China Demographics Because They Matter.
Bill Russo, China car expert extraordinaire, has been running an excellent series of posts on China's car market and he just hit the lucky number 8 and final one and this one really got my attention. It is entitled, "TREND #8: China's Rapidly Changing Demographics and Growing Demand in Lower Tier Cities," and its focus is on China's demographics relating to car sales in China. But it really is a terrific short briefing on China's demographics as they are relevant to business.
If you are dong business in China or thinking of doing business in China, particularly if you are selling product or services in or into China, I suggest you read it. And it certainly would not hurt you to read the seven posts that preceded it.
Comments (8)
Read through and enter the discussion by using the form at the endDennis - December 3, 2009 8:02 PM
An interesting post for sure, but it has some wild assumptions: If we define “middle class” as people with annual income greater than 150,000 RMB ($22,000 US), this number has increased from 1.5 million to 4.8 million individuals from 2000 through 2008. This number is expected to increase to over 40.3 million individuals by 2020.
2000-2008 will probably be looked back at as a particular benevolent period of world history. Decline of trade barriers; what happens now that the US consumer is totally tapped out and the threat of trade barriers seems very real? What happens if China has to re-capitalize their banks yet again after the rise of NPL?
Bill Russo - December 4, 2009 1:35 AM
Time will tell...but this "wild assumption" comes from the following sources:
Asian Demographics; Study commissioned by Beijing Young Post; China Statistical Yearbook; Global Insight; Booz & Company analysis
It's also worth noting from my own personal experience, forecasting is imprecise. However, forecasts in virtually every other market are too optimistic. China has been the exception: forecasts still inaccurate - only too pessimistic.
Dennis - December 4, 2009 2:41 PM
Wait, so all sources predicted the same number or did one source predict it and the other ones quoted it?
But more importantly, the numbers just look incredible. The middle class will grow by 833% over 12 years while in the previous, much more pro-growth period, the increase was only 3 times over 8, suggests the kind of "Everyone has to pile into China" attitude that has been incredible popular among consultancy firms...
Again, considering the increased difficulty we may see in world trade and the decrease of consumption as % of the Chinese GDP growth in the middle of the greatest growth period in PRC history suggests that these numbers should be viewed with extreme skepticism (akin to the current bureau of labor numbers in the United States)
bill Russo - December 4, 2009 5:36 PM
Last name on the source list did the final analysis....and 40.3 M number is highly believable in a country the size of China.
I would not be surprised given this year's development (study was last year) if the timetable to this number is even shorter.
Dennis - December 4, 2009 8:23 PM
This year's development? You mean the incredible increase in loans? What happens when they come due and the government is forced to recaptalize loans by penalizing citizens yet again -- either through further devaluation of the yuan or through increased taxes or to further lowering of the interest rate?
What happens if an increasingly likely trade war between China and the US takes off? Heck, what happens when the US consumer does not bounce back and stop buying? Almost all of the stimulus money has gone into industries that support export.
What happens when provincial and prefecture sized units start going bankrupt because they overlevereged themselves on stimulus money?
Many of the factors that propelled China forward in this decade may be gone forever. And replaced with a much nastier international trade climate. And China has not, despite President Hu's promises to focus on social development/spreading development to inner China, initiated any serious efforts to increased consumption as a % of the GDP.
China is in an incredibly vulnerable place because of its economic relationship with the US. And as America continues to devalue its dollar [and thus its debts] and as the American consumers clean up their balance sheets the Chinese producer will be feeling an increasing amount of pressure.
FR - December 5, 2009 2:51 AM
Great links. Thanks.
Dennis - December 5, 2009 8:07 AM
http://mpettis.com/2009/12/the-difficult-arithmetic-of-chinese-consumption/
Car guy - May 28, 2011 3:04 AM
Russo is an insider regarding China's auto industry, but I wish he would focus more on that than on what article he had published where.