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Who is the next China?May 14th, 2012  China is a phenomenally important player in the world’s economy. The country does, of course, have a reputation as home to much of the world’s low-cost manufacturing, but this is not such an accurate reflection of its economic standing today; increasingly China is moving up the pecking order and shedding its reputation as the world’s workshop. All of which does perhaps beg the question, where will low-value manufacturing go next? Indonesia is one country creating a lot of interest in this regard. With a significant population, growing middle class and relatively stable government, it certainly ticks some of the required boxes, but some concerns persist, such as onerous labour regulations and weak infrastructure. Indeed, one trend that has been noted is for certain countries to carve out certain niches. Bangladesh and Cambodia, for example, are very much establishing themselves in the textile industry. Elsewhere, Vietnam is tipped by some to be the next stop for global supply chains, but others feel it is not living up to its potential for a number of reasons, among them a poor transportation infrastructure, political instability and high inflation. Meanwhile, manufacturing industries in countries such as Thailand and Malaysia, both of which produce a bigger share of sophisticated goods than China (particularly electronics and car parts) could actually find themselves threatened by Chinese manufacturers moving up the value chain – and therefore into their turf. With complex supply chains predicted to continue to fragment across multiple countries, specific industries are expected to gravitate towards countries with comparative advantages in that area. In summary, there is no one clear successor to China, but all Southeast Asian countries together might just stand a chance. — This blog is based on an article first appearing in China Economic Review. To read the article in full, please click here or to learn more about the potential of the Asia Pacific region for your business, visit our website. Surveying the Consumer Survey LandscapeMay 9th, 2012  Following the launch of Google Consumer Surveys, Simi Dhawan offers her thoughts on this new way of gauging consumer opinion Every month, here at B2B International, we hold a working Lunch & Learn meeting for all executives. This serves as a sort of groupthink discussion into ways of advancing the business, whilst raising collective awareness of hot topics (think ‘Big Data’ or ‘Mobile Research’). Last month, having just launched our B2C arm ‘Deep See’, it was not surprising that the recent commence of Google’s Consumer Surveys tool cropped up. Similar to ads, a business pays Google in order to construct a self-designed short survey that reaches consumer audiences by being embedded within publisher sites (e.g. Adweek) with access to select consumers/readers, who can be targeted accordingly. Whilst readers browse articles, a short survey question will pop up and readers are then introduced with the trade-off between answering the question (taking a few seconds of their time) in return for gaining access to the premium content they are seeking. Publishers then receive a percentage of what Google charges the business who is commissioning the research – a ‘win-win’ money-making model. Figure 1: Google Consumer Surveys Homepage – www.google.com/insights/consumersurveys  Whilst one reader, in response to James Verrinder’s article about the tool within Research Live magazine, exclaimed: ‘I think everyone in the industry just peed their pants,’ this is not entirely true. Whilst any new (and mass) means of data collection does of course stir up a gossip frenzy, it does not mean that we are cashing in our chips or drawing up a panic-ridden contingency career plan just yet. In truth, I admire Google for recognising this opportunity, which looks as though it could potentially provide a more cost-efficient alternative for smaller businesses with limited resources from which to commission what might otherwise be a full-scale and detailed research programme. However, whilst it is well suited to short, quantitative surveys (more comparable to a ‘dip your toe in the water’ polling survey), this type of research is not without limitations…..and more specifically, it is of little current value for the B2B researcher (as its name implies). Whilst Consumer Surveys is able to target respondents based on basic demographics i.e. age, gender and census region, it can go no further than this. Moreover, if the total survey length is 3 short questions, then another limitation of the tool is that each question is actually answered by a different person, rather than allowing a single individual to complete all of the questions (which places the validity of any cross-analysis into question). More than this, there are time restrictions. Should you need the survey completing within a certain timeframe then this option may need careful consideration as it is directly related to many factors and, as such, difficult to predict (e.g. from the sensitivity of questions and the screening criteria to publisher site content and competing surveys in existence at the time). However, whilst understanding these limitations might push our noses back into joint and release us from any emotional whiplash incurred from the initial revelation of Google’s move into the market research industry, one point worth noting is that this will not be the only application Google launches in this space – and the likelihood is that this will cause a ripple in terms of sparking others to think of new, innovative measures to harness insight from ‘Big Data’. Golden Time for Exporting to ChinaMay 8th, 2012  China, one of the Four Great Ancient Civilisations, with over 5000 years’ history, has tacitly regained its prestige and proficiency, standing as the second biggest economic power in the current world. Over the past three decades, thanks to the Reform and Opening-up initiated and enacted by Chairman Deng in 1978, China has grown its economy at a significant and stampeding pace (see Figure 1).
Figure 1 China GDP 1978-2011  China is renowned for its incomparable labour cost and unrivalled manufacturing capacity, which easily leads to scales of economy and thus cheaper prices. In addition, China has a controversially high tariff as the entry barrier for importation from other countries. Therefore, a great many people in the world still believe that it is extremely difficult to export goods, particularly those manufactured in the Western world, into China. However, the situation is gradually changing. From a macro-economic perspective, China has seen its importation having a nominal increase of almost 2.5 times over the past 6 years (see Figure 2). Even after taking into consideration the Chinese currency appreciation of around 28% (see Figure 3), China still managed to double its imports between 2006 and 2012. Therefore, it is not bold to make an assumption that this trend will not change and the peak of China’s imports is yet to come. Figure 2 China imports 2006 – 2012  Figure 3 Appreciation of Chinese Yuan 2006 – 2012  1) The Expanding Middle Class in Mainland China Only as far back as 1970, the middle class in mainland China was a stable minority. Once again, thanks to the Reform and Opening-up policies, the middle class emerged and grew steadily in numbers post 1978. According to Euromonitor International, driven by a continued strong economic growth, China’s middle class expanded from 65.5 million in January 2005 to 80 million in January 2007 and is forecast to reach 700 million by 2020 (see Figure 4). According to the Research Report on the National Population Development Strategy, in 2020, China’s population is to reach 1.45 billion. Thus, in ten years, China’s middle class will account for 48 percent of the whole social hierarchy. Needless to say, this group of people are no longer just concerned about having “adequate food and clothing” and, in contrast, would rather pay a bit extra for a better quality of life. Therefore, they represent an unparalleled and growing purchasing power, the likes of which one would never be able to find anywhere in the world. Figure 4 Number of middle class in mainland China by 2020  2) Inflation and Currency Appreciation Making Western Goods More Affordable On the one hand, although China has a relatively high inflation rate (especially recently), China’s GDP annual growth rate has been outperforming its annual inflation rate over the past 10 years (see Figure 5). Thus, generally speaking, the purchasing power of people from mainland China has not visibly been affected by inflation. On the other hand, a continuous increase in inflation has resulted in more expensive goods in China than ever before, which can be partly reflected by the rising Consumer Price Index (CPI). From Figure 6 we can see that since 2010, the CPI of Beijing has increased by 26%, whilst London has not seen any significant change, thus closing the gap between these two cities. Figure 5 Real GDP Growth Rates vs. Inflation Rates  Figure 6 Consumer Price Index Beijing and London  In addition, as mentioned before, the Chinese currency has appreciated by almost 30% over the past ten years, making goods produced in China increasingly more expensive, which, along with the impact from inflation, leads to commodities from Western countries becoming more affordable to Chinese citizens than ever before. 3) The Desire for Goods of Quality and Reliability Although having a strong prospect for further economic development, China still has some urgent issues to resolve, particularly with regards to ensuring the quality and reliability of its commodities. Take food and medical safety as an example. Recently, the world was shocked to learn about the inferior quality of infant milk powder that was produced and sold in China, which not only caused irreversible damage to the health of many babies but also resulted in several deaths. Recent news of a shocking affair involving the production of medical capsules’ gelatinous coatings from industrial material or more literally, “old shoes and leather”, served to further fuel a common distrust amongst Chinese citizens for the commercial interests of the government’s standards authorities. Such a lack of trust within Chinese society has driven many to have a much stronger aspiration and desire for goods of a higher quality and reliability or, as in many cases, ones that are not made in China. All in all, we can expect to see an expanding group of customers with a growing purchasing power, amongst whom there would be a rising preference for better quality goods and more reliable commodities, living in an increasingly expensive China, where Western goods are comparably becoming more affordable. Therefore, in the face of such prime commercial opportunities, it seems an obvious question to ask those Western companies who have not yet traded to China – why the wait? However, doing business in China is far more complicated than what can be imagined. International enterprises must take various aspects into account, such as tackling the legal issues, sourcing suppliers, distributors and partners, all of which would be clearer with the assistance from a professional research and consulting firm. B2B International, as an experienced research and consulting agency with an established operation in China, would like to support companies willing to grasp this “Golden Time for Exporting to China”. To find out more about how we may be able to help, please visit www.b2binternational.com/china Internet Up, DM DownMay 4th, 2012  The latest figures released by the Interactive Advertising Bureau show that expenditure on Internet adverts increased rapidly throughout 2011 to reach a record $31 billion for the year. This is an increase of 22% over 2010. Of this, display-related advertising revenue totalled $11.1 billion (up 15% from the previous year) and digital video totalled $1,8 billion (an increase of 29%), but the largest share of Internet ad revenue went to search campaigns – $14.8 billion, up almost 27%. Spending on mobile advertising, although constituting just $1.6 billion of the total spend, actually increased by a startling 149%. A separate study just released by Strategy Analytics predicts mobile ad revenue will reach an estimated $11.6 billion this year. At the same time, budgets for direct marketing were revised down in the first quarter of 2012, with the change being principally attributed to shifts in spend towards internet advertising. It should be noted, however, that according to this latest IPA Bellweather report, actual spend on direct marketing rose, in 2011, for the first time in four years (based on provisional data). Analysis of marketing budgets by medium for Q1  Doing Business In ChinaApril 25th, 2012  Last week, B2B International CEO Matthew Harrison was a guest speaker on the panel of Insider’s International Trade Breakfast in Manchester. Matt, along with the other panellists, discussed all things China, offering advice to companies interested in the opportunities this vast country has to offer, as well as answering any specific questions or concerns put to them by members of the audience. Matt, who set up B2B International’s first office in China back in 2006 and who has also helped scores of other companies across a whole host of sectors to establish or expand operations in the Middle Kingdom, was perfectly placed to share his insights. Insider’s review of the event can be found by clicking here. If you are interested in doing [more] business in China, why not visit our China website to find out how we may be able to help you.
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