China’s Middle Class: New Global Travelers

Recently, I was interviewed by Travel Weekly, a national newspaper of travel industry, on increasing Chinese travelers and how they affect the travel industry in the U. S. Below is an excerpt of my conversation with Diane Merlino, editor in chief of Travel Weekly PLUS:

Merlino: How do you define the Chinese middle class?
Wang: Chinese middle class households earn between $10,000 and $60,000 a year, but those figures can be misleading because the cost of living in China is very different from what it is the West. In the U.S. you can’t even get by on $10,000, but in China $10,000 is the beginning of having a lot of purchasing power in certain areas, especially in smaller cities. In Shanghai, the cost of living is quite high; that’s why there is that range in income.

So, the rule of thumb I use is a family is considered middle class in China if the household has a third of its income available for discretionary spending.

Merlino: Give us an idea of the size of the Chinese middle class and the growth rate of that demographic.
Wang: Five years ago, when my book first came out, the Chinese middle class was estimated at 250 million to 300 million people. Today, the middle class has reached an estimated 450 million people, and we’re projected to reach 800 million middle-class Chinese by 2025.

….

Merlino: How important is travel to the Chinese middle class?
Wang: 
A lot of Chinese have a desire to travel because China was closed 30 or 40 years ago. Very few people traveled during that time, but now that China is opening travel, to go see the world is a life goal for a lot of people. The younger generation, those in their 20s and 30s, are traveling a lot. If they have less money, they travel within China, but now when I travel around the world I see so many younger Chinese. It’s amazing. Continue reading

The Rise of China’s Generation-2 Consumers

A new research by McKinsey indicates that a new generation of sophisticated young Chinese consumers are changing the rules for China’s consumer market and the companies that serve it. See the video below:

The image of China as a place to sell only low-cost, unsophisticated mass-market products is changing as dramatically as its demographics. Lifted by a wave of growing middle-class wealth, the country’s economy is undergoing significant shifts in consumption dynamics as a new generation of young, prosperous, and individualistic shoppers moves to the fore. Our latest research suggests that within the burgeoning middle class, the upper middle class is poised to become the principal engine of consumer spending over the next decade.

As that happens, a new, more globally minded generation, born after the mid-1980s, will exercise disproportionate influence in the market. In this video, Yougang Chen, a principal in McKinsey’s Greater China office, explores the rise of these Generation-2 (G2) consumers, their buying preferences, and the impact on Chinese and multinational companies as niche product categories and luxury goods become the hallmarks of China’s consumer evolution.

Why Some Brands Succeed While Others Struggle in China

I was invited to be on CCTV-America, the America bureau for China Central Television, to discuss China’s middle class and what it means to Western brands. Here is a clip:

Apparently, CCTV-America was launched last February in the United States. It broadcasts a daily program from its Washington DC production center.

 

What You Can Learn from Burger King’s Missteps

Eight years after Burger King first entered the China market in 2005, the world’s second largest burger chain restaurant has only 63 restaurants in the country, falling far short of its own plan of opening 250 to 300 restaurants by 2012.

Many analysts pointed to Burger King’s uphill battle with its competitors. Both Yum! Brands and McDonald’s entered China much earlier and both have established significant presence in the country. Yum! China has more than 4,000 KFCs and 750 Pizza Huts, in addition to its China-based units East Dawning and Little Sheep. McDonald’s China division has more than 1,500 locations.

However, there is plenty of demand for more than two big American restaurant chains in China’s $29 billion fast food market, thanks to a growing Chinese middle class. Here are a few things Burger King can do to catch up:

Myth that Chinese Don’t Eat Beef

Burger King has failed to play up the advantages of its traditional beef dishes. Instead, it added chicken burgers, believing Chinese prefer chicken to beef. The reason many Chinese consume more pork and chicken is because they are more affordable and readily available. Chinese farmers typically raise pigs and chickens to sell in the market, while cows are used mainly for farming.

The truth is that Chinese consumers consider beef a quality meat because it has less fat. Continue reading

Chinese People Must Define Their Own Dream

China’s incoming president Xi Jinping has struck a new tone: “the Chinese Dream.” In a visit to the “Road to Revival” exhibit at the National Museum in Beijing, Xi delivered a speech, calling for the revival of China into a strong nation.

“Everyone has their own ideals, pursuits, and dreams,” he said. “The greatest Chinese dream, I think, is to achieve great rejuvenation of the Chinese nation.”  He then went on to say that his generation of Communists should continue to build the Party and forge ahead with the goal of the rejuvenation of the Chinese nation.

Since then, the term “the Chinese Dream” has been repeatedly discussed by media and on Weibo, a Chinese social media site with over 300 million users.  Both Chinese and foreigners are asking the question: what is the Chinese Dream? After all, the Chinese middle class is now approaching half a billion. What is the Chinese Dream that can inspire their aspirations for a better life?

Clearly, it is not Xi Jinping’s version of the Chinese Dream.

Chinese People’s Reaction

On February 1, the Chinese government newspaper People’s Daily published an article to further explain Xi’s Chinese dream, “Power Source of the Chinese Dream.” The article says: “The American Dream is this: regardless of one’s background, with hard work and determination, one can achieve whatever one aspires. The Chinese Dream promotes the concept that what’s good for the country will be good for individuals. It reflects the Eastern culture of collectivism and believes as long as the country is strong people will be rightfully benefitted.”

Soon after the article appeared online, hundreds of people commented on Weibo: Continue reading