Chinese Box

Are high prices in China the fault of Chinese consumers

As someone who buys a lot of apple products but refuses to pay out the nose for it, I've always been rather ticked off about the cost of Foreign goods in China. I've generally blamed it on customs and taxes. But the Harvard Business Review points out that Chinese people are just as much to blame:

 China often witnesses reverse price wars, during which rivals compete to increase prices so they can attract shoppers who will only buy the more expensive brands. For example, in 2004, a maker of baijiu — distilled liquor that is a popular gift in China — launched a new brand at almost twice the price of its nearest rival. Its sales soared, leading rivals to hike prices too. This war has sent the cost of premium baiju skyrocketing by around 300% in the last five years.

To be fair though, a little mentioned reason for Chinese people's fondness for overpriced goods is the fact that underpriced goods are often not only of low quality but also dangerous (secondhand cars tend to be stripped of anything worth any money), and consumer protection is non-existant. Sometimes its better to be safe in your purchasing choices.

China makes a commercial

I really rather like this move, though it seems to be unpopular with the Chinese bloggers. 

The Chinese Ministry of Commerce and a few Industry groups have put together a commercial advertising China's place in the global manufacturing chain, and its cooperation with foreign designers. While the negative spin from Steven Lin seems to be based on the downplaying of Chinese innovation capacity and the general siege mentality that's not par for the course for Chinese media commentators, I in general think this is a huge step towards a more mature economy, for a few reasons.

1. It reasserts the value of global trade: China has been overly focused on national brand building, and have been going at it rather cockeyed. They particularly support state-owned companies and conglomerates as opposed to technology driven start-ups. They want to create the next GE not the next Apple, and as we all know GE is a dysfunctional company. Manufacturing is an inherent strength of the Chinese economy if for no other reason than the gigantic population (there are other reasons), taking this attitude shows that "China" (though I'm sure this is a ministerial decision) is interested in working with multinationals, and not against them. This is a more mature internal economic decision (China should be working to build the next Foxconn not the next GE), and shows China taking the high road in regards to protectionism. 

2. It asserts that China can compete in quality: The chambers of commerce involved in the production of the brand are all chambers that are losing contracts to cheaper places (primarily Bangladesh and Vietnam), and the commercial seems to claim that China is the partner you trust. Which is definitely a step up from China is the partner you can afford.

3. Its the first time the Chinese government has claimed the "Made in China" brand: Which emphasizes point 2. "Made in China" refers to a gigantic number of barely regulated factories over a space of land larger than Europe. China has always been rather resistant towards claiming the brand for its own, because then things like poisoned toothpaste might mean even bigger loss of face. If we can start considering Made in China as a unified brand though, that implies a larger stakeholder position for the owner of that brand.

Looking at China's position economically and demographically it seems pretty clear that over the next 50 years the country's position in the world will be as a medium value manufacturer. Its nice to see the country finally staking out its claim on that spot.

Japanese service culture or Indian market culture in China

There is a fairly large subset of Americans who will tell you that Chinese people are highly respectful, rule following, group oriented, clean people. The first thing that most people realize though when coming to Asia is that those Americans are stereotyping Asians based on Japanese culture. I spent my first year in Asia split between China and Japan, and I remember my most distinct impression being that the two countries tried their hardest to be as different from one another as possible.

I just moved in around the corner from a 7-11, and my I noticed in my now increasing visits that there is something distinctly unnerving about the atmosphere in there. The store is set up for Japanese people. Most noticeable is the mass greeting whenever someone enters the store (which I always found unnerving in Japan), but also the food is similar (less sushi and more noodles, but both places have both), and they even serve Asahi beer. While an Asian 7-11 is far different from an American one, it does seem the management of 7-11 has stuck to a single formula for the entire region.

Its been fairly well proved by this point that matching a local service culture makes a huge difference in the success of international consumer good companies. Wal-mart was famously unsuccessful in Europe, while there have been studies published showing that Indian people actually prefer a chaotic market to an orderly supermarket.  

China's service culture is something of a mystery though. When I first was in the country salesmen either gave you a hard sell or completely ignored you, more and more they seem to be reaching a happy middle ground, still somewhat lazy service, but one where you can get what you want when you want it, and pick up on the character of some of the underpaid staff. Chinese people seem to like it fine enough, as most will admit that they like a bit of renao (noise), but on the other hand places like 7-11 have done quite well, and restaurants still try to force their workers to exercise in lines every morning despite high-schoolish protestations. And every multi-national seems to think China is like a more cost-conscious America.

Personally I'm for a bit of a human touch in marketing, which a Chinese restaurant sometimes has a bit too much of, but it can be quite rewarding at times. I don't think the real Chinese service model has been discovered yet though, but whoever does discover it will make a fortune.