Helen H. Wang, author of The Chinese Dream: The Rise of the World Largest Middle Class

The Chinese Middle Class Approaches Half a Billion

And how American companies can seize the opportunities…

The Chinese middle class is expanding rapidly, reaching 474 million this year, according to my latest calculation.

Many people may challenge this number. But it’s just arithmetic. In a recent report “Consuming China,” McKinsey indicates that 83 % of households in China’s mega cities (cities with population of over 10 million: Beijing, Chongqing, Guangzhou, Shanghai, Shenzhen, and Tianjin) and 66 % in the rest of the cities are middle class families.

By the end of 2011, China’s urban population reached 691 million. Do the simple math, and you will get the same number I got: the population of the Chinese middle class was 474 million, with 88 million living in mega cities, and 386 million in smaller cities.

This means the Chinese middle class accounts for 68 percent of urban population, which is believable to me. Assuming two percent are super rich, still about 30 percent of the people in urban areas are poor.

Some would argue that there are different criteria to measure the size of the Chinese middle class. A simple and important rule of thumb, as stated in my book The Chinese Dream, is that of a household with a third of its income for discretionary spending. These people have passed the threshold of survival and have disposable income to spend on leisure items. As I travel around China, it’s very clear to me that the majority of people in urban areas have reached this stage.

Chinese Consumers Love “Made in USA” Products

The rising Chinese middle class is the biggest story of our time. However, many US companies are missing the opportunity. US exports to China account for only 6 percent of China’s total imports. The major categories of US exports to are in industrial sectors such as power generation equipment, aircraft, and medical equipment.

The biggest opportunity, however, is in the consumer sector. On November 11, China’s “Single Day” shopping festival, online retailers Tmall (B2C) and Taobao Marketplace (C2C) generated a record revenue of $3.1 billion, more than the total sales in the U. S. on Black Friday and Cyber Monday combined. Before long, China will become the world’s largest consumer market, and its consumption could reach $13 to $16 trillion by 2020.

Better yet, Chinese consumers love American goods and are willing to pay more for them. Continue reading The Chinese Middle Class Approaches Half a Billion

The Chinese Middle Class View of the Leadership Transition

The Chinese Communist Party began its once in a decade leadership transition as the 18^th National Congress opened on Thursday. I was interviewed by the Canadian TV News Channel and a German newspaper, Sueddeutche.de, regarding the change of power in China and how members of the Chinese middle class view the leadership transition. Below are the questions and my answers:

Q: What do members of the Chinese middle-class think about the last ten years and the leadership of Hu Jintao?

A: Members of the Chinese middle class think that the country has made a lot of progress economically in the last ten years under the leadership of Hu Jintao. They feel that their lives have improved tremendously. Many of them now own homes and drive cars. This compares to thirty years ago when their parents lived in slums and could hardly afford bicycles.

While many of them approve what the government has done, they are also under extreme anxiety. This anxiety has become increasingly intense in recent years due to political uncertainties. Continue reading The Chinese Middle Class View of the Leadership Transition

What Went Wrong with the House of Barbie

Last March, American toy maker Mattel closed its first flagship Barbie store – the House of Barbie – in Shanghai after two years struggling since opening in 2009. Mattel invested over $30 million in the House of Barbie in celebration of the American iconic doll’s 50^thanniversary.

The concept was that Barbie is not just a fashion forward doll, she would also be a lifestyle symbol and cultural icon for girls and young women. The six-story building had the world’s largest collection of Barbie dolls and affiliated products such as children’s bedroom furniture and young women’s clothes. It also features a fashion runway, a design studio, a stunning spiral staircase decorated with 800 Barbie dolls, and a café on the top floor.

Many analysts pointed to the fact that Barbie is a Western doll and is “too sexy” for Chinese girls. The reality is, however, that Chinese girls actually like the blond Barbie better than the localized Chinese Barbie called “Ling.” Before the House of Barbie was launched, Barbie dolls had been sold in China and were relatively well received by Chinese girls. When I first bought a Barbie doll for my niece about ten years ago, I was surprised to find out that she already had a couple of them.

So, what are the real reasons that the House of Barbie failed to live up to its expectation? Recently, I spoke to the general manager of Barbie Shanghai, Gar Crispell, about what went wrong with the House of Barbie and what lessons can be drawn from that experience. Continue reading What Went Wrong with the House of Barbie

Tom Friedman: China Needs Its Own Dream

Last month, I was honored to be invited to a private dinner with Tom Friedman in Shanghai. The dinner was hosted by Peggy Liu, founder of US-China Collaboration on Clean Energy (JUCCCE) to help Friedman get an insider’s view on China.

At the dinner, we (about twelve of us) discussed many challenges as well as opportunities China faces. Some cited the low trust in the Chinese society, others talked about entrepreneurial activities on the ground. I had a chance to give Friedman a copy of my book The Chinese Dream: The Rise of the World’s Largest Middle Class and What It Means to You.

In his recent column “China Needs Its Own Dream,” Friedman pointed out that China needs to define its own dream rather than blindly follow American’s “We all need to be rethinking how we sustain rising middle classes with rising incomes in a warming world, otherwise the convergence of warming, consuming and crowding will mean we grow ourselves to death.”

I am glad he used the size of the Chinese middle class from my book – 300 million people expected to grow to 800 million by 2025.

Chinese Consumers Spend Twice as Much

Luxury retailer Shanghai Tang CEO Raphael le Masne de Chermont told the Wall Street Journal that its Chinese customers spend an average of 500-600 euro per year, which is about twice as much as their counterparts in New York and London.

Chermont also said that Chinese consumers are getting more sophisticated, meaning they are now less about big brand names to show off their status, but more about consuming the luxury.

However, Chinese consumers still want to be re-assured that Shanghai Tang is not just a Chinese brand, but a brand with stores in Paris and New York.

As Chermont pointed out, even though Chinese economy may slow down a little in the coming years, there are still a lot of potentials for growths.

HELEN H WANG

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