China's economic development has reached a stage where effective
and efficient distribution is taking precedence over advertising and
communications.
According to MindShare regional business director Chris Walton, this is
because new markets are fast opening up in the interior of the country
far from the primary and secondary cities.
It is a trend spurred on by China's expected entry into the World Trade
Organisation (WTO) by 2006 and government economic initiatives in the
less well-off western provinces.
Accession to WTO would result in an influx of new foreign capital, while
Beijing's initiatives in the western part of the country - including 10
major infrastructural projects such as highways, railways and gas
pipelines under the direct leadership of president Jiang Zemin, plus
high-tech investments by IBM and Hewlett-Packard - would boost the
overall standard of living of the general population there.
Mr Walton said the current strategy of having major production
facilities in Guangzhou, Shanghai and Beijing no longer made sense,
especially at a time when marketers were targeting the interior
provinces, where disposable incomes were on the rise.
"Distribution has to be sorted out before communications," Mr Walton
said.
"It's like making products in Leicester in England and shipping them out
to Rome and Berlin. It's ridiculous but it's happening in China.
"Companies set up in China with factories in the primary cities and ship
their products the length and breadth of the country."
The potential of the nation as a whole can be seen from the fact that
while the primary cities are home to less than two per cent of China's
population, they account for 17 per cent of its GDP.
The nation's potential can be seen from the fact that Shanghai's average
yearly income per capita is US$1,300, while in the interior city
of Guiyang in Guizhou province, it is just US$166.
"What we see is that in a place like Guiyang, the income level is a lot
higher compared with five years ago, and it is expected to be higher in
succeeding years," Mr Walton said.
"But the main point is that the gap with Shanghai is likely to become
smaller and this is where the opportunities lie for smart marketers and
their agencies."
He also pointed out that the uptake of household products in China is
extremely fast.
"After just 15 years, almost 90 per cent of households in major Chinese
cities possess colour television sets - compare that with about four
decades for the United States."
Government economic initiatives being launched in the western provinces
were part of an official effort to even out the income imbalance across
the nation.
"This is necessary, otherwise social instability will ensue if the gap
is not closed," Mr Walton told MEDIA.
"What foreign investors do not want to see is China turning into another
Yugoslavia."
He added that another major initiative being undertaken by Beijing is to
stamp out corruption nationwide.
"We hear of very senior government officials being executed after being
found guilty of corruption," he said.
"This sends a strong signal to foreign and local businesses that Beijing
wants to create an even playing field for everyone and this is good news
for all investors and entrepreneurs."
