Friday, January 14, 2011

Weeping in a BMW: China Pushes Consumption; Move Over U..S.

Chna seems to be sending a message: Move over U.S., we will be the new kings of consumption; increase internal consumption or else.

Now imagine 1.4B people doing that. (By the way, there won't be enough food for their new tastes - got food commodities?)

Germany's Der Spiegel reports that China and Hong Kong together already have more than 100 billionaires, that is four times as many as Japan.

Please note that we track all Chinese ETFs live here.

"Attending an annual trade fair in Shanghai, whose high-end luxury goods cater to China's nouveau riche, is more important to them than going to see traditional military parades. Indeed, the party hopes that ostentatious displays of wealth will boost domestic consumption".

China is becoming a promising market for Western corporations, particularly in light of the warm welcome they often receive from government economic planners. Consumption has become an acceptable form of patriotism. International experience, Vice Premier Li says, teaches us that "any major power's development process must be led by domestic demand."

To strengthen purchasing power -- and following a series of suicides among workers at Foxconn, a supplier to the American technology giant Apple -- Chinese leaders have even allowed workers in many plants to strike for higher wages. In its next five-year plan, Beijing plans for the first time to assign its highest priority to consumption as an engine of growth.

Whether the strategy works will depend in part on how well the government gets inflation under control. But either way, affluent urban residents like Zhang and his wife Xu are hardly deterred by higher prices. Indeed, Beijing, it would seem, would like their next major purchase to be a car. Since the global financial crisis began, the government has stimulated car-buying by reducing taxes. The Volkswagen Group alone sold more than 1.9 million cars in China last year, a 37 percent increase over the previous year. Although Beijing's city government has put a cap on the number of new vehicle registrations it allows, it represents but a minor hurdle in the large-scale plan to boost consumption.


"For many Chinese, owning a car is the second most important status symbol after buying an apartment. "I would rather weep in a BMW than smile on a bicycle," a candidate on a popular TV dating show said recently when describing her ideal husband. The episode gave rise to a new term on the Internet, "BMW woman," a reference to this particular type of materialistic Chinese woman".

Meanwhile, the roughly 700 million residents of China's rural areas face completely different problems. Traditionally, they have saved much of their income for times of illness and old age. But now the party has launched campaigns to turn frugal farmers into consumers by encouraging them to buy television sets, refrigerators and computers.

Officials throughout the country are promoting the construction of giant, amusement park-like shopping centers to serve as temples of the new consumer religion. Wuhan, a city of 9 million, also aspires to win global fame from its malls. The most upscale of these complexes is the Wuhan International Plaza, and -- like a promise of things to come -- it rises up out of the smog that envelopes this iron-and-steel-producing city almost year-round"

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