The Chinese Market

With its population of 1,3 billion people and therefore as many potential customers, China is a very lucrative market for any business and advertiser. There are rules however, that foreign companies should play by to successfully enter the Chinese market.

Due to the many political, social and economical reforms introduced by Deng Xiaoping, who was the leader of China from 1978 to 1989, China has been experiencing development comparable to the history of the United States – only faster. Or in the words of James McGregor, journalist-turned-businessman and chief executive of Dow Jones & Co. in China from 1994 to 2000:

“China is undergoing the raw capitalism of the Robber Baron era of the late 1800s; the speculative financial mania of the 1920s; the rural-to-urban migration of the 1930s; the emergence of the first-car, first-home, first-fashionable clothes; (…) middle-class consumer of the 1950s; (…)
                                                                                                                                             (2005, p. 3)

With a Chinese market that is continuously opening up to foreign companies, it is important to understand the marketing and advertising environment of the country. Important factors that need to be taken into account are demographic characteristics as well as the economic and political environment.

As already mentioned above, China with its 1,3 billion people has the largest population in the world and is therefore a promising market.
There are however other demographic factors like population density, age structure and education that need to be considered as well.
The population density of China lies at around 144 people per square kilometre in 2010, while the majority of the population lives in urban areas in the eastern coastal regions.

According to The World Factbook, life expectancy in China is 74,9 years with 46,7% of the population aged between 25 and 54 years, which Mueller calls “the prime earning and spending years” and therefore an interesting group for marketers and advertisers (2011, p. 91). 
Since the age group of 60 years and older is expected to grow as well, advertisers will increasingly need to focus on senior Chinese as customers.

Since there seems to be a relationship between economic development and educational attainment, education, which can be measured by the literacy rate for example, is another relevant factor for international advertisers (Mueller 2011, p. 92).
China’s literacy rate lies at 92,2% (Factbook), which means that the cast majority of consumers are able to read advertising messages and understand warranty and guarantee information (Mueller 2011, p. 92).

When analysing China’s economic environment, there are numerous factors that need to be investigated and the following two factors shall serve as examples.
China is a newly industrialised economy, which is defined by Mueller as a “major exporter of manufactured goods” and investment funds with “a large middle class” (2011, p. 93).
Due to the rapid growth of China’s economy, the gross domestic product (GDP) has more than decupled to $12,61 trillion since the first reforms in 1978, which has created a middle class with impressive buying power. Besides the GDP, advertisers also take the GDP per capita into account, which lies at $9,300 in 2012 (Factbook).

Another valuable factor for international marketers and advertisers is the degree of urbanization within a country, because it usually reflects the development of that country. China has an urban population of 50,6% of the total population, which is far below the United States for example with 82%.
With an annual urbanization rate of 2,85% however, China will keep playing a leading role in the international market and stay very attractive for advertisers!

(Factbook)


Sources:
McGregor, James, One Billion Customers, Free Press, New York, USA, 2005

Mueller, Barbara, Dynamics of International Advertising, Peter Lang Publishing, Inc., New York, USA, 2010