For our two-part series, “10 for 10,” Jing Daily asked experts to weigh in about upcoming trends in a range of industries in China over the course of 2010. In Part Two of “10 for 10,” we include a bonus six experts sharing their predictions for the Year of the Tiger. If you missed it last week, be sure to take a look at Part One.
Patricia Pao, Author, CEO, The Pao Principle
Regarding what’s ahead for China and top trends in the luxury goods market:
1. Aggressive expansion into second- and third-tier cities. We will be seeing companies like LVMH, having saturated the first-tier cities, moving into cities such Tianjin and Xi’an in an effort to be the first to “put their stake in the ground” to win the “hearts and minds” of current and aspirational luxury buyers.
2. Partnerships with Chinese companies, as evidenced by Hermès’ partnership Shang Xia, as a means to provide opening price points and convey commitment to China.
3. More brands moving into China, especially through their beauty and fragrance businesses. Our recent China luxury panel study issued in October 2009 showed that beauty was the portal into luxury goods. Almost 80% of our respondents who said they had NOT purchased a designer handbag, watch or piece of fine jewelry over the past 12 months said that they HAD purchased a beauty or fragrance item. When asked what their next brand purchase would be almost 80% cited handbags as their next desired purchase.
Patricia Pao, CEO of the luxury consulting firm The Pao Principle, has over 20 years of experience dealing with a wide industry range including consumer packaged goods, luxury goods, beauty, retail, spas/salons, technology, and nonprofit work. Her client list includes companies such as: Clorox, Avon, Guerlain, Elizabeth Arden & Epson. Pao is a member of the CEW and a guest lecturer at FIT’s School of Continuing and Professional Studies.
The Pao Principle: http://www.paoprinciple.com/
China Luxury Panel: http://www.chinaluxurypanel.com/
“10 Things Every Luxury Marketer Should Know” by Patricia Pao (AdAge China): http://adage.com/china/article?article_id=140774
Adjusting To A New Economic Reality
Patrick Chovanec, Professor, Tsinghua University School of Economics and Management (Beijing)
The greatest challenge facing China in 2010 is to adapt to the new reality created by its own economic success. For the past 30 years, China has relied on exports to turbo-charge growth, a strategy that was entirely appropriate for a rising economy. But last year, China emerged as the world’s top exporter, and is now poised to become the world’s second largest economy. The old model is no longer sustainable, and China needs to transition to a new one driven by rising standards of living at home.
Not only will this require China to embrace bold new policies – such as more flexible exchange rates and market-driven interest rates – it requires a change in the 30-year mindset that defines exports as “good” and imports as “bad,” foreign investment as “good” and capital outflows as “bad.”
Japan’s failure to make precisely this transition, when the time came, resulted in a bubble economy followed by a “lost decade” of stagnation. China cannot afford to make the same mistake.
Patrick Chovanec (程致宇) is an associate professor at Tsinghua University’s School of Economics and Management in Beijing, China, where he teaches in the school’s International MBA Program. His insights into Chinese business, economics, politics, and culture have been featured in the Wall Street Journal, Financial Times, South China Morning Post, Far Eastern Economic Review, Los Angeles Times, Chicago Tribune, and The Atlantic, and on CNN, Al Jazeera, France24, Chinese Central Television (CCTV-9), and China Radio International (CRI).
Patrick Chovanec discussing Toyota’s troubles on “Dialogue” (CCTV-9): http://chovanec.wordpress.com/2010/02/10/cctv-9-toyotas-troubles/
“Internet With Chinese Characteristics”
Marina Zhang, Co-Author: “China 2.0: The Transformation of an Emerging Superpower…And the New Opportunities”
The interconnectedness of Chinese citizens empowered by Web 2.0 technologies is continuing to increase rapidly. However, the development of the Internet and how people use the Internet, like everything else, has Chinese characteristics. For Western users, the Internet is just another medium of communication, but the Internet has transformed China socially, culturally, economically and even politically.
The critical factor for any foreign brand seeking to reach consumers in China is to trigger a well-designed word-of-mouth information cascade appealing to Chinese cultural sentiments. On the other hand, if a negative information cascade is created among Chinese consumers the damage can seriously imperil that brand.
Dr. Marina Zhang is the author of China 2.0: The Transformation of an Emerging Superpower…And the New Opportunities (Wiley 2009), along with Bruce W. Stening. [http://www.wiley.com/WileyCDA/WileyTitle/productCd-0470824239.html]
Dr. Zhang has over 15 years of experience in management consulting and executive education in diversified cultural contexts. She obtained her bachelor’s degree in biological sciences from Peking University, and her MBA and PhD in management from the Australian National University. She lives in Beijiing.
Hong Kong As Asia’s Wine Hub
Jim Boyce, Blogger: Grape Wall of China, Beijingboyce
Hong Kong further solidified itself alongside New York and London last year as a hub for fine wine auctions, with houses such as Sotheby’s, Christie’s, and Acker, Merrall & Condit holding major sales, with heavy demand for trophy wines such as Lafite, Latour, and Petrus, with numerous records being broken, and with many of the buyers hailing from continental China.
Despite the global economic doldrums, this trend looks set to continue in 2010: Sotheby’s raised nearly US$7 million on January 23 when it held its first sale of the year in Hong Kong.
People joke that you can find more 1982 Lafite in Hong Kong than was ever produced and this joke at least in part underscores the growing importance of the city to the global fine wine market.
Jim Boyce administers a China wine blog, grapewallofchina.com and writes a blog documenting Beijing’s rapidly changing nightlife scene, beijingboyce.com.
Grape Wall of China: http://www.grapewallofchina.com/
Beijing Boyce: http://www.beijingboyce.com/
Adam Cathcart, Historian/Professor/Blogger: Sinologistical Violoncellist
In 2010, expect to see more moves toward Sino-Japanese reconciliation in the political arena and a parallel effort by the CCP to encourage an image of Japanese culture and lifestyle more in line with the archipelago’s “soft power” strategy. Yet even as the CCP clearly indicates interest in rapprochement, expect to see some pushback from local commemorative groups and students in the PRC, for instance, over the Party’s attempts to reframe the Nanking Massacre.
Another quiet but important story in 2010 will be the rebuilding of the Sino-French relationship from its low point represented by the attacks on the Olympic torch parade in Paris and the subsequent Christie’s auction of the Yuanmingyuan bronzes. Cultural exchanges are a major part of this drive: the French, via tours by musician Yann Tiersen, for instance, are working assiduously to mend their fences with China. Thus, the same Parisian mayor who welcomed the Dalai Lama last summer today parties with the PRC ambassador in Hôtel de Ville. But expect some turbulence about French hypocrisy regarding Google restrictions, religious freedom, and stories like the recent French government ban on an anti-Sarkozy installation by a young Chinese artist in Paris. And, given the pains surrounding the birth of the American pavilion for the Shanghai Expo, it will be interesting to see throughout the course of the year if the United States continues to fall behind the French – and the Germans, and the Spanish — in the field of cultural diplomacy in China
Adam Cathcart, Ph.D., is an assistant professor of Chinese history at Pacific Lutheran University in Tacoma, Washington, with research interests in Chinese nationalism and cultural diplomacy. He is the author, most recently, of “North Korean Hip-Hop? Reflections on Musical Diplomacy” (Acta Koreana) as well as articles in China Quarterly and other academic journals. Armed with a bachelor’s degree from the Cleveland Institute of Music, he remains active as a recitalist and cello soloist.
Dr. Cathcart’s blog: Sinologistical Violoncellist
Essays re: Sino-French relations: http://adamcathcart.wordpress.com/tag/sino-french-relations/
Translations from the German press re: Ai Weiwei: http://adamcathcart.wordpress.com/tag/ai-weiwei/
New Chinese Collectors At Auction
Ian McGinlay, Director, Head of Client Development for Asia, Sotheby’s
I think we’ll see five major trends in the auction market in China this year:
1.) Increasing Mainland Chinese participation
Mainland Chinese notably dominated Sotheby’s Hong Kong sales in October 2009, and I expect this trend to increase in 2010.
2.) Chinese Contemporary Art
I believe we’ll see renewed demand for iconic masterpieces by blue-chip Contemporary Chinese artists such as Cai Guo-Qiang, Zhang Xiaogang. Zeng Fanzhi, etc.
3.) Western Art
There is growing interest in key western Impressionist and contemporary artists such as Picasso, Renoir, Matisse, Warhol, and others, although Chinese art will continue to hold the most allure among Chinese collectors.
The interest in China for jewellery — specifically diamonds — has increased in recent years and will continue to grow in 2010. Demand for Jadeite jewellery also remains strong. Recent articles have noted that China is now the #2 diamond market after the US, and Sotheby’s recent sales clearly demonstrate this – not only in HK but internationally as well.
The phenomenal results and the active participation of mainland Chinese buyers at Sotheby’s worldwide wine auctions in 2009 will continue this year, demonstrating the strength of these new clients in this market.
Ian McGinlay joined Sotheby’s Hong Kong in June 2008 as the Director, Head of Client Development for Asia. Mr. McGinlay is primarily responsible for managing, establishing, developing and fostering the company’s long-term client relationships in Asia.
Mr. McGinlay also leads and provides strategic direction in expanding the reach of the Sotheby’s business across the region through exploring and building new client contacts.
Jing Daily would like to thank all of our respondents for contributing such insightful and substantive comments.