China's market potential lures foreign businesses

Updated: 2011-12-31 10:56


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BEIJING - When a British businessman said in the 1840s, "if we could only persuade every person in China to lengthen his shirt-tail by a foot, we could keep the mills of Lancashire working round the clock," he saw the potential of Chinese consumers, but didn't foresee the emergence of a new ideology -- Made for China-ism.

Unlike the British man, the current generation of business people act instead of think. What if China, brimming with a population of over 1.3 billion, becomes a major consuming nation?

To woo consumers, from KFC's crispy Youtiao, a traditional Chinese snack for breakfast, Hermes' China brand Shangxia to BMW's China-only limited version of the M3 Tiger, more and more foreign firms have launched new products or brands custom-made for China.

Others, such as the Italy-based sunglass giant Luxottica Group, established their design hubs in China.

Even Apple changed its traditional line of "Designed in California, Made in China" to "Designed in California, Made for China" on the giveaway T-shirts when it opened a new store in Shanghai.

"This Made-for-China phenomenon is just one of the many sub-trends spawned by the macro trend of economic and consumption power shifting toward emerging markets," according to a report by the trend research company

With consumers in the eurozone and the United States laid up indefinitely, the world is turning to China to take up the slack.

Calling China the "last untapped market on Earth" with unparalleled potential, Lu Haiqing, corporate affairs senior vice president of Tesco China said, "any wise and rational enterprise will have no choice but to come to China -- no matter if they like it or not." Entering the Chinese market in 2004, the UK-based grocery and general merchandising retailer now owns more than 100 outlets.

"More than 4 million Chinese customers shop at Tesco China every week and the trend of trade-up is obvious," Lu said.

Tesco is not alone. For Franz Collection Inc., a renowned porcelain designer and producer headquartered in downtown San Francisco, the change has been proven a success.

Besides a production base supplying porcelain products tattooed with "Made in China," China is growing into Franz's major market.

"This year's sales on the Chinese mainland, which has more than 100 stores, equal the aggregated earnings from 6,000-plus stores overseas," said Liu Chongli, sales manager of a Franz branch in Jingdezhen, the dubbed ceramic capital in Jiangxi province.

Liu said the company this year announced a set of porcelain vases specially designed for Chinese consumers, which featured parts of a traditional Chinese ink painting of "Dwelling in the Fuchun Mountains."

China's emerging buying power is an inevitable result of rising incomes, said Liu Yuhui, a researcher with the Chinese Academy of Social Sciences, a government think tank.

Early this month, policy makers agreed at the Central Economic Work Conference that the country will "increase the proportion of the middle class" next year. Analysts believe the move is vital to transforming the country from the world's factory into a land of shoppers.

China's consumer spending has been on the rise for years. Retail sales rose 17 percent year-on-year to 16.35 trillion yuan ($2.60 trillion) in the first 11 months of the year. The figure was more than 4 times as much as that for the whole year of 2001.

The country has vowed to restructure its national economy by weaning off its reliance on exports and boosting domestic demand. President Hu Jintao expects the country's retail sales to grow by more than 15 percent annually in the next five years and hit 32 trillion yuan by 2015.

Also by 2015, China is expected to overtake Japan as the world's largest luxury market, according to research released in March by McKinsey & Company, a global consulting firm. But the World Luxury Association forecast the replacement would happen next year.

The scale of the Chinese market and its seemingly resilient growth paint an optimistic picture for foreign businesses. However, cashing in on the market is not easy.

"The Chinese market is vast and unique. It's so special that merely dumping an existing management scheme, which succeeds elsewhere, is doomed to fail here," Lu said, adding that the country deserves a solution dedicated to it.

Besides the cultural and economic diversities between the West and China, there are regional variances with the country, Lu said. "It's a big challenge for us."

China has 31 provincial regions, 656 cities, 56 ethnic groups and more than 80 spoken languages on the mainland. Meanwhile, there are enormous disparities in the areas of income, education and lifestyle between different regions.

According to Lu, all Tesco's China outlets are now scattered in the eastern half of the country. High costs of land transports, lack of sophisticated logistics and relatively lower income levels are the main factors that hold back the retail giant from expanding its network in China's western regions.