Changing China

Changing China

No dragons please!

Tips on writing a report on China

Avoid Clichés

Do not use a red background & images of dragons or fireworks

Avoid terms like 'chasing', 'taming' or 'riding'

Don't start each section with a Chinese proverb

Steer clear of overused facts – '1.3 billion' etc.

Keep clear of stereotypes

'Wily, mysterious oriental salepersons'

(Source: 'That's Shanghai' Magazine, June 2010)

Background

Aim

Get some early insights into what makes China tick today & how this will change

Interviewees

9 Chinese, 2 Hong Kong, 1 Taiwanese, 1 Australian

Sectors

Health, retail, journalism, publishing, hotels, research

Chris Middleton with Haibao (Expo

2010 Macott)

Changing China

Going underground

Reasons for change

Size, stupid

1.3 bn (damn!) : you feel the pressure of people and the need to fight to survive

Ultra competitive: 1 place for every 90 university applicants

Starting overCultural Revolution = no intellectuals, no city culture, no entrepreneurs, no change

Change is so good because past/history is so bad

Keeping up with change is a key status indicator; even the old feel this pressure

Conversations regularly start with dialogue about what's new, what's the latest

Inconceivable rates of change

Examples

Before the Expo, Shanghai had 4 metro lines; 3 years later there are 10

There are 6,500 kms hi-speed train lines; by 2020 there will be 20,000 kms

Anecdotes

Interviewee left for a week; returning she couldn't find home due to a new tunnel

Bar advertised as venue for world cup TV; it had closed before opening match

InsightState capable of rising to almost any challenge

Rate of change likely to accelerate through own momentum; no signs of inertia

Changing China

At the top : Park Hyattis World's Tallest hotel

Getting to the top

Stress

Chinese hide stress well; no visible tension, aggression

There is mental illness however; e.g. 3 student suicides in early June 2010

But 'face' is important concept i.e. best to not show stress

Letting off steam through alcohol is OK; bosses get tipsy on nights' out

Work rateWork long hours, but to western eyes workers can seem less productive

In truth, there is always a good cultural reason for taking the 'long way round'

Common to see people asleep in public

Leaving the ratraceAlmost impossible to slow down, down shift

Pressure of having to support 6 adults in retirement (2 parents; 4 grandparents)

Social pressure is enormous to keep up with the changes and not be left out

New ways to succeedNew parents want their kids to be more rounded, to have fun

Kids still need to pass exams but are being taught to be innovative

InsightWhilst achievement is all motivating, already signs that success has to be fun

Little Emperor's (single kid's) values will change Chinese society forever

In 10 years, a creative generation will change Chinese brands' image & success

Changing China

Land-grab: LV have 3 storesin Shanghai already

Retail Therapy

It really works!

Going shopping is a hobby for most middle-class urbanites

It is explicity claimed as an anti-stress tool; work hard to spend hard

Young spend everything; makes work worthwhile; a very tight connection

From thin airWith low salaries & high rents, how do they spend so much?

In 1998 most were virtually given their homes; since then prices are up 10 times

Home prices have tripled in last 3 years in Shanghai: people feel very wealthy

Grandparents are extremely thrifty but will give anything to their Little Emperors

The stock market has risen 160% in 5 years

GiftsA 'gift' is a term often used to mean a bribe in China

State officials can expect to at least double their salaries through gifts

Luxury brands' might gain as much as half their sales revenues because of gifts

Anecdote: Salvatore Ferragamo customer ordered 300 ties to give as gifts

Municipalities fight to have luxury brands locate in their district, for presige - & gifts

What a luxury!New middle-classes want Western luxury brands – now moving to tier 2 & 3 cities

Luxury wants China – prices 2.5 times European rates; shops look empty but at

these margins, they can afford to wait!

However, C&A, Zara and H&M having success too

Changing China

Herbal Life restaurant: Looks good, does you good

Health

Traditional Chinese Medicine (TCM)

Several cases of fake practitioners have scandalised China & corrupted image

Harmonised food intake is key along with concept of warming and cooling foods

New concept restaurant blends healthy foods and medicinal herbs in its cooking

Hospitals

Proper healthcare is so remote for many, that they can barely even think about it

Some rich reject modern hospitals too; the body is intimate; hospitals are not

Focus of most pharma sales activities and most treatments are hospitals not GPs

Phenomenon of super specialist hospitals: 3,000 dermatological treatments/day

However, lack of medical facilities opens way for faith, gurus and cults

PharmaciesCan be State run

Huge squeeze on their business model now due to high rents and lowering prices

Increasing numbers having to relocate: low investment in stock is another result

Products & ServicesWho fancies one of the following health supplements: sheep placenta, deer bones

or kangaroo blood tablets?

Phenomenon of boot camps to 'cure' young internet addicts

Western medicine is not necessarily seen as 'superior'; it's not as old as TCM

Headline from newspaper on 08/06/10: “Global brands face crisis” referring to

product-security scandals in China (Novatis, J&J, P&G have all had problems) Time to take stock?

Changing ChinaBiggest Surprises

- Mobile phone vending machines

- Mobile phone recharge available in street

- Western business persons often needing to be chaperoned by Chinese locals due to intractable cultural differences

- No graffiti in Shanghai

- Market changes so rapidly that some agencies are abandoning traditional research and strategy approaches; they are

outdated before any concept gets to market

- It is not unheard of for a secretary to spend 2,000€ on a handbag

- Change to one child policy? Where two only-children come together in marriage they can/will be able to have 2 kids

- Chinese brands still have so much to go for in 3rd and 4th tier cities that exporting brands to the West is far away

- Typical student exam questions: “The change of light and shadows in one's life”; “Wouild cats take the trouble of

catching rats when they can have easy access to fish?”; Green is related to life & ecology; green life is a new concept”

- People want white skin to avoid being seen as a peasant from the countryside (& not to seem more western)

- Many workers in good positions have maids at home and full-time drivers

- It is often necessary to 'donate your liver' in order to make sales deals (due to culture of copious alcohol consumption)

- Such is the quest for the 'next new' that brands must innovate and launch new products on a continual basis

- Whilst stores have many employees, the level of personal service is often rudimentary.

Changing ChinaA Designers' Paradise

Even roads are lit up at night

Expo 2010

Looking inside The Grand Hyatt (floors 54-86)

Changing China

My most important finding(and another rule of report writing broken!)

LONDON • PARIS

Prepared by Chris Middleton

chris@futurescoaching.com

www.futurescoaching.com