In many ways China shows many developed market trends. An ageing population. A slowing birth-rate. Shrinking household size. Improving educational profile. And increasing household, and hence because of declining household size, rising personal income.

Behind these similarities

are three important discriminators between China and other developed markets.

Firstly, the economic growth is off an extremely low base. The majority of the Chinese population remains comparatively poor. And hence highly price sensitive.

Secondly, China remains a rural oriented market. By the year 2010 only 42% of the Chinese population will be living in urban environments. And this movement to the cities is focused on a few key metropolis. One thus finds wealth concentrated in a few key regions rather than, as is evidenced in other developed markets, more widely distributed across the nation. Key regions in China are Guangdong (43% of households earning over RMB34,000/annum), Shanghai (31.1% of household earning over RMB34,000/annum) and Beijing (14.2% of households earning over RMB34,000/annum). These three regions have 89% of the nations affluent households.

Additionally, the slowing of population growth is not driven by rising wealth (although this is a contributor). Traditional socio-demographic analysis highlights the strong correlation between income and household size. Generally the rule is:

The poorer the population living without government social safety nets the larger the household size. This is driven by the reality of children being one’s best insurance against ageing (the more children one has the greater the chance of some surviving and being able to look after one in one’s old age). Hence as countries and people become wealthier and more able to support themselves later in life the less the necessity to have more children.

But in China slowing population growth is primarily driven by the government one child policy. Families are smaller because the government has imposed such a policy. And at the same time supported old people through cooperative farm arrangements and employment in state owned enterprises(SOE). These two forms of security are increasingly falling away. SOE have been forced to restructure or close. The agricultural market is shrinking and land is consolidating around the few, increasingly, successful farmers.

And hence rising unemployment. Currently officially estimated at 130,000,000 people. With the agricultural and manufacturing industries expected to shrink by between 10-20 per cent over the next five years ( China Daily. September 25,2002) China faces extreme challenges moving forward.

What are the key lessons here? On the positive side we see rising affluence driven by economic growth, increasing disposal income, increasing levels of education and rising urban wealth. Challenges for China are unemployment, slowing economic growth, and rising social costs driven by the restructuring of the state and agricultural economic sectors.

While the rapid growth of China in the past cannot be expected to continue the market does represent significant opportunities for marketers. The opportunity will lie in the identification and penetration of specific growth segments and regions.