooperated with Yao Ming, and then set its sights on the Beijing Olympics.It allowed Yao to sign advertising contracts with Reebok, his market rival, and to take other steps to attract consumers and expand market share.The potential of the Chinese market is considerable.Companies like Cisco and Nike know that their intellectual property rights will be at risk, but they still choose to enter the Chinese market because of the huge potential of the Chinese market.Even if companies will suffer certain losses due to unfavorable intellectual property protection in the Chinese market, the prospect of huge profits still prevents them from giving up the Chinese market.Hundreds of multinational companies such as Motorola, Intel, Procter & Gamble, General Electric, Emerson Electric, and Archer Daniels Midland have invested billions of dollars in China because of the huge potential of the Chinese market.Instead of producing low-cost goods in China and shipping them to the U.S. to sell, they want to produce goods in China and sell them in the Chinese market. However, even though the profits of many multinational corporations have begun to reflect China's potential as a huge consumer market, there is still a general perception in the United States that China is only a low-cost commodity manufacturer and exporter.From 2003 to 2004, American newspapers and media began to pay more attention to China.Initially, the main reports were negative, focusing on the SARS outbreak in Hong Kong in the spring of 2003. The outbreak of "SARS" has not only aroused the concern of the market, but also the concern of health officials around the world, who are worried that "SARS" will spread globally.The image of a family fleeing Hong Kong wearing face masks is not a positive portrayal of China, but instead reinforces Americans’ long-held belief that China is a threat rather than an opportunity. But it turns out that "SARS" did not develop into the crisis that many people feared. In 2004, coverage of China surged in media outlets such as The Wall Street Journal, Fortune, BusinessWeek, The Economist, and the Financial Times, which saw China as a "new" thing.However, many articles are too exaggerated and do not report the actual situation in China, and the description of China is simplified.However, these media have a more accurate view of China's development trend than many American experts, unlike these experts who are still skeptical about the feasibility of China's development path.The media has seized on the close connection between China's rise and the United States. China's rise is not only related to China itself, but also to the United States.They know that this connection will determine the future development prospects of globalization. The media realized that an article about Huawei is not just a report on this high-tech enterprise from China, but also about Cisco, about the competition facing the US economic power, and about the future of global trade.The growth of Huawei and the power behind it has unnerved Americans, who worry that the company will become an unstoppable economic force in the future.This makes Americans not only curious about China, but also worried.In fact, Cisco itself also conducts many highly confidential cooperation with military and intelligence agencies such as the US Department of Defense and national security agencies.In the eyes of the Americans, the cooperation between Chinese companies and the Chinese military means that "their" high-tech companies are helping "their" military, which is very detrimental to the United States.Regardless of whether it is the issue of China's Taiwan or the issue of China as a whole, the Chinese also have reasons to be worried and suspicious of the intentions of the United States. The United States can get a lot of returns from the Chinese market, which alleviates the worries of Americans to a certain extent. The rewards for American companies such as IBM are examples. In late 2004, China's Lenovo Group acquired IBM's personal computer business.It didn't cause as much of an uproar as the Huawei-Cisco rivalry, but it was no less surprising.IBM has indeed played an important role in Huawei's development into a global enterprise, but over the years, IBM itself has also been transforming. IBM used to be mainly engaged in the low-margin personal computer business, and later began to devote time and energy to the construction of new business systems. It wanted to become a professional consulting company and provide assistance to companies like Huawei that wanted to enter the world market.The company's CEO Samuel Palmisano made it clear that the future development of IBM will no longer focus on a certain country, but focus on the global market.For most of the 20th century, IBM has been a symbol of American business and a symbol of American economic strength.In the 1990s, IBM also went through a difficult period, facing the competition of "new economy enterprises", it seemed a bit clumsy and weak.However, in less than 10 years, IBM has achieved transformation, and China is an important reason for its transformation. There are some contradictions in Chinese society, which can be reflected in Yao Ming.Yao Ming was bred in China and eventually became a powerful symbol of China's integration into the world.Yao Ming is an advertising superstar, which embodies the nationalist dream, but also reflects his team's dream of wealth.Yao Ming has dealt with all kinds of conflicts in a certain way, and so have his fans.It is very appropriate to say that Yao Ming's growth path is a microcosm of the development path of "China and the United States".