Just how big is the opportunity to market to China?
The next superpower. The world’s fastest growing middle class. Capitalist Communists. China is called many things, each of which adds to the confusion surrounding this most unique of countries. Unfortunately, it’s this confusion that can see stunning opportunities go begging.
There’s really no delicate or reserved way to say this, so let’s just come out with it. China represents perhaps the greatest money making opportunity the global economy has ever seen. Never before has such a swathe of humanity come into such an abundance of disposable income at the same time.
It’s quite the statement, but the facts back it up. And Australia is perfectly placed to capitalise on this embarrassment of newfound riches.
Why should Australian brands market to China? Let’s take a closer look.
Economies of scale
One billion. It’s a number that can be difficult to wrap your head around. The temptation is to think of it as a million with a few extra zeroes; a millionaire and a billionaire are both rich after all. But while that might be true, the scale of that wealth is vastly different.
It helps to think of it this way: one million seconds is 11.5 days. One billion seconds is almost 32 years.
And there, in a nutshell, is the China proposition. Where Australia is home to around 25 million people, at the time of writing no less than 1.386 billion individuals call China home. There are over 55 Chinese citizens for every Australian.
Headcount isn’t everything – China has always been populous, but it’s also been poor. In 1991 every fifth person in the world was Chinese (and that’s rounding down), but China wasn’t even in the world’s top 10 economies, boasting a GDP similar to Australia’s.
But from that moment on, we’ve been witness to an economic explosion unlike anything the world has seen before. By 2010 China had overtaken Japan as the world’s second largest economy, and the growth hasn’t slowed since.
A fascinating illustration of China’s economic success can be found in this infographic by Visual Capitalist. It compares the GDP of 35 of China’s cities to countries from around the world. Shenzhen has the GDP of Sweden. Tangshan matches New Zealand. The same with Chongqing and Chile. Guangzhou generates as much wealth as the Swiss and their famous bankers. And the fact that you probably haven’t heard of any of these cities makes their numbers all the more impressive.
A bounty of buyers
Between 2009 and 2030, China expects to add 850 million individuals to its middle class. Once again, the sheer scale of that number can be lost on those perhaps not used to dealing in millions and billions, but it’s the equivalent of 2.5 USAs or 13 United Kingdoms just popping up in Asia, ready to spend.
In comparison, the European middle class is expected to grow by 16 million by 2030, and the American middle class is expected to fall by 16 million in the same period. While other markets stagnate or decline, China is set to explode.
The propensity to spend is already developing into a distinctly Chinese trait. Luxury brands have been some of the first to spot the opportunity – a recent study of high net worth individuals (HNWIs) found that 86% of Chinese HNWIs planned to spend more on luxury goods into the future while only 45% of American HNWIs said the same. This and other trends resulted in China accounting for no less than 30% of global luxury brand sales in 2016, and that already high percentage is set to rise sharply in the coming years.
An enviable position
What does all this mean for Australia? Well, because we’re in close proximity to this economic powerhouse, it could mean great things. As one of China’s largest and most developed neighbours, we’ve got both the wherewithal and the established trading channels to capitalise on this growth – to supply the needs and wants of this new middle class, be it through products, services, tourism or education.
Thanks to luxury brands and other pioneers, the ice, to some degree, has already been broken. We know that international brands can gain a stranglehold in China. It’s been done. And as a developed nation with an innovative economy and a fortuitous location, there’s really no reason we can’t see a wealth of our own brands capitalising just as the likes of Gucci and Prada have, but this time across all manner of industries.
No matter what measure you use – population, GDP or even land mass – China isn’t just big, it’s monumental.
And so too is the economic opportunity for those willing to take the leap.