Friday, February 20, 2009

Insights from China

In the past week I had the opportunity to speak with a friend and colleague Mr. Tony Tsai, currently Chief Executive Officer - BHG Retail Innovation Institute and Executive VP Operations - The BJ Hualian Hypermarket Co. in China. I present a consolidation of Mr. Tsai's brilliant insights below:
  • The world's largest immersive and experiential innovation center for in-context consumer research is on track with first phase opening in October 2009, see details here. Please see more details on some of the work I was engaged in at Procter & Gamble at my colleague Mr. Franz Dill's blog here. Franz was one of the founders of the P&G's innovation center

  • Approximately 20 million Chinese labor workers have returned to their rural homes during the Chinese new year. Yet, these laborers returned with earnings and there has been an up tick in spending in these rural areas in consumer and some discretionary spending

  • Chinese funded construction has stopped while foreign funded investment continues to grow this year

  • The largest retail chains of the world continue to scout, purchase and break ground on new facilities in China as it takes approximately two to three years to opening doors for business

  • Large retailers are very aggressive in China. WalMart believes that in approximately 20 years China will be its biggest market (by square meters of space per number of stores)

  • China remains the largest purchaser of USA Treasuries in the world

  • Large number of plants have closed, for example the toy industry has gone from twenty thousand plants of all sizes to five thousand. A lot of consolidation is taking place

  • China is being hit by the global economic down turn yet the recovery may already have begun, for example the government has approved close to a trillion dollars in infrastructure projects for the nation. Due to the extraordinary amount of cash in Chinese reserves, the debt situation is not impacted in any serious fashion, while keeping a bubble in the particular sector of spending from being created

  • China already has a five year plan for infrastructure development, they are simply accelerating it. Approximately 20 million worker will be brought back into the labor force. A good rate for a farmer of rural worker is approximately $200/month

  • China knows how to put extremely large work force into productive action and produce results

  • In comparison, for example India may not be able to move as fast around decisions and execution as the democratic process may generate tremendous amount of debate

  • Further strengthening this argument is that the city and provincial governments belong to the same political party
I asked Mr. Tsai how does the USA look from China, a few comments:
  • Looks divided in two financially

  • Also, financially, it is the repetition of distribution of wealth as it occurred during the down fall of the British Colonial Empire

  • USA has a desire to support a high standard of living while the economics of the country do not support it
And finally, Mr. Tsai stated that Asia is realizing that USA will be a key player for a while but consumption from China and India will increase in volume first and then in value.

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