China Consumer Insight with iTV-Asia

I was very honored to share the stage with Tom Doctorroff, Asia-Pacific CEO of JWT Advertising, at iTV-Asia’s China Consumer Insight event in Shanghai.

As the Chinese middle class grows, China’s consumption market is expected to reach $16 trillion by 2020, according to a Credit Suisse report. Who are these new consumers? What are their characteristics? How can multinationals reach them? These were the subject of our panel discussion.

Below are the highlights:

  • Chinese consumers are fundamentally Chinese. Certain characteristics stay true despite recent dramatic changes. For example, Chinese culture is collective-oriented. People tend to measure their worth according what society expects of them, rather than what they want for themselves. Chinese consumers are more willing to buy products that enhance their social status. Western companies can charge premier prices for such products.
  • Young people are becoming more individualistic, and they want to express themselves. However, once they get married, they are more likely to follow the conventional collectivist mindset. Marketers need to understand this and craft their messages to reach different age groups.
  • Although there is a lot of optimism, many people are living under extreme anxiety. Part of the reason for anxiety is peer pressure.  They see some people become very rich while others remain poor. They are worried they will be left behind, which would be humiliating.

To give some context, I define the Chinese middle class as those who earn an annual income from $10,000 to $60,000. They are mostly urban professionals and entrepreneurs. A rule of thumb is that a middle-class household has one-third of its income for discretionary spending.

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Endure the Hardship of Hardships, Become the Man above Men

An excerpt from The Chinese Dream

When I read the story of a young American woman selling her ova for $7,000 in order to pay off her credit cards, I kept thinking about young women I met in China. They earned about $100 a month, yet saved 80 percent of their incomes to help pay for their siblings’ education. I felt a huge disconnection. Although many people are worried that the middle class in the West is shrinking, Americans still enjoy immense privilege compared to the vast majority of people in the world. To many Chinese rural migrants, enduring hardship is their way of life.

On a hot summer day, I was roaming randomly down Jianguomen Avenue in Beijing. I found myself drawn to a place called Liang Zi Fitness. As soon as I stepped in the front door, six young ladies dressed in the traditional Qipao (pronounced chi-pao), a tradition one-piece body-hugging Chinese dress for women, gently bowed and greeted me, “Welcome, distinguished guest.”

When I asked what Liang Zi Fitness was, one of the girls politely handed me a menu, which described different kinds of acupressure massages combined with Chinese herbal medicine treatments. Having been cheated in a massage salon before, I was suspicious. However, since I did not have any plans that night, I thought I might as well try it. My favorite massage in China is always the foot massage that is not easy to find in the United States. So, I ordered an “empress foot massage,” which cost about $25.

As I was escorted along the hallway, my eyes turned to the grand wall murals that illustrated Chinese ancient mythologies. “This massage place seems a little extravagant,” I thought to myself. It was huge: there were two floors with many individual rooms. Along the way, the staff, dressed in traditional Chinese clothes, would stop, bow, and greet me: “Welcome, distinguished guest.” “Good evening, distinguished guest.”

I was led to a room with a flat panel TV and a couple of massage couches. Before I sat down, a fruit plate and tea were served. Shortly after, my masseur appeared. He introduced himself as “Technician Number 30.” He was about twenty years old, attentive and gentle-mannered. His dark skin tone suggested his rural origin (peasants in China usually have darker skin tone because they labor in the field under the sun; light skin tone is considered more desirable in China since it implies the privilege of city life). In our conversation, I learned that he was from Henan province, which is one of the poorest provinces in China and produces the largest number of migrant workers.

He told me the company recruited him and put him through a strict training program. He earned about 3,000-4,000 yuan ($400-$550) per month as a massage technician, with free meals and lodging. The company used a performance-based point system to encourage good customer service and adroit massage skills. That means the more customers who come back to the same massage technician, the more points he or she will earn, and the higher the rate of pay.

I was more than impressed by everything I had experienced so far—the tasteful interior design, the courteous staff, and the excellent service. “Who is the person who started this company?” I asked.

“He was a poor boy from Henan province,” he said. “His family was so poor that he never tasted meat before he was ten years old. He started out selling barbecued food on the street when he was thirteen years old. He had done many things, including selling fish, trading clothes, and running a restaurant, before he opened his first foot massage business in Henan. It was 1997 and he was twenty-seven years old. Since then, the business has grown so quickly, and he has opened many branches and made it into a franchise business. Beijing has seven Liang Zi locations, and many want to join the franchise. Now he is rich. He has a big house and two cars.”

“What’s his name?” I asked.

“His name is Zhu Guofan,” he said.

A young girl came in to pour tea in my cup. She wore light makeup, with her hair tied up tidily like a stewardess. Quietly, she retreated backwards as if facing an empress. Just as I was wondering how these young men and women became so well trained and who was responsible, my masseur said, “We have been through military training before we joined the company.”

“Military training?” It was as if he had dropped a bomb, and I was immediately alarmed. Having heard so many news stories about hideous abuse to rural migrants, including physical assault and personal humiliation, I was full of sympathy.

“Yes, the company came to our village and recruited us. Then we were all sent to a military compound for one month of military training.”

“What did you do at the military training?”

“We got up early in the morning for running and exercising. During the day, we took classes, learning about acupressure points in the human body, and also the company history, corporate culture, and team building.”

I was taken aback to hear such things at a foot massage salon. “Corporate culture and team building? Tell me, what is your corporate culture? And what is the team building?”

“Working hard and making progress every day, helping each other and working together to succeed, striving for excellent performance, and providing superior customer service,” he said, as if reciting a poem.

“Who paid for all this?”

“The company.”

Suddenly, everything made sense to me. China’s abundant labor source comes with a cost. Imagine how hard it is to train a large pool of rural people with no job skills. Some entrepreneurs like Zhu Guofan took on the task on their own. In addition to training, the company provides lodging and meals, which saves a lot of trouble for these newcomers as they settle into the cities. No wonder the staff was so warm and professional. No wonder this technician knew the company history by heart. No wonder the tea in my cup never got cold.

“This Zhu Guofan,” I said, still in shock. “He was so poor and didn’t have much education, right? How did he know about the franchising business and corporate culture?”

“When the business grew so fast, he realized he needed more knowledge in order to keep up with his business. So he enrolled in an eMBA program (an executive MBA program provided for midcareer entrepreneurs). He took a year off to study management.”

Technician Number 30 continued, “During Chinese New Year, if we do not go back home, the company throws a big party, and the boss gives each of us a red envelope (it is a Chinese tradition to give New Year’s money in a red envelope). The employees here are very happy. Some top performers move up to become managers. They make about 10,000 to 20,000 yuan ($1,470 to $2,940) a month.”

“Is that what you plan to do—become a manager?” I asked.

“Maybe,” he said. Then he added, “Well, in a few years, I may start my own business. Zhu Guofan encourages us to start our own businesses. He said he would help us. There are many opportunities.”

“Is it hard for you, leaving home and working in a big city like Beijing?” I was still probing for some sign of dissatisfaction or bitterness.

He looked at me, with a sparkle in his eyes, and said, “Only if you endure the hardship of hardships will you become the man above men” (a well-known Chinese saying).

I left Liang Zi Fitness late in the night. The lights on Jianguomen Avenue were flickering and shimmering through foggy air, like an abstract painting against dark sky. They were like the sparks I saw in the eyes of Massage Technician Number 30. With those sparks, any adversity or affliction is another stepping-stone to a better life. I have no doubt my masseur will be another Zhu Guofan, and he will be part of the middle class of tomorrow.

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What Is the Chinese Dream?

Forbes: Helen H. Wang

In an event in Silicon Valley, someone asked me: “In one sentence or two, would you tell me what is the Chinese dream?” (as he learned I wrote a book called The Chinese Dream).

A simple question, but no simple answers.

When I left China 20 years ago, there was no Chinese dream. I had to leave my country and come to America to pursue my dream of a better future. But today, many young people in China can start their own business and have a lot more opportunities. Even many of my American friends are going to China because of the tremendous opportunities presented there.

As a Chinese magazine editor told me bluntly, “The Chinese Dream is a copy of the American Dream.”

Many middle class Chinese are influenced by the American way of life. They are bombarded by many material temptations and proliferating choices. TV commercials, the Internet, and Hollywood movies give them a rosy picture of the American middle class.

One Chinese blog described it this way: “American middle class people live in a villa with a two-car garage in the suburbs. In front of the house, there is a green lawn. They have 2-3 children, and a dog. The husband goes out to work, and the wife stays at home taking care of the children. On weekends, they drive their SUVs to the countryside for barbecues and camping.”

That is the picture in most Chinese people’s minds of “the American Dream”— owning a big house, driving a nice car, and having a comfortable life. The Chinese middle class wants it all. Continue reading