China Has 703 Million Cell Phone Users. The Middle Class Is Rising.
703 million. (h/t Shanghaiist) Think about that for just a minute. That's about 2.5 times the population of the United States.
More than three years ago (gosh, have we really been here that long??!!) I did a post on how China had hit 410 million cell phone users. In that post, I stated the following:
I love this sort of hard number because to me it is a very accurate way to measure China's growth and increasing wealth, perhaps even more so than a more standard measure like per capita income, which can be easily manipulated and whose impact is heavily dependent on living costs.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.
The comments to that post (and some of our other posts) questioned the validity of the number. I recall someone saying that the number reflected the fact that many users had two phones. One for business and a "black phone" for the mistress. Another comment was along the lines of how many people in China, particularly rural areas, had a phone because it was absolutely necessary for their micro business and so having a phone does not one for one translate into someone being in the middle class.
I agree with all the criticisms of linking China's cell phone numbers to numbers of Chinese middle class, but I persist in believing there is a correlation. And if there is a correlation, then the numbers of China' middle class have risen considerably since 2006.
What do you think?
Comments (13)
Read through and enter the discussion by using the form at the endChris - September 5, 2009 7:54 PM
Another interesting post Dan. There is no doubt a correlation between mobile phones and the middle class but it's not absolute. Mobiles have reached deeper into the middle class with school kids and older people from middle class families using them at a higher rate. However, the criticism of using mobiles as an absolute indicator is also valid, with the guys riding "Sanlunche" and collecting scrap also using them to communicate.
Regardless the growth in wealth cross the country is obvious. I travel a lot and see both Chinese and Western brands now extending their presence into small regional cities and towns. Avon has an extraordinary market coverage, it's everywhere!
Chinese consumers are complex. Any company wanting to get in with "their" product needs to be smart, savvy and more local than the locals (in terms of sales, marketing and distribution) to succeed.
Shippingnews - September 5, 2009 9:51 PM
I think the number has no problem. But actually it cannot show the rising of a middle class in China. You know this large cell ownership here results from lots of reasons besides the "middle class" one, e.g.it's much easier (much easier than to register a fixed phone) and cheaper to get a number in China, Chinese characters are most suitable for taxting short messages which makes cell the most popular communication methods in China.
Don Clarke - September 5, 2009 10:10 PM
I'm afraid I go with the critics on this. Even the beggars seem to have cell phones. Your point, I realize, is that even if not every cell phone user is in the middle class, some percentage is, and therefore more cell phones should mean more members of the middle class. But there's a problem here: I suspect that cell phones are not only getting relatively less expensive over time (compared with average incomes); they are probably actually getting cheaper even nominally. In other words, the percentage of middle class members among cell phone users is probably falling as ownership spreads into the poorer classes. As to whether "someone who can afford a mobile phone" is a potential buyer of Western products - well, just how much does it cost to buy and use a cell phone in China? Not a whole heck of a lot. Would we say the same thing about "someone who can afford a bicycle"?
R Mitchell - September 5, 2009 11:47 PM
It's cheaper to own a mobile phone than to have a house phone installed in China.
One should ask is the middle class actually growing or are phones and rates getting cheaper?
Allroads - September 6, 2009 12:36 AM
Dan.
I think to draw out how many are middle class, you would need to dig down deeper into the numbers.. look at (1) if the numbers are subscriber based on a plan or are pay as you go (2) how many are roaming vs. how many are for that locality (3) how many phones are being purchased and what the numbers behind various price points are.
I have known traveling sales people that carry one phone for all of China (monthly plans + roaming), and 10 local chips for a second phone so that they can save money (pay as they go)... that person may be middle class, so the analysis works in that regard, but to say that there were 11 middle class people would not be.
Using a different tangent. We once did a study of 500 farmers in Jiangsu province, and many of them had a phone. All were sustenance farmers, and few of them made calls out using the phone. they just used it to receive messages on pricing information, and when the delivery guys was coming to pick up crops.
R
hanmeng - September 6, 2009 4:57 AM
What's your definition of middle class?
Louis Brands Savage - September 6, 2009 9:23 AM
The drastic increase in the number of Chinese cell phone users has more to do with the success of Chinese mobile phone companies and less to do with the rise of the middle class for at least two reasons. 1) The second-hand mobile phone market in China is extremely efficient; it's possible to buy a decent second-hand phone for less than RMB 100; 2) the cost of SMS services is very low, many Chinese cell phone users never actually speak on their phones. So what the number may really reflect is a bunch of new users who spend very little on their phones. The Chinese mobile phone industry is still able to make money on the new customers, but the new customers are not rich.
If the new customers were actually rich, we would see a rise in the average cost of a cell phone and an increase in the number of users. What is actually happening is the price is the price of cell phone ownership is dropping while the number of users rises.
This is easier to see in a setting where we are pretty sure the middle class is not booming, and yet cell phone users increase in number: Africa. http://blogs.msdn.com/africansatmicrosoft/archive/2008/12/30/africa-s-mobile-revolution.aspx
James G - September 7, 2009 6:08 AM
Seconded to the maturing second hand phone market comment above. Just 5 years ago, even in Shanghai you had to go to slightly funky flea market kinda places to get a used phone, the quality might be laughably poor, and the prices weren't that much of a savings. Now they are, and with the constant addition of functions, styles, and increased memory, there is faster turnover of higher end (yet cheap) phones.
Plus cell phones are the number #1 most stolen item in China. It's not like in the west, where pickpocketing take a backseat to other more prevalent forms of crime. I remember waiting for the bus on Pudong Avenue and watched as "enterprising" youngsters took phone after phone... and the people they were pickpocketing were almost always blissfully unaware. I remember once asking a group of female coworkers (all Chinese) how many had been pickpocketed of their cell phones, and it was nearly ALL of them.
Bike sales continue to be brisk in China, not because the market isn't already saturated, but also due to the high rate of theft.
chriswaugh_bj - September 7, 2009 6:22 AM
Just to back up all the comments posted so far: I'm sure my wife and I are not the only ones to pass perfectly good cellphones on to poorer, generally younger members of the family when we upgrade, for starters. Secondly, we bought my father in law a very basic Nokia for a little over 300 kuai- meaning: even some foreign brands can be got cheap. Also, the SIM card we got for his phone is a special rural-area card with much more favourable rates than what we get in the city, much cheaper and a lot of free stuff we don't get.
So I'm sure there is some correlation between absolute cellphone user numbers and the rise of the middle class, but the cellphone market is also expanding downwards into much lower-level markets, so those numbers have to be taken with a grain or two of salt.
Karl J. Weaver - September 7, 2009 10:10 AM
The Chinese look at the cell phone as a 21st century business tool which is lifting them out of poverty. I am in the SIM card and mobile handset industry here, can confirm many of these figures of SIM cards and handset sold are fairly accurate, as the IMEI is tracked per handset in each operators network and SIM card sales are publicly disclosed. The Chinese middle class is upon us and CHinese users change handsets normally once every 9-12 months. Whomever said the Chinese don't talk on their phones and only do text messaging has it all wrong, voice in CHina and globally is cheap - data plans are expensive (that does not include SMS because that is not part of a wireless data plan) SMS is very cheap in CHina and I even use it all the time, but voice is still highly used in China. The handset industry in 5 years will be controlled mostly by Chinese brands, as Western brands will be playing catch up, they continue to lose market share year after year.
Thanks,
Tony - September 7, 2009 10:05 PM
There are many other ways to measure an emerging middle class, like growth in insurance, growth travel/holiday expediture, growth in car sales.
Growth in mobile phones users is a less reliable indicator quite simply because EVERYONE in China can afford one or two. Some facts - local brands of mobile phone are on sale for as little as 200yuan in Shenzhen, which is about 1/5 of the monthly minimum wage in the city. An I-Phone ripoff goes for 500yuan. I've seen street cleaners chatting away on their phone during their ciggie breaks.
Mobile Man - November 9, 2010 10:53 PM
What's the latest figure on this, do you know?
Alex Gavin - November 20, 2010 10:26 AM
China's numbers are already mind-boggling and i expect them to become even more so in the coming years.