TNS China

Country road, (don’t) take me home

The reluctant march home

Twenty million migrant workers from the Chinese countryside, who have lost their jobs in the aftermath of the global financial crisis, do not wish to go home. Driven by the export boom, nearly 130 million rural Chinese had left their farms to toil in urban workshops and construction sites, sending money home to supplement the meager agricultural income. Unfortunately last year the Wall Street brought down the Main Street, which in turn resulted in the closure of factories in China which churned out products enjoyed by American consumers with borrowed money. Last month the Chinese government revealed that 20 million of these workers have lost their jobs and will possibly need to return to their rural homes.

The workers do not want to go home as their income from tilling their small farms is woefully inadequate to provide them with a comfortable existence and even a modicum of savings and security. The per capita rural income in 2007 was less than one third of what the urban Chinese enjoyed. Despite the harsh conditions of work and stay in the cities and the emotional pain of living separately from their loved ones, they willingly accepted this existence to be able to provide their families with a better quality of life.

The official deliberations

Not surprisingly, the welfare of these migrant workers and the economy in general was salient in the deliberations of China’s top legislative body (National People’s Congress or the NPC) and the top advisory group (CPPCC) which meet every year in Beijing around this time. As can be expected in China, scale is important and the meetings are held with great pomp and ceremony. The sheer size is staggering – NPC has nearly 3000 deputies, and the CPPCC National Committee has 2,235 members. Unlike the House of Lords in UK and the Rajya Sabha in India, attendance is high even in the advisory body and members are expected to remain awake during the proceedings. The publicly released pictures of the meetings show the members in a state of significant alertness, despite sometimes soporific speeches of fellow members and leaders. Previous meetings have debated, modified and adopted other important issues such as the Labor Contract Law and the Property Law. Discussion on China’s economy has always been prominent, but the tone in the past has been congratulatory and exuding pride. Economic achievement offered much fuel for pride in the past (in the 2008 meeting of the NPC the Chinese Premier Wen Jia Bao had proudly declared that China's economy grew by 65.5 percent over the past five years, or an average annual increase of 10.6 percent)

Not only is the agenda this year single-mindedly focusing on economic development, for the first time this year, in recognition of the need of the hour of judicious spending, the agenda of the meeting itself has been trimmed to 10 days from the usual 14 days. The euphoria of a decade long galloping economy has evaporated and the party officials are scratching their heads for how to keep the gravy train going and continue to provide jobs for the laid of workers as well as the new workforce entering the market (including a crop of 5.5 million university graduates every year). The languishing countryside and the widening urban-rural income gap was always an area of anxiety for the leaders. Guided by this concern, the party leadership in the past raised slogans like “the new socialistic countryside” accompanied by supportive actions such as abolishing the tax on agricultural income. The 2009 meeting clearly recognized that more needs to be done.

The rural stimulus

Research done by TNS in the cities, indicates that the urban Chinese though fearful of the global crisis (63% think that they will be affected slightly and 28% significantly) still sport a staunch optimism. However the rural folks – particularly the migrant workers are already in distress. The workers are obviously not happy to lose an income which they will never able to match with digging the small piece of land back home. They will perhaps be willing to work for even less, driving down the labor prices, and undoing some of the strength they had gained since the adoption of the Labor Contract Law last year. The government is helping out by infrastructure spending in the 4 trillion Yuan stimulus package– including expansion of railways, building roads and housing - much of which will go to rural areas and small towns. It is also trying to boost domestic consumption and cheer the rural masses by offering a 13% subsidy on a range of home appliances ranging from washing machines to mobile phones.

While the new DVD player and a color television may serve as a temporary palliative and help the returned workers while away their time (of which they have no scarcity now) a more lasting smile on their faces can only be achieved through alternate meaningful employment. The workers need an alternative to a miserable though lucrative toil in the cities and leisurely but penurious existence at home. More needs to be done to equip the laid off workers with new skills which make them eligible for other employment opportunities in and around their homes.

Equally important will be to offer them advice, guidance as well as small loans to start village level enterprises which could offer a sustained source of income. Micro-credit, the business of giving small, mortgage free loans in rural communities, which has transformed the lives of millions of peasants in many countries, possibly has a major role to play in China too. The new motorcycle that a rural resident may buy, aided with a newly introduced 13% discount, needs to become a vehicle for entrepreneurship and its engine also serve as an engine for rural growth.

Written by Ashok Sethi, TNS China

Ashok.Sethi@tns-global.com

Love in crisis

The importance of being in love

The Chinese celebrate Valentine’s day on the 7th day of the 7th lunar month.. As if one Valentine’s day was not enough, the people have also whole heartedly embraced the Western Valentine’s day of February 14, as is evident from the spurt of sales promotions and amorous activities seen around this time in the main cities.

It is not surprising, therefore, that love is important for the Chinese - as high as 98% claim that they have ever been in love. In fact falling in love seems to be easy for the Chinese – 76% believe in love at first sight. Surprisingly the sentiment does not wane with age and the belief in first sight Cupid is as strong among the older Chinese as among the younger. On an average a Chinese has been in love 2.5 times, and 10% have been swept off their feet as many as 5 times. They also start their love life relatively early – two in five first fell victims at the tender age of 18 or even less.

Where love has gone

But the Chinese love story has elements of both joy and tragedy. While nearly all have been in love at some point of their lives, regrettably only 37% can say that they feel the sway of the emotion in their hearts today. Age definitely dims the ardor – with only 17% of 45 years and older feeling the tug of love today. Men seem to fall out of love more easily than women – only 32% claim to be in love today as compared to 41% of the women. The words of Ambrose Pierce ( “Love: a temporary insanity, curable by marriage”) seem to ring true as only 24% of the married men and women say that they are still in love, as compared to 94% of unmarried couples. Even among the incurable romantics (who say that they believe in everlasting love) many could not help feeling disillusioned. It would seem that the celebration of Valentine’s day with sending gifts (which is the intention of 36%), dining out (planned by 34%), or an evening out at the movies (17%) for many may be less an expression of passion and romance and more a mechanical ritual.

The lack of love in people’s lives today is particularly poignant as 60% equate love with happiness. This happiness expected or derived out of love seems to come more from the feeling of companionship, affection and understanding than passion and pleasure. Love means passion for only one in ten urban Chinese. Also only for one in five, sex is one of the important meanings of love. While men talk a little more about sex, women perhaps euphemistically refer to “attraction”.

Fidelity and love

The lack of feeling of love today could well be related to a feeling that their partner has not been giving them his or her single–minded attention. Nearly half the people said that they feel they have been cheated by their partner. Whether real or imagined, fidelity seems to be a key ingredient of love in China. The feeling here is more “sinned against than sinning” – only one third admit themselves that they have succumbed to the temptation of an illicit affair, but nearly half are suspicious of their partner’s fidelity.

Written by Ashok Sethi

Ashok.Sethi@tns-global.com

Based on an online survey of 290 Chinese, aged 18-54 in key cities of China. Conducted in February 2009, before Valentine’s day.

Let old disasters be forgotten

It was Queen Elizabeth II who first publicly used the term “annus horribilis” (before that it was considered to be in poor taste to refer to certain parts of anatomy in public). She was, of course, referring to the miserable year that she had in 1992, where most of her children parted company with their spouses and her house (Windsor Castle) caught fire. More recently, the Economist referred to the year 2008 as the Wall Street’s annus horribilis – at the end of which, of Wall Street’s five big securities firms, only Goldman Sachs and Morgan Stanley still remain in recognizable existence.

The Chinese started the year 2008 with great expectation and anticipation. After all 2008 should have been a lucky year - an “annus mirabilis”, as all years, months and days which include the number “8” are expected to be. However, the year had merely commenced when tragedy struck in the form of the worst snow storm ever witnessed by China, with millions of workers stranded on the road, trains and railway stations and unable to make the almost mandatory trip back home for the Chinese new year. The snow had hardly melted and the workers barely resumed their roles in turning the economic wheel of China, when the earth trembled viciously in Sichuan province, and destroyed thousands of lives, and hundreds of thousands of home and livelihoods.

China did have its day in the sun when it unveiled the opening ceremony of the Olympics on the 8th day of the 8th month of 2008 and dazzled the world with its technical prowess and cultural richness. As widely expected, it brought down the curtain two weeks later with the largest haul of gold medals - even though their favourite 110 metres hurdles runner, Liu Xiang, broke the nation’s heart by limping away from the track nursing an ankle injury.

The glow of national pride was blindingly bright and many thought that it had changed China for ever. But then the “melamine” tragedy struck, a grim reminder of the hazard of greed overshadowing a sense of right and wrong. Thousands of children in China were hospitalized as they developed kidney stones as a result of drinking milk which was contaminated with melamine – an industrial chemical which found a new revenue stream as an aid to showing a high protein level reading, even when the milk has been diluted.

Already hurting at the monumental collapse of their stock market, the financial sentiment further deteriorated as all hell broke loose on Wall Street. Initially the economists and the government shrugged off the threat and felt reasonably secure and “decoupled”. However when the American consumers stopped buying the toys made in Guangdong province in South China, and workers were seen arguing for their unpaid wages, a realization dawned that this would be as much a Chinese crisis as an American one. China’s exports actually declined by 2.2% in November 2008 – first decline seen in the last 7 years.

Today, gloomy economists are speculating whether China (along with India) will be one of the worst affected economies from the credit crunch. Particularly China, which depends so heavily on exports (accounting for 37% of its GDP). How it is going to run those factories and pay the wages when the orders dry up as American consumers either do not have money or do not feel inclined to spend it. Will it be able to find alternative routes to maintain the growth? Will the traditionally thrifty Chinese (with 25% household savings rate) want to hoard even more when they see the gloom in the West? The car sales in China have already seen a negative growth in recent months. Consumers are reluctant to buy houses, an activity that added significantly to economic growth in the last decade.

That China will slow down and that the current crisis signals the end of the uninterrupted double digit growth which made China the cynosure and envy of the world is not disputed now. However, will it merely decelerate to a more modest, but still a healthy growth, while continuing on the path of striving for a better life for its citizens, or will it derail and cause ruin and mayhem. So far the government has been responsive. Interest rate has been reduced as many as five times in the last 5 months to stimulate lending and borrowing. The government has also announced that it will spend as much as 4 trillion yuan (US $ 586 billion) over the next couple of years to stimulate demand. A mammoth amount is planned to be spent on infrastructure projects, including adding 41,000 kms of railroad by 2020 and providing six million jobs on the way. However, this alone is unlikely to suffice to ensure a continued ride for the Chinese on the train to economic prosperity. To continue on the joy ride, the Chinese economy will need a nimbleness and openness with which it can reinvent itself and wean itself from the export dependence that it has been flourishing on so far.

Written by Ashok Sethi
Ashok.Sethi@tns-global.com

Lower tier markets and the financial crisis

Moving to lower tier markets

Concomitant with the spread of economic prosperity from large cities and coastal areas of China to inland and lower tier cities, the market for consumer products is also expanding to wider geographical areas. While the sword of current economic crisis hangs perilously over China, there are indications to suggest that the economic measures initiated by the Chinese government to stimulate domestic demand (particularly the plan to spend 4 trillion yuan in the next 2 years) will actually accelerate the spread of consumer products to lower tier cities and rural China.

Penetrating China

According to a survey done by AmCamb Shanghai among its members in 2007, 40% of the surveyed companies had no presence in the lower tier markets. Even successful companies like McDonald’s only operate in 120 of the over 600 main cities and 20,000 towns in China – not to mention the countless villages which dot the country. The fact remains that the companies operating in the big cities are only scratching the surface the four top cities only account for 3% of the population – in fact the total urban population together is only 45% of the population of China. It is not surprising, therefore, that the most successful companies in China are those who have been successfully able to penetrate the lower tier and rural markets of China.

Though the transition from the large metros to the lower tier and rural markets is imperative for growth, it is not always very easy to implement. The lower tier cities and rural areas differ significantly from the large cities in many ways – not only in lower incomes but also in terms of the profile of the consumers, the way we can access them, the retail infrastructure, consumers’ media habits and the way they think and make brand choices. Marketers need to carefully decide their expansion strategies, and modify their marketing tactics in tune with the local consumer preferences, lifestyle and habits.

Financial crisis and China

In the meanwhile, as the world bemoans its financial woes, after some debate, a consensus seems to be emerging among the economists about the potential impact on the Chinese economy. China, most now opine, can not escape unscathed from the global financial mess. The official figures also suggest a slow down (GDP growth of 9.9% in the first 3 quarters of this year, 2.3% lower than the same period last year) and a shadow of nervousness over job cuts and future uncertainty mars the mood of the Chinese consumers.

The biggest worry comes from the likely impact on Chinese exports. China is the factory of world, and its low priced products sit smugly on the shelves of Walmart in America, from where the consumers have been transferring them on to their large shopping baskets with a flourish and getting past the tills with their over stretched credit cards. With American consumers losing their jobs, seeing their houses plummet in value, and their credit cards less yielding, the Chinese products seem to sit longer on the shelves, and the orders for factories in Guangdong seem to be approaching a drought.

In anticipation of further accentuation of the impact on growth, the Chinese government is naturally and logically hastening to stimulate the domestic demand. A few days ago the State Council announced that China will spend a generous 4 trillion yuan over the next two years to offset adverse global economic conditions by boosting domestic demand. This money will be spent on 10 major areas – which include rural infrastructure, build more affordable housing, including rural housing, transport, raising average incomes – particularly in rural areas.

While all these measures are targeted at stimulating the overall domestic demand, their effect is likely to be even stronger in lower tier markets, including rural markets. In essence, the importance of lower tier markets in China has received a big boost from the global economic crisis. This stimulus package will give a fillip to the lower tier markets in a number of ways:

• Firstly, it will provide employment opportunities related to the investment in infrastructure and other accelerated economic activities in rural China. It is estimated that investment in railway construction alone will create 6 million jobs.
• Secondly, the government plans to spend on poverty relief and try to raise the income of the lower income groups to raise their consumption ability, thereby facilitating another objective of the Chinese government – that is narrowing the ever increasing urban rural income divide.
• Thirdly, it will increase physical access to lower tier and rural markets through construction of new and improved road and railways infrastructure and hence ease the expansion of distribution networks.
• Lastly, by providing low cost housing, it will increase the disposable income available to lower tier residents.

While the stimulus package would boost the overall economy, it would also ensure that the benefits accrue more to the lower income consumers, and those who are away from the more accessible large cities, and thereby paving the way for faster expansion of consumer goods to lower tier markets.

Written by Ashok Sethi, TNS China

www.tnsglobal.com

Financial crisis with Chinese characteristics

Observing the process of making jiaozi (Chinese dumplings) is an interesting experience. A long and thick strand is extracted from the pile of dough, broken into little pieces, each piece rolled into a thin pancake skin and stuffed with ground meat, chopped green vegetables, or egg. These little parcels are finally steamed, boiled or fried and served steaming hot with a dip of vinegar and optional chillies and mashed garlic. While observing the process and enjoying a portion of jiaozi and last week in a small roadside shop near Xizang Road in Shanghai, I was somehow reminded of the packaging of sub-prime loans into delicious looking structured investment vehicles, which were steamed into respectability by the credit agencies and picked up by the financial community with as much relish as I was raising the jiaozi to my mouth.

As if reading my thoughts, the restaurant owner who was rolling jiaozi, broke my reverie with a sudden question, “How is the financial crisis affecting India?” Given the universality of basic education in China, the level of general awareness (though not necessarily the degree of appreciation of the issues) tends to be high. It was not a surprise, therefore, that the dumpling roller from a village in Shandong province seem familiar with the global meltdown and curious about how it is affecting the world. His dumpling business in downtown Shanghai, however, he felt was not particularly vulnerable to the global crisis of confidence.

The mood elsewhere in China, however, is somber and in fact had been since the beginning of this year. According to a newspaper report, the number of people seeking psychological counseling in Beijing has doubled since the beginning of the year, and 85% of these are worried about possible job loss.

The stock prices started tumbling earlier this year and wiped out over half the value of most large companies listed on the Shanghai stock exchange and the savings of many who were enticed to the market by its heady ascent. Once a favorite pastime of the urban Chinese, including retired government workers and grizzled grandmothers, betting on the stock market has turned out be a regrettable indulgence.

The first Chinese victims of the current global financial crisis are the migrant workers who power the exports of cheap toys, garments, shoes and other such products to the Western world. Toy factories in Guangdong province of China are already closing and workers forced to go back to the villages they came from and again face the subsistence existence based on a tiny plot of land. Many, however, are likely to come back to the cities and seek employment in more export-proof industries of China.

Among the general Chinese population, the consumer confidence index is down from a high of 100.8 in October 2007 to 91 in September 2008 (a moderate decline when compared to the plunge in the US consumer confidence from 61.4 to 38 in just a month as reported by the Conference Board). Thrifty by nature and not afflicted by the profligate habits of their American counterparts, the confidence dip in China has not so far translated into a drastic tightening of purse strings or a cataclysmic reduction in consumption. However, the Chinese brow is also writ with worries about the future, queues outside popular and premium restaurants are getting shorter, and the shopping bags carried around luxury shopping malls seem lighter.

According to the latest data, the Chinese economy grew 9% in the third quarter of 2008, a dazzling performance compared to a 0.5% decline in Britain but a poor fizzle as compared to a blistering 11.9% growth in the same period of 2007 in China. When it did grow at this scorching pace, the talk was often of “overheating” and the government often voiced concern and attempted to rein the economic horse on steroids. But this strain has made a sudden reversal, and the People’s Bank of China cut interest rate for a second time in three weeks to reinvigorate the economy.

While not fully immune to the global virus of uncertainty and anxiety, the Chinese definitely show a higher resistance and resilience. While a relatively healthy and vibrant economy still growing at a 8%+ clip definitely helps, it is the Chinese psyche which possibly also contributes strongly to this feeling. As my colleague Eric Tai remarked “The Chinese have a saying –“Weiji jiu shi zhuanji” or “opportunity arises from crisis”. This positive thinking will definitely help the Chinese tide over the crisis with greater aplomb and the Chinese resilience should help cushion some the pain caused by unrestrained greed and excesses of the Western financial establishment.

Written by Ashok Sethi, TNS China

www.tnsglobal.com

Imagine – a Unicef luxury watch!

Defining luxury goods

While there could be many ways of defining luxury goods, possibly one key element of all the definitions will be that the functional benefit that the consumer gets out of buying luxury, though substantial, normally does not commensurate with the price paid, and the deficit is made up by emotional gratification. While emotional gratification also constitutes an important part of delivery in mass market products, the difference is that for mass market products the balance of delivery is tilted towards functional benefits, whereas for luxury products the balance gets skewed in favour of emotional payoffs.

If this premise is accepted, we need to explore whether it is possible to expand the range of emotional gratification that the consumer may get from spending a large sum of money, which does not offer commensurate functional gratification. The emotions that the luxury goods marketers have traditionally been exploiting have been prestige, class and exclusivity. Luxury advertising often portrays its users as being unique, belonging to an exclusive clique and admired and fawned upon by others.

New emotional gratifications

Human beings are complex animals and have a range of emotional needs. While needs for prestige and admiration are well established, and it is also known that consumer is willing to pay to satisfy these needs, it should be possible to go beyond these into new areas of gratification. I hypothesise that it is possible to go beyond these clichéd emotional gratifications and persuade the consumer to pay luxury prices for a range of products and services, offering newer types of emotional gratifications.

These needs include a need to feel responsible, helpful and leading a worthwhile existence. “Giving back” to the society is an often theme heard among those who have made it and feel that they owe something. I present below three new avenues for luxury goods. These avenues, I feel, will not only lead to profits for companies who explore these, but will also contribute to the good of society.

Green luxury

More and more hybrid cars are getting sold in the developed world. Sold at a significant premium, functionally they offer little more (in fact a little less, some will argue) as compared to the conventional gas guzzlers. However, the purchase is fueled by (pun intended) a need to prove (to oneself as well as others) of being a responsible consumer. More extreme is the example of cars run on fuel cells whose only emission is pure water – which in spite of the enormous cost is finding retail customers in the US and is considered by some to be the ultimate environmental status symbol. As environmental awareness increases, consumers are keen to reduce their carbon footprints and are willing to pay more for products and services which are environmentally friendly. Luxury good opportunities exist in areas of personal vehicles, energy solutions and green homes as also for a range of products and services which espouse environmentally friendly production and distribution methods.

Responsible luxury

The 2006 film Blood Diamonds created awareness about conflict diamonds and made one wonder whether the beautiful stones you are sporting are tinted in the blood of innocent people who are exploited and killed for profiteering and diamond money. RugMark is an international nonprofit organization which randomly inspects the looms of companies that agree to employ adults only and provides a child-labor free certification for rugs. With cost pressures and competition, companies have been going out of their way to cut costs. While doing that some have also fallen to the temptation of cutting corners. Luxury goods buyers will pay a premium for the emotional satisfaction that their joy of owning the product which is not produced at the cost of exploitation of others. Luxury good buyers will pay more for consumption for products certified to be made ethically and responsibly.

Charitable luxury

While charity balls is not a new concept, a charity Louis Vuitton handbag is. Unicef attempts to raise money by selling products under its brand but offers little more than New year cards, some trinkets and toys. The challenge for luxury goods manufacturers is to sell more to the buyer and make them indulge in frequent purchases. In doing that they need to find new appeals and draws. While on the face of it, the concept of luxury handbags while the poor are starving may be repellant, but the combination of the two is practical and offers a win-win situation for the buyer, the seller, and the poor. I feel that there is scope for selling luxury goods, with the sales linked to donations for the needy. In doing that we will enrich the emotional satisfaction of the buyers and also contribute to charity (meeting the emotional needs of the rich and the functional needs of the poor!).

Written by Ashok Sethi, TNS China

www.tnsglobal.com

Moral Debate in China

Despite repeated aftershocks, the dust is slowly settling on the devastation of the Sichuan earthquake and the Chinese media coverage has shifted its focus to celebrating the Olympics. In all the heart-rending destruction and devastation, there are two episodes from the earthquake which generate a quizzical smile. The first of these is the story of Fan Meizhong, a school teacher who ran for his life when the quake struck, leaving his students behind. Fortunately, his school remained standing and none of his students were hurt. However, the aggravating fact was that he later, in a fit of candidness, admitted to abandoning his wards and defended his action as guided by his own sense of morality and the natural instinct of self-preservation. He proclaimed that he loved his life and that he would not sacrifice it for anyone. Only safety of his daughter (not even his mother) could induce him to sacrifice his own life. Expectedly this proclamation elicited a huge hue and cry from the general public. Nicknamed “Run Run Fan” in light of his action, faced swift condemnation and was fired from his job. Not only that, it even prompted the Ministry of education to issue a new State ethics regulation, which says that protecting the students is a moral obligation of the teachers.

While Fan’s detractors have been more numerous as well as more strident, the media has not been devoid of a few who have dared to praise him for his honesty. Fan could have kept quiet and possibly lived with a nagging feeling of guilt throughout his life. But he chose to publicly expunge it and in a way proclaim his innocence while admitting his guilt.

The second incident is perhaps even more intriguing. Jiang Xiaojuan, a 30 year old police woman in Jiangyou city in Sichuan province and a mother of a six month old child, breastfed six children who lost their mothers in the earthquake. Caught in the act by a press photographer, Jiang expectedly faced profuse showers of praise and approval. Clearly this was a unambiguous case of selfless compassion, of a member of the police force behaving with uncharacteristic tenderness and care. While most agreed to this, what caused the debate among the Chinese was her subsequent promotion to assistant commissioner of public security for the city. While her action was clearly commendable, the resultant promotion, the Chinese public felt, was not justified - as compassion alone, however heart-felt and moving it may be, is not an adequate criteria for elevation to a senior position in the police department.

The Western media and political leaders are obsessed with what they see as absence of democracy and free speech in the China. Some even go to the absurd length of saying that the country suffers from a moral vacuum. The lively and open debate around the Run Run Fan and Jiang Xiaojuan shows that it there is spirit of debate and moral discussion which is alive and vibrant in China – it is just that the issues that the West considers as the core of morality are perhaps not the same as the ones that excite debate and passion among the Chinese. West needs to resist the temptation of judging every country and every person by the single minded view of Western morality and democratic ideals. The Sichuan earthquake revealed a profile of the country which is compassionate, considerate and reflective. There is a sense of balance and intense reflection on what is right and wrong. Recognizing such a mindset, the West needs to let go, relax and let China find its own path at its own pace.

Written by Ashok Sethi, TNS China

www.tnsglobal.com

The Colours of China

The red envelop

Red is the most “Chinese” of all colours. “Hong bao”, literally a red envelop, is one of the most fundamental parts of Chinese life and is traditionally used to house money which the adults gift to children on Chinese new year. The concept is extended to any kind of gifting (voluntary or obligatory), including gift to the married couples, to employees from the company boss, but most importantly to grease the palms of those who wield the power to make your life easier by conferring favours or removing impediments. A little money in the red envelop makes people more malleable and more amenable to extend a helping hand. Red is very special colour in China – the most auspicious of colours, a colour which is steeped in tradition and a colour of celebration. Red is also sexy, warm, vibrant and exciting. It is one of the favourite colours in China – though not the most favourite.

The heavenly blue –favourite of Chinese

In fact it is blue, which is the favourite of the Chinese – for both men and women and young and old. If red symbolizes prosperity on earth, blue connotes the heaven and the sky. If red is exciting blue is calming – and preference of blue over red indicates that given the hectic existence that the Chinese are leading (and perhaps the turmoil that they went through earlier), they now prefer serenity and peace over excitement. Blue offers that feeling of tranquility and also manages to stay cheerful and modern. Blue apparel is particularly favoured by both men and women – including shirts, trousers, suits and also skirts for women. Paying a heavy cost of economic development in terms of urban pollution, blue is also a color the Chinese are seeing less and less of – as formerly blue skies bear a depressing grey and erstwhile limpid water looks turbid and muddy.

In black and white

While colors like red, pink and yellow bring up vivid imagery and associations, for practical use black and white rule the roost. Black is considered prestigious and sophisticated and a favourite color not only for apparel (suits, trousers and even skirts fro women) but also for cars, mobile phones and other electronic equipment. Traditionally, associations with black in China have not been very positive, but modernization has bestowed the color with respectability and even prestige. Same holds true with white – while traditionally associated with funerals, it does not bear that stigma now. In fact, white has been adopted as a color of the dress that an urban Chinese bride will wear at her wedding. White also has associations of purity, and is also seen as bright and calming. It is a color for shirts and underwear for men and women, but also shoes and skirts for women. Of course it is the desired color of the skin and Chinese women spend a fortune on whitening lotions and fairness creams. It is the most popular hue of paint for the walls (along with cream) of the living room and the bedroom – though for children’s room, many would prefer a warmer and more cheerful shade of pink. White also forms the name of China’s most popular tipple – bai jiu (literally white spirit or wine) – a potent potion that causes much grief at wedding banquets and other parties, as victims (the newly married couple or the hosts) fall in exhaustion and inebriation after interminable rounds of obligatory “gan bei” (bottoms up) with the guests.

The sexy pink opportunity

Pink is expectedly seen as the most feminine and sensuous color, but is also strongly associated with children. Men are most turned on by pink, though women find black to be sexy. It is the favourite color among women to paint the bedroom walls with – their husbands may have to settle for this for the sake of marital bliss, and the joy of sharing the wife’s bed – though their own preference lies with white and cream. While more men and women go for the obvious choice of black and silver for mobile phones, notebook computers and television sets, a sizeable opportunity exists for pink among women in these product categories. With increasing participation of women in durable purchase and other areas of decision-making which have traditionally been dominated by men, the manufactures of these products may well give a second look at the feminine and sensuous pink for cars, mobile phones and laptops.

The green revolution

Green also finds favour with the Chinese – a bit more with men, as women are drawn to many more colours. While green is one of the favourite, it lacks a unique personality – other than being cheerful. Though green does not feature very high in the external or internal apparel of the Chinese, more and more environmentally savvy Chinese will like the companies to sport this colour in a spirit of environmental sensitivity. In fact, from that point of view, green is the most important colour of 2008 – as consumers show higher and higher levels of environmental awareness and willingness to pay a premium (and even suffer a bit of discomfort) in their bit to preserve this earth for the future generations.

The coming of gold and silver

A home to many dynasties, China well recognizes gold and purple as symbols of royalty. Gold is also seen as bright, prestigious and an obvious, if kitsch, symbol of the rich. Gold is the second most auspicious color after red, and the third most “Chinese” shade (after red and yellow). Always a better judge of value, gold is closer to women’s hearts than men – and they are willing to colour their hair with this and some even paint their toe nails in glittering gold.

Silver also has a sizeable following (and increasing in popularity). Considered vibrant and bright, the most distinctive attribute of silver is its modernity. It is the second most popular color for electronics equipment and automobiles (black being the most popular) – in fact among women it is nearly as strong as black and even preferred.

Marketing of colours

While the “little red book” (a compilation of quotations from the Chinese leader Mao Zedong) is reduced to a mere tourist attraction, the colour red still resonates in China and the consumers feel that it will be one of the most fashionable colours of 2008. Other colours which are likely to be seen more prominently in 2008 are prestigious black, shining silver and glittering gold. Colour holds strong associations in the mind of the Chinese consumers which are steeped in traditional, but tempered with modernity. Understanding and monitoring these as they evolve further, would be an important distinction between companies which reach for the gold and those who face red in their balance sheets.

Based on an online research among 403 Chinese, aged 18-44 and living in key tier 1 and tier 2 cities of China. The research was conducted by TNS, the largest marketing information provider in China, and the second largest research agency in the world.

Written by Ashok Sethi, TNS China

www.tnsglobal.com

The tremors that moved the nation

It was in the TNS China office on the 28th floor of Finance Square in Shanghai, where I sat with a concept test brief in my hand, in deep contemplation on how to add value to the research design, when my cogitation was interrupted by the tinkling of the blinds against the windows. Before I could get time to puzzle about why the blinds were moving inside the building with all the windows tightly sealed, I realized that it was not just the blinds but the whole building which seem to have broken into a gentle dance. If my colleagues were frightened at the realization that we were experiencing an earthquake, they did a great job of disguising their fear and with great aplomb and composure we started shuffling down the stairs to evacuate the building (including me, with the concept test brief still in my hand). The tremors were persistent and I kept on feeling the building’s sway right till our dreadfully slow descent to the 20th floor. After that, while the earth seemed to have steadied itself, the legs had acquired a momentum of their own and I kept feeling the sway for quite some time to come.

Finally out of the building, we were puzzled at the strange occurrence – Shanghai has almost never had an earthquake and it was the first time that most of us experienced the trembling of the building and having to evacuate it under the fear that it will collapse on top of us. While engaged in animated discussion, some irritated and some relieved with the unexpected break in the office monotony, little did we realize the tragedy that had taken place more than a thousand kilometers away in Sichuan province. While the Finance Square kept standing and did not bury us in its steel and mortar blocks, 900 school children in Dujiangyan city near the provincial capital Chengdu, were not as fortunate. Nor were thousands of other children and adults, who could not escape their schools, factories and homes in time and were trapped under plies of rubble. Gradually the magnitude of the disaster unfolded in front of us, numbing us with grief and stupefaction.

While natural disasters are inescapable and we have little choice but to stoically and philosophically accept their tragic consequences, the subsequent human ineptitude and neglect which often compounds the misery is definitely preventable. Fortunately, China’s response was in sharp contrast to the apathy of the Generals of Myanmar when faced with the devastating cyclone which struck the country a few weeks ago. Chinese Premier Wen Jiabao was in Sichuan within hours of the earthquake. With a megaphone in hand and moist eyes, the nation saw him addressing the victims in a tremulous voice, offering condolences, reassurance and hope. It was clear in the days to come that the country mobilized every possible resource to rescue those who were still alive under the rubble and offer relief and succour to those who suffered the most.

It was a tragedy that touched the hearts of the people throughout the country. In a wave of sympathy, the people are reaching for their wallets, donating blood, volunteering to work in the affected areas, even offering to adopt the children who lost their parents.

It will be a while before China can forget the tragedy that struck it out of the blue and traumatised the nation. Those who lost their loved ones, their homes or livelihoods will possibly live the rest of their lives with indelible physical and emotional scars. However, it will also be a while before China and the world can forget the efficiency, promptitude and compassion with which China dealt with the tragedy. It is reassuring to see that it is not only the Chinese mind which has transformed the country into an economic powerhouse, which deserves praise, but that its heart is also in the right place.

TNS China employees have made personal donation of RMB 80,000 so far for those who are suffering from the wrath of the quake.

Broadband and narrow incomes

Largest number of internet users in the world

“Largest” and “biggest” are appellations often conferred on China – for an increasing number of categories China is already the largest, one of the largest, or soon to be one of the largest markets in the world. Accordingly, China is home to the largest number of mobile phone users, television viewers - and now internet users. Researchers from China Internet Network information Center (CNNIC) counted 210 million internet users by the end of December 2007. This was a cool 73 million more than an year ago – an astounding growth of 53.3%. The number fell just short of the 215 million internet users that are believed to reside in the United States. However, due to the relatively stable number in the US, and the expected continuation of the heady growth in China, it can be safely inferred, that based on normal projections, China now is the home to the largest number of internet users in the world.

However, the development of the internet in China has taken a unique path and character, and marketing companies need to carefully study the nature of this development. China’s internet offers substantial opportunities – but to identify these one needs to look carefully at its unique character and texture.

User profile

While comparatively, the internet users enjoy better economic conditions than others, in absolute terms purchasing power of Chinese netizens is relatively modest – with nearly 3/4th of them having an income of less than RMB 2000 (around USD 285) per month (Source: Statistical Survey report on the Internet development in China – CINIC, January, 2008). Clearly, then this group does not offer an enormous market for lucrative e-commerce and other money spinning internet related commercial activities seen in the Western markets. In fact, as many as 53 million of the 210 million internet users live in villages (currently the per capita disposable income in rural areas is less than 1/3rd of that in urban areas). This rural thrust is because of the Chinese government’s decision to use technology as a tool for narrowing the widening urban-rural chasm and help its rural citizens benefit from the country’s prosperity.

Broadband and iCafes

While the incomes of the users are low, their mode of access is sophisticated. Most internet users use a fast broadband, and not dial-up to access the internet. Given the relatively low incomes, it is not surprising that a large proportion of Chinese internet users – particularly the younger users - access the net at internet cafes. Additionally, the use of mobile internet is on the rise and with over 500 million mobile phone connections in the country, its increasing utilization to access the internet augurs well for mobile phone related internet opportunities in China. This “out of home” character of internet access on the phone and in iCafes is unique to China and also shapes the way the Chinese use the net and its position in their lives. iCafes, in fact, have the potential for developing into a broader marketing channel than merely a source of providing internet access.

Not an elite tool

The changing composition of the internet users seems to suggest that it is no longer a tool for the elite and the well educated. Internet in China is now finding a broad base and helping to equip the consumers with information and entertainment. In fact unlike the West, the most frequent use of the net is driven by social and entertainment needs – particularly to download music and video, to keep in touch with friends through instant messaging and also access online news. The traditional uses for the net such as e-mail is significantly lower than in the West. While e-commerce is not totally missing – the popular Chinese sites such as www.taobao.com (consumer targeted equivalent of eBay in China) and www.alibaba.com (directed at businesses) have unique business models and characteristics specific to China. E-commerce in China is far from the faceless, large item, credit card facilitated purchases seen in the West, but is based on sales of small but relatively unique, hard to find articles, and given the absence of wide acceptance of credit cards, and apprehensions of the users, often payment is based on cash on delivery.

Web 2.0

Web 2.0 thrives in China with as high as 2/3rd of the internet users having uploaded something or contributed to the net in some form or the other. The users seem to be generous in sharing pictures, and also magnanimously share music and video (often, though not confined to, with themselves as stars). Xu Jinglei, a popular Chinese actress and film director, has the world’s most visited blog (http://blog.sina.com.cn/xujinglei ) with 86.97 million clicks in 18 months. Blogging is popular in China as it allows an easy avenue for expression, which has traditionally been hard to find in China. Blogging has caught the imagination of the Chinese who use it to express their views, share their feelings and express their personality.

Need for information

The explosion of the net and the overwhelming embrace from the Chinese populace needs to be seen in the context of the enormous degree and the incredible pace of change which has swept the Chinese society. Change implies an increase of opportunities, a multiplication of choices and the concomitant need for information and advice to exercise these choices. Unlike the countries which developed gradually over a longer period of time, the traditional Chinese information systems could not keep pace with the change. The traditional information network and media was anyway designed to pass the party doctrines to the citizens, and inculcate values of moderation and conformity, not to inform them about how they can improve their consumption of products and services. In other societies, consumption and choice is guided by experience of others, word of mouth, and experience passed down in families and friends. Today multitudes of Chinese are going abroad on holidays, buying automobiles, buying apartments, and have no one to turn to for information and advice in their immediate family or close circle of friends who have done these before. It is not surprising then that internet fills this vacuum and takes the role of the source of information and the guide.

The marketing opportunity

For marketing companies the rapidly expanding reach and influence of the net in China has created a new set of opportunities and challenges. On the positive side, they have a powerful medium with which to reach their potential consumers, inform them, educate them and woo them. The direct reach and the interactive nature of the medium provides it with the kind of engagement potential that the traditional media is just not able to offer.

Secondly, with the strong development of Web 2.0 in China , the flow of information between the manufacturer and the Chinese consumer has truly become a two-way phenomenon, and manufacturers need to tap into the enormous bag of consumer creativity. Companies are already using the net to encourage user contribution to the development of their brands, marketing communication and product portfolio. The net offers the opportunity to use the consumers, not merely to test products and brands, but to participate in their creation.

Thirdly, internet in China expands the reach of the marketer – as while many companies are still confined to operating in larger cities, internet has already achieved significant penetration in rural areas and small towns through internet cafes and community computers. Marketers need to think about how they can exploit this opportunity.

Fourthly, internet in China provides a tool for information dissemination but also creating a positive word of mouth. By actively providing detailed information, and engaging consumers to share their experiences in a controlled way, marketers can spawn off effective word of mouth campaigns for their brands.

Lastly, the potential for word of mouth can also backfire if the media is left unmonitored or if the response and redressal of grievances is not swift. Marketers need to make sure that they closely monitor what is being said about them and their brands, and take prompt corrective action if something seems amiss.