‘The End of Cheap China’ – A Good Introduction to Understanding Today’s China Market

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Op-Ed Commentary: Chris Devonshire-Ellis

Apr. 18 – Amid the plethora of China books that are published each year, I only ever read a handful. The market is saturated with various perspectives, economic theories and political nuances in such numbers that only a crazy man could ever read them all and obtain a balanced view. Yet every once in a while, a book appears that makes you think “Yeah, I can buy into that.” Shaun Rein’s new book, “The End of Cheap China,” is such a volume.

Unlike many of today’s China writers, Rein is the real deal. For a start, he set up and runs his own market research firm in China, and he lives in the country. Surprisingly few China commentators are actually based in China and even fewer face the responsibilities associated with running their own business. Rein does, and that marks his opinions out as possessing some merit. Forbes certainly thinks so – he has been a regular contributor to their online website for some time.

Rein’s thesis is that China is moving up the value chain and becoming wealthier, and he discusses the implications this has for global trade as well as the new opportunities and strategies that need to be deployed in China. His observations come from literally thousands of interviews he has conducted over the years with everyone from Chinese billionaires, factory workers, young mothers and even prostitutes, all sought out to extract some sense of China’s evolution: where it is headed and ultimately, what the modern Chinese consumer wants to buy and how they expect to be treated.

It is littered with anecdotes and some surprising statistics. I’ll list a handful that stood out for me:

  • The average age of a Chinese Mercedes-Benz buyer being 39 as opposed to 53 in the United States
  • The Chinese are buying their homes five years younger than their American counterparts on average
  • Chinese meat consumption has shot up to half that of the United States
  • Nearly 25 percent of China’s 1,000 wealthiest billionaires did so through real estate
  • Healthcare and education are primary sources of concern for the mainland consumer
  • Young Chinese women will often save up to three times their monthly salary to buy a luxury item such as a designer handbag

If I had a gripe about the book, it would be that not enough detail has gone into research ascertaining where the low-cost manufacturing base China had is now moving to, and the throw away premise that American consumers will (as a result of increasing Chinese labor costs) have to pay more for goods doesn’t quite ring true.

A couple of additional chapters to round the book off concerning the rise of ASEAN nations and India as inheriting Chinese population dividend and low-cost labor base would have provided a good ending for the book, although it’s also possible Rein has a sequel up his sleeve. But for a concise, entertaining and thoughtful look at where China is going, why, and some nicely laid out “Key Action Items” for erstwhile marketers to follow, Rein’s book does a good job. If there is one book you should read on an international flight heading for China – and especially for those businesses that are looking to sell to the Chinese – this is the volume you need.

7 Responses

  • Roger Souter says:

    Chris – any guide to the China blogs written in China you rate? That’d be useful as well. As you say there’s a hell of a lot – almost too much – out there and sorting out the wheat from the chaff would be a good starting point. Thanks
    Rog

  • Chris Devonshire-Ellis says:

    Rog, thanks for the question. Many people use blog aggregators, and i use China Alltop (http://china.alltop.com) for this research. It has many good blogs on it – as requested I have listed only those that are actually written in China, and the best of these can be subdivided as follows being those I would recommend in each category:

    China Law & IP: Stan Abrams: http://www.chinahearsay.com
    China Media: David Wolf: http://siliconhutong.com
    China PR: Will Moss : http://imagethief.com
    China Sourcing: David Dayton: http://silkroadintl.net/blog
    China Quality Control: Renaud Anjoran: http://www.qualityinspection.org
    China Consumer Trends: Bill Dodson: http://thisischinablog.com
    China Education: Robert Vance: http://www.teachabroadchina.com
    China-India Bilateral Relations & Trade: http://www.2point6billion.com
    China General Analysis: Richard Brubaker: http://www.allroadsleadtochina.com

    Shaun Rein is found – as well as many other great China writers (and their books) – on http://www.chinaherald.net

    Otherwise for China expat culture blogs I could recommend our own Ernie Diaz at http://www.chinaexpat.com plus
    Mark Tanner: http://www.marktanner.com/blog
    Tom Weiskopf: http://www.seeingredinchina.com
    Josh Summers: http://www.farwestchina.com

    I may have missed some off in which case I apologize and please let me know otherwise, and about any other great blogs out there. Remember they must be written in-country. Apart from those the rest are either the types of low value blogs with little original content that just comment on other peoples work, plus there are some inundated with trolls – there was plenty of ridiculous chatter about Shaun’s book online for example and I think for the most part although some people enjoy that kind of nonsense, I wouldn’t waste your time, they’re not useful and no-one takes them seriously. Apart from those you get the professional journalists at the WSJ for example, but while they are popular, they don’t have huge depth, and certainly not to the extent of any of the above, very niche market blogs.

    Another good China based example is China Accounting, written by Paul Gillis: http://www.chinaccountingblog.com

    If anyone else would like to suggest a blog, please feel free to comment here and let our readers know – they must be written by people living and working in China. I think has to be the quality benchmark now to sort out the China pretenders from the real China hands.

    Thanks
    Chris

  • Girish says:

    Two earning persons to support 4 parents and a child, apart from property bubbling prices of home morgages in a country with average age of 34 years and per capita income of 4000 USD. By the time Chinese per capita will be 20000 USD (half of today’s developed world), its meidan age will be around 44 years (that of today’s Japan with 7 times more elder to take care off).
    Migration from export oriented economy to cumsumption based economy will take more then 25 years for China, considering export is 35% of its economy and infrastrcuture development at 20% of its GDP.
    Export and infrastructure development support jobs and return on property investment and that is linked to stability in China.
    Transforming chinese economy into consumption based economy will take atleast 20 years and by that time consumption will itself vanish as average chinese age will be 44 years.

    China is in extremly dangerous situation due to demogray. Their economy will never be a comsumption based one due to less money(in percentage) to spend on living standard due to high current libalities and future saving for old age. Incase of property bubble brust in China (which is very likely) the inventment made by people will be washed away. (25% billioners are from real state in China)

    China cannot climb fast enough the high end production to support its aging labour force with high income in the competitive sorrunding of India (who is spreading its wings into high end as well as low end industries at the same time) i.e

    China is just not in correct situation to sustain its growth. China will become old before it come rich ever. And not to forget the issues related to CCP and people seaking freedom and voice which will be a major issue for stability in China for industries to sustain.

  • Chris Devonshire-Ellis says:

    @Girish – fascinating stuff and I’m sure you’re right – but I also recommend reading Shaun’s take on it. The main issue is that right now and for the next decade – China looks like being a huge consumer market, and his book deals with how to access that.
    Chris

  • Pete Marks says:

    I thought it was a decent book, but I also felt like it was written 3-4 years ago but took until now to get published and come out. That is the problem with all books like this. By the time they come out they are outdated. I am an avid reader of Shaun’s columns on Forbes and though I hate to say it, I would suggest people just read those (and this blog) and not the book if they want the most current information on China.

  • Chris Devonshire-Ellis says:

    @Peter – much of the book is theory based upon statistical evidence, although in one or two instances (Bo XiLai being described as a potential future leader for example) the book does show a couple of months aging. However the basic premise and supporting material I thought was pretty current.

  • knut says:

    chris, thank you for sharing this blog list with the public.
    i have one on china’s environmental law: http://www.chinaenvironmentallaw.com/ which is surely decisive, although I dont know if the author resides in China.
    k

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