Chinese Market: composition and characteristics
The ambition of every company: to conquer the Chinese market
China has a huge market, both to trade with and to invest in. The figures of the balance of payments speak for themselves: imports: USD 1,817 billion. Exports: USD 2,050 billion. It is the second largest economy by size, with a per capita income of USD 9161.97. In this article we also review the main characteristics of Chinese consumers, as diverse and numerous in the country itself.
China is the world’s most populous country, with approximately 1.300 million inhabitants. This means that just for the sheer number of potential customers is ideal for developing export strategies to this country. Since 1979, the rural population decreased from 71% to 64% and the urban rose from 29% to 36%, in the last decades. The population is primarily found in the east, on the coast of the south and eastern China seas. The Sichuan province is the most populated and is inhabited by more than 100 million people, in an area equivalent to that of Spain. The average density in Eastern China is 300 inhabitants per square kilometer, and in Western China, the figure is 40. These figures tell the story of a migratory process that began with the market reforms. The current policy seeks to bring investment into the country, with the aim of obtaining a more harmonious development.
Most of the population inhabits rural areas, due to the predominance of agriculture as the main source of livelihood. However, the industry hyper thrust led to a very fast growth of many densely populated cities. China is a unitary multi-ethnic country with 56 ethnic groups in total. Among them, the Han is the largest and represents 92% of the entire population, while the other 55 reach only 8%, and constitute ethnic minorities.
China’s population growth is fairly quick. According to statistics, in 1949 China’s population was 540 million. From the 70s on, the State has been implementing the family planning policy consisting of “good parenting and healthy procreation”, reducing the birth rate from 34.11 per thousand in 1969 to 16.57 per thousand in 1997, and the natural growth rate from 26.08 per thousand to 10.06 per thousand. This family planning is known as the one-child policy. In accordance with the natural growth rate of 1970-1997, it is estimated that over 20 years of implementation of this planning, and because of it, China had 300 million inhabitants less.
Among the 55 ethnic minorities, those who exceed or are close to 5 million are the Zhuang, Manchu, Hui, the Yi, Miao, Uighur, the Tujia, Tibetans and Mongols. The Zhuang population exceeds over 15 million people, being the largest ethnic minority.
These are the most relevant figures that can provide a proper perspective of what is spoken or written, when referring to the Chinese market.
- China is the second largest economy with a GDP, measured in current prices in USD (U.S. dollars) of 8,277,040 million. Its GDP, measured according to World Bank standards in Purchasing Power Parity (PPP, according to its acronym in English) is $ 12,405,670 million, according to the latest data available.
- Its GDP per capita is USD 9161.97
- Its foreign trade throws these figures. Imports: USD 1,817 billion. Exports: USD 2,050 billion
- Its main trading partners are the United States, South Korea and Japan. Behind are the European Union and Latin America, thus showing tremendous potential for growth in trade with the Asian giant.
- Its economic structure is as follows: Agriculture, 10.10% of GDP. Industry, 45.3% of GDP. Services, 44.6 of GDP.
(Data Source: EW Economic Statistics Database.)
In a very enlightening comparison, we can say that China is like the European Union, for its geographical diversity and different levels of demographic and socioeconomic variables. Hence, the Chinese market segmentation presents many shades to elaborate a successful entry strategy to its markets. Chinese Market segmentation can be done by region or province, by income and wealth of its inhabitants, also by its administrative divisions. Performing this research can reveal many characteristics of the Chinese consumer.
An extensive field research reveals key aspects of the Chinese consumer characteristics:
- Chinese consumers have not very clear and distinct perceptions about Western companies, their brands and products. This fact implies the existence of opportunities but also challenges for Western companies wishing to export or invest in China. The image of a company, or brand, has more influence in the purchasing choices of male individuals than in female ones.
- The purchase criteria is guided more by getting quality for the money spent, than by the image of the company or product that it is acquired.
- The Chinese consumer is eager to experiment with new brands, products and services. This finding is a strong incentive for SME companies wishing to enter or invest in the Chinese market.
- Chinese consumers are unwilling to pay higher prices for abstract added value to products. Within this category, we can mention as an example, certification for organic food products or certification for low carbon and greenhouse gases in the manufacture and marketing of a product.
To conquer the consumer is the goal of all business strategies that are projected to the Far East. There is nothing amazing about it: the developed economies have made crisis their usual mode of operation and the Chinese government’s official policy, is to encourage domestic consumption, as an engine of growth to replace the anemic exports to markets in Europe and the United States.