Guest Post: Helen Wang & The Chinese Dream

Related entries: Business Issues, Consumer Market, General, Research

The China Business Services bookshelf has a new addition (as previoulsy noted) in the form of Helen Wang’s book “The Chinese Dream”. It is a good read, with an informed, personal perspective on China’s growth, and on the rising power of China’s middle class. In this guest post Helen introduces the book, and shares some of its insights…

Introduction – from author Helen Wang
The Chinese Dream is a groundbreaking book about the rising middle class in China. As a result of China’s economic growth, a burgeoning middle class—calculated to reach 800 million within the next fifteen years—is jumping aboard the consumerism train and riding it for all it’s worth—a reality that may provide the answer to America’s economic woes. And with China’s increasing urbanization and top-down governmental approach, it now faces increasing energy, environmental, and health problems—problems that the U.S. can help solve. Through timely interviews, personal stories, and a historical perspective, the book takes readers into the world of the Chinese entrepreneurial middle class to show how a growing global mindset and the realization of unity in diversity may ultimately provide the way to creating a saner, safer world for all.
Below is an excerpt from The Chinese Dream (available on Amazon and TheChineseDreamBook.com)

Chapter 4. A New Economic Engine (book excerpt)
“No generation has had the opportunity, as we now have, to build a global economy that leaves no one behind.” – Bill Clinton

“San Francisco International Airport is one of my favorite airports in the world. It is nicely carpeted, has exquisite art displays, and features an impressive range of luxury goods in duty-free shops. The best thing about flying internationally, for me, is to indulge myself at the airport duty-free stores. Almost invariably, I would pick up some perfume or Swarovski jewelry.

On one of my trips to China, after passing through the security check, I went into the first duty-free store I saw on the concourse—Gucci. A pair of sunglasses immediately tempted me. It was chic, stylish, and looked perfect on me. It was not too expensive either: $150. There was only one problem: I had just bought a pair of sunglasses by Juicy Couture which I absolutely adored. I certainly did not need two pairs of fancy sunglasses, did I?

As I was debating whether I should get the Gucci sunglasses, I overheard some women speaking my native tongue, Mandarin. I turned around and saw two middle-aged Chinese women who were trying on different pairs of shoes. They did not strike me as upper class or fashionable. However, I noticed the Louis Vuitton handbags they both carried. A teenage boy, looking bored while waiting for the women to shop, sat on a bench with his legs stretched out to show off a pair of Gucci gym shoes. They were the coolest gym shoes that I had ever seen—with red and green stripes and a unique pattern that is only Gucci’s. I could only imagine how expensive they were (if they were not knock-offs)!

As I started to get interested, I heard one of the women ask her friend, “Do they look good on me?” She tilted her head, admiring the leather shoes on her slightly swollen feet.

“Very pretty, very pretty,” her friend nodded with approval.

“How much do they cost?” the woman asked the sales lady. Unmistakably, almost all the salesladies in the luxury duty-free stores at the airport were Asians and spoke Mandarin.

“Four hundred seventy-five dollars,” the saleslady said, looking at the price tag.

The woman turned to her friend and asked, “Shall I get them?”

“Get them, get them,” the friend encouraged her.

That was it. She purchased the $475 shoes without the slightest sign of hesitation as if she was just ordering an ice cream. I must confess that I am fond of shoes and have more shoes than I need. Living in a consumer culture in the United States, I find it hard to resist the many temptations. However, I have never owned a pair of shoes that costs remotely close to that price.

After the women and boy left, I chatted with the saleslady and learned her family was originally from Taiwan.

“The Chinese have money now,” she said. “Yesterday, I sold a $1,200 purse to a woman from China. She bought the purse for her daughter, who is studying in college here. She wanted her daughter to impress their neighbors when they return home—look who just came back from the United States.”

“Isn’t that insane?” I said. “Most people in America cannot afford a purse for $1,200.”

“Well, it’s just like people from Taiwan thirty years ago.” She did not seem so surprised. “When people in Taiwan became rich, they were like that, too, buying some expensive luxury goods to show off.”

According to Merrill Lynch & Co., China had more than three hundred thousand millionaires, who controlled some $350 billion in assets, in 2006. Average urban income increased more than 21 percent between 2005 and 2009. However, exact income is hard to gauge. Many state companies give big bonuses that often they do not report. Some even have benefits that include company-paid overseas travel (solely for tourism). A recent study by Credit Suisse AG revealed that China’s households hide as much as $1.4 trillion of income that is not reported in official figures.

As I was about to leave the store, the saleslady smiled charmingly. “By the way, are you still interested in the sunglasses? They look so good on you.”

Suddenly, the $150 sunglasses felt quite affordable. So I said, “Okay, I’ll get them.”

I boarded the plane and settled into my seat in the exit row in economy class. As a premier member of United Airlines, I always try to get a seat in the exit row that provides more leg room. As I plugged my earphones into my iPod and flipped through some magazines, the woman who bought the Gucci shoes walked down the aisle, carrying many plastic bags of duty-free goods. The teenage boy followed her.
Before they settled into the row behind me, the woman pulled out at least a dozen fancy boxes of Gucci, Fendi, and Versace products from the bags and tried to stuff them into her luggage. If I could afford a pair of $475 shoes, I thought, I would be sitting in first class. Naturally, I started a casual conversation. It turned out that she worked in the government judiciary in Beijing. She and her son, who was busy playing computer games in his seat, were with a tourist group that had toured eight U.S. cities in twelve days.
“Well, you must have done pretty well in China,” I said. “Look at all these duty-free goodies!”

“They are for my friends,” she said. “They gave me a shopping list before I came.”

“I see,” I said, putting on a smile and trying to sound friendly. “Most Americans cannot afford the shoes you bought at the Gucci store.”

“Oh,” she said, looking at me cautiously. “Our salaries have been increased three times in the past year.”
This story may be an extreme case. However, as incomes in urban China have increased multifold, many people can afford goods and services previously unavailable to them.

While Americans have consumed their way into a deep hole, the Chinese have just begun to open their wallets. News headlines have focused on China’s generally weak consumption. The trend in consumption, however, is significantly moving upward. Retail spending has increased steadily at 15 percent and more in recent years. Even during the worldwide recession in 2008-2009, Chinese consumer confidence remained high despite thousands of factories shutting down due to slow global demand. China has already become the world’s largest market for automobiles, television sets, and cell phones, and the world’s second largest market for luxury goods.

This trend will likely continue. Over the next two decades, the Chinese middle class will begin to play a larger role in China’s economy. Studies predict that the Chinese middle class will wield enormous spending power as it reaches 600 million-800 million people in fifteen years. A 2011 Credit Suisse report predicts China’s consumer market will reach $16 trillion by 2020, overtaking the United States as the world’s largest consumer market in the world.

As this process unfolds, the Chinese middle class will change the dynamics of the world we live in. The world will not be “China produces and the United States consumes.” The Chinese middle class will create enormous opportunities for Western companies to sell into China’s market. This process will serve to better balance global trade.”

Author Bio
Helen Wang is a Forbes columnist and consultant on China’s middle class. Originally from China, Wang has lived in the United States for more than twenty years. After finishing her master’s degree at Stanford University, she worked in Silicon Valley, holding a variety of jobs, from consultant to Fortune 500 companies to entrepreneur at Internet start-ups. A sought-after speaker, Wang now divides her time between consulting for companies doing business in China and helping non-profit organizations make a difference. She lives in Silicon Valley, U.S.A, with her husband, her dog Frodo, and her parakeet Star.

Reproduced by permission of the author.
This post may not be copied without prior approval of Helen Wang

The Chinese Dream

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