China Law Blog

Not too fast, Dan. Very few numbers in China are 'hard'. This number relates to the number of mobile phone numbers that have been issued and does not discount the numbers that are not being used, or the people who have more than one number. I estimate that the number is closer to 300 million than to 400 million. Still impressive, but a little bit lower.

It's still flawed, but there is always the option of comparing GDP per capita, using purchasing power parity. This neutralizes the effects of market forces on currency comparisons, by weighing sums (say, in dollars and RMB,) against a fixed basket of goods. The method is described with more precision at wikipedia (last I checked,) and more accurately pits spending-power against spending-power.

Christopher and Fons --
Purchasing power parity works okay for comparing two countries, but what I don't like about it with China is that the cost differences between Shanghai/Beijing/Shenzhen and the rest of China can be so big as to skew GDP numbers. $2400 per year is a good income in Qingdao, but far less so for Shanghai. But if someone can afford a mobile phone in either city, they must have disposable income.

As for the number 300 versus 400, I find it hard to believe that 1/4 of the mobile phone subscribers have numbers they do not use or have more than one number. I would certainly believe that a family might have more than one phone, but still, each of them in the family equal one consumer. Even if you are right that this number is softer than I think it is, the growth in that number is still a good indicator of the growth in wealth in China.

What Fons said could be correct. China gov estimates some 60 million phone numbers are not in use. China's new rules require users to provide their real identity for phone numbers and service will be disconnected for numbers without a real ID.

China is doing pretty well in the telecom area, in both service and technology.

China is s big market for western companies already. China is the second PC market in the world, after the US. More than 19 million PCs were sold in China last year. China should be the largest market for a lot of home appliances, such as washing machines, TVs, refrigerators, DVD players... China's auto market even surpassed Japan in the number of autos sold.

Japanese and S Korean companies are doing pretty well in China in auto, electric appliance industries. US and european companies are doing good in industry equipment, telecomm, auto, IT fields.

China imported more than $660 billion in product. That's a big number already. If you include the products foreign companies made and sold in China, it would be much larger.

Nor would I equate the ability to purchase a mobile phone with someone who is likely to purchase western products (at least now and in the near term future).

The phone is a tool for all sorts of communication among friends, voice, sms, as well as status. I have a hunch that some of these folks are buying a bit above their means in order to make an impression. I have been using a 2+ year old low end Motorola in Shanghai. Many of my Chinese colleagues like to sport their latest Nokias and Motorolas. These same colleagues barely make 3000 rmb a month, walk an extra 10 minutes each way at lunch to buy lunch for 3.5 not 5 rmb, and regularly alternate among two or three outfits at the office. The point being is that while there may be a lot of mobile phones in China, I expect some are "living beyond their means" when they buy one and are thus not likely to be buying IPods, Vidal Sassoon shampoo, or drink much Starbucks coffee...

Steven -- Thanks for the info re the new identity requirements.

PHS -- I completely agree that many in China stretch to buy a phone for status reasons, but my thought is that if they are willing and able to strectch there, they are most likely willing and able to stretch for other things as well. Reminds me of a marketer who once said that the Chinese will pay a lot for that which brings them status but they will never buy expensive underwear.

The number is startling, but I am not certain that it represents a new stage in China's consumer market development. Perhaps this is true in the cities, but the situation is quite different in the countryside. During my time in a village in Anhui, I was surprised to find that even the tea farmers and the local village butcher owned mobile-phones (purchased second-hand). They all agreed that it was an expensive, but necessary piece of "modern" equipment. When I asked them about other consumer products they owned (ie. televisions, clothes, shoes) they said that they could do without them and spending money on things of that sort was "lang fei" (wasteful). Obviously, villagers from Anhui, who are generally poorer (and thriftier) than most of the total rural population, should not be seen as representative of the consumerist mentality of the entire countryside population. It does, however, illustrate a point of the great divide between urban and rural market development. Considering that nearly 30% of China's population is still situated in the countryside, one must always be careful before aggregating China into one market however startling a number may be.

"The way I see, it, if someone can afford a mobile phone, they are a legitimate potential buyer of Western products and a legitimate potential customer for Western retailers. "

I disagree...with the amount of theft and reselling of mobile phones in China (notice all those 2nd hand mobile phone markets in Chinese cities) you can very cheaply purchase a mobile phone...or hell just go and steal one!

John/Dezza -

Dezza makes a good point about the huge amout of cell phone theft in China. I once saw figures on this and though I do not remember them, I do remember they were staggering. John also makes a good point that China is not one market and on that I completely agree. I just read an article dividing China into 30 markets, but who knows whether even that is enough. Despite all this, I still believe that a mobile phone is not a necessity in China or anywhere else and that anyone who has purchased one (either new or second hand, but probably not stolen one) has enough disposable income to be a potential buyer of Western goods. I am not expecting the cell phone owners of Anhui to go out and buy Western dishwashers and washing machines, no. But is it too much to expect them to buy a Zippo lighter?

410 million subscribers mean there are still a lot of Chinese who do not have cell phones. Other countries can only envy the type of potential China has.

What exactly does China mean by mobile phone subscribers? Is that the total number of mobile phone numbers issued, and if so is that to retailers or end users?

If it is to end users I wonder is that to individuals or total number of accounts maintained? My wife and I have two phone numbers EACH, two leftover from an older plan that still has money on it. Are these types included?

Furthermore, many of my colleagues and some of my friends have two or more current phones and numbers (for work and life, or so they say). I expect some of these folks are doubling up.

That said it is still a large number. I would like to see the percentage of mobile phone users by province/city, or rural versus urban. That would be a far more telling figure in my opinion...

SH -- China's market potential, based just on the numbers alone, is incredible. US News just did a story on Chuppies (Chinese Yuppies) in which they said that in talking about China,"Western business executives can't stop using the word 'scale.'"

However, one must be cautious about this. Nearly every bad business plan I have ever seen starts out by saying that the market for this product is everyone in the country and if we just capture 1% of it our profits will be some astronomical figure.

PeterPaul -- I believe subscribers means phone numbers, so it would include essentially dead lines. On top of this, because using prepaid cards is so common in China, one would expect there to be a greater number of unused lines there than in, let's say the United States.

I agree it would be hugely interesting to see a geographic breakdown of these numbers, but I have yet to see anything along those lines.

"But is it too much to expect them to buy a Zippo lighter?"

You're kidding right? 300rmb a pop? you could get a decent 2nd hand mobile phone for that price. Unless you're talking about a 2nd hand zippo lighter? In China, I could buy 400-500 regular lighters for the price of a zippo! haha

You are right. I wasn't thinking. I was trying to think of something small and since I had just been looking at the files on a case on which I had worked that involved a Chinese lighter manufacturer, I thought of lighters. I shouldn't have. I no nothing about the cost of lighters, Zippo or otherwise, in China or anywhere else. Bad example. 1000 lashes. I humbly apologize. Please forgive me.

Hi my name is Elena Fonoti and I'm a student at Fortitude Valley state school and I'm doing a task were we have to write an argument about a topic and i have chosen mobile phones and some of this information has come very handy

Elena -- Thanks for checking in. Glad to be of service. I had to look up your school and I think I found it. It's in Australia, right?