Week 4 lecture notes:
4.1 Doing business in China: context
The rise of the consuming middle class and many of those are in China, Britain required 150 years to
double the output per person it was 50 years in the US, China doubled their GDP in 12 years
Industrialisation in UK and US started at 10 million, China started at 1 billion
China as the leading emerging economy is experiencing 10 times the economic acceleration of the
industrial revolution, on 100 times the scale
10% growth rate every year for the last 40 years, the quickest we have ever seen before and on a
scale that is unprecedented
4.2 China as a marketplace:
The Chinese economy is 30 times larger than it was in 1980 (GDP per person in 1980 = $300, in 2017
= $10,000) Those rising incomes translate into more spending, so 1 billion people with increased
spending power which has provided a major boost to the world economy
Urbanisation is a large contribution– nearly 200 cities with over 1 million people (migration of rural
workers into the cities) 15 megacities with over 10 million people
Over a third of Chinese people will be in a significant consuming middle class by 2030 (35% of
population) That’s a lot of people with spending power
Only 11% of the Chinese population will be in low income group by 2030 compared to 37% in 2015
China is currently and will be the largest market for all goods and services for the next couple of
decades
Only 15% of Chinese citizens have a passport, as the country becomes more developed and gets
richer the global tourism rates will rise massively, but there’s also enormous pressure on certain
areas with the potential number of visitors
4.3 Locating in China:
700 million workers – labour force
Wages rising – 5 times higher than in India
Increasingly educated especially in major cities
Relatively speaking wages in china are low but they are rising very quickly, they have risen 65% since
2000 – this is what should happen as a country develops
Higher wages Consequences for patterns of consumption there will be more spending, there is also a
challenge for business. Labour costs in Tier 1 cities - The tier 1 cities are not a low base cost for
production, wage rates in those tier 1 cities are similar to those in Portugal and South Africa.
Other challenges to doing business in China other than wages – the formal and informal rules of
institutional frameworks
Market heterogeneity – China is diverse, there are different ethnic groups and languages and huge
differences in tastes and preferences in different regions in China – firms need to understand the
4.1 Doing business in China: context
The rise of the consuming middle class and many of those are in China, Britain required 150 years to
double the output per person it was 50 years in the US, China doubled their GDP in 12 years
Industrialisation in UK and US started at 10 million, China started at 1 billion
China as the leading emerging economy is experiencing 10 times the economic acceleration of the
industrial revolution, on 100 times the scale
10% growth rate every year for the last 40 years, the quickest we have ever seen before and on a
scale that is unprecedented
4.2 China as a marketplace:
The Chinese economy is 30 times larger than it was in 1980 (GDP per person in 1980 = $300, in 2017
= $10,000) Those rising incomes translate into more spending, so 1 billion people with increased
spending power which has provided a major boost to the world economy
Urbanisation is a large contribution– nearly 200 cities with over 1 million people (migration of rural
workers into the cities) 15 megacities with over 10 million people
Over a third of Chinese people will be in a significant consuming middle class by 2030 (35% of
population) That’s a lot of people with spending power
Only 11% of the Chinese population will be in low income group by 2030 compared to 37% in 2015
China is currently and will be the largest market for all goods and services for the next couple of
decades
Only 15% of Chinese citizens have a passport, as the country becomes more developed and gets
richer the global tourism rates will rise massively, but there’s also enormous pressure on certain
areas with the potential number of visitors
4.3 Locating in China:
700 million workers – labour force
Wages rising – 5 times higher than in India
Increasingly educated especially in major cities
Relatively speaking wages in china are low but they are rising very quickly, they have risen 65% since
2000 – this is what should happen as a country develops
Higher wages Consequences for patterns of consumption there will be more spending, there is also a
challenge for business. Labour costs in Tier 1 cities - The tier 1 cities are not a low base cost for
production, wage rates in those tier 1 cities are similar to those in Portugal and South Africa.
Other challenges to doing business in China other than wages – the formal and informal rules of
institutional frameworks
Market heterogeneity – China is diverse, there are different ethnic groups and languages and huge
differences in tastes and preferences in different regions in China – firms need to understand the
