As they enter the Chinese market, multinational firms have not only changed the industrial landscape but also nurtured a growing Chinese middle class with new products in industries ranging from investment and banking to education, entertainment and grocery stores. As an Economics Professor with Peking University, Xiao Zhuoji pointed out back in 2001, the five to ten years after China’s accession to the WTO would give rise to a strengthened consumer segment, the middle class with growing disposable income.
The first impression of price-conscious Chinese consumers had toward WTO was its potential to bring lower prices to the Mainland. According to a study of China Prices Information Center on a comparison between the pricing of 64 products in the Mainland and overseas, by May 2000, there wee 42 types of important products priced higher than international average and 34% lower than international average. Many imported goods are now more similar to the international ones in terms of prices.
Shanghai, for example, has seen a rapid increase in the volume of imported fruit and vegetables. “There was limited number of imported goods in our supermarket five years ago,” says Sun Ming with Lianhua Supermarket Shanghai office. “Now we have around 4,000 imported items on our inventory list.”
The supermarket is only one of the many examples showing how the influx of imported goods helps shape a new consumer trend, more internationalized consumer techniques such as accepting more bank cards and membership cards. The introduction of Western holiday’s including Valentine’s Day, Christmas, Father’s Day and Mother’s Day has resulted in more commerce during these times of year.
Many luxury brands accelerate their expansion to China as soon as the country opened up its retail sector. A recent report released by TNS said that Chinese middle class has a growing interest in luxury items. Many of them believe luxuries are the symbols of success, position and good taste, with more than 50% of survey respondents saying they plan to buy “affordable” luxuries. At present, nearly all the luxuries manufacturers, foreign or local, are aiming at the high-end market, with millionaires and richest of the rich as their major customers, who make up less than 0.02% of the Chinese population.
While China consumed 11% of the world’s luxury items in 2004, it has become the second biggest auto consumer in the world. Many auto brands place more emphasis on smaller market segment to better improve their positions in the market. Foreign brands, including Volkswagen and Ford, as well as Chinese brands such as Geely and Chery have launched new models that are targeted specifically at the middle class after conducting extensive market research on Chinese consumer behavior and habits.
In the field of financial investing, many commercial banks and financial institutions, both foreign-funded and local, have established financial planning and wealth management entities to tap the growing Chinese wealth. The general manager of wealth management center at Everbright Bank Zhang Xuyang says in addition to one-to-one professional financial consulting services, the bank also provides advisory services on insurance, securities, foreign currency and fund to meet the growing demands for fund management.