One of the most significant marketing opportunities in the history of the global economy may be the emerging consumer market in China. According to a report in the SINO Daily dated January 17, 2012, “Urbanisation is an irreversible process and in the next 20 years, China’s urban population will reach 75 percent of the total population,” said Li Jianmin, head of the Institute of Population and Development Research at Nankai University.” The migration of the rural population of China to the cities looking for work, and looking for places to live, and looking for goods to buy, may change the global marketplace in ways most Americans may not be able to comprehend.
Further evidence for this population shift prediction was provided in an article posted by Bloomberg BusinessWeek on November 13, 2008, in which the author Dexter Roberts reported that “by 2025, at least 220 Chinese cities likely will have more than 1 million people.” These people will not only be in the market for housing, appliances and cars, but assuredly millions will purchase mobile communications devises.
According to evidence provided by Christina Warren in a report for Mashable Tech.com dated January 30, 2012, Apple already has plans to take advantage of this emerging market. Christina Warren reported that “Apple could move as many as 40 million iPhones in China in 2013, according to one analyst’s prediction.”
A decade ago, no one talked about tail risk hedge funds, which were a minuscule niche of the market. However, today many large investors, including pension funds and other institutions, have mandates that require the inclusion of tail risk protection. In a recent interview with ValueWalk, Kris Sidial of tail risk fund Ambrus Group, a Read More
The report in Mashable Tech.com indicates the course that Apple needs to embark upon to take full advantage of the opportunity in China. Apple’s plans may include a major telecommunications deal with China Mobile; “The real prize for Apple would be a deal with China Mobile, the world’s largest wireless carrier. The company serves the majority of the country’s high-end subscribers. Rumors have been swirling for months that Apple is in talks to bring the iPhone to China Mobile.” It is interesting to note that this article reported that China Mobile is “the world’s largest wireless carrier.” The potential wireless market in China dwarfs the wireless markets in the United States. The following chart shows the breadth of the Chinese wireless market potential for Apple smartphones.
Apples commitment to the Chinese market is far deeper than just sales. Apple manufactures the iPhone in China. When President Obama asked Steve Jobs what it would take to bring Apple’s manufacturing activities back to the United States, Steve Jobs reportedly said it would be next to impossible to do so. A report in The Week.com dated January 23, 2012 gave Apple’s official response to the question why Apple manufacturing jobs will remain in China.
What does China have that America lacks?
Quite a lot. China has more mid-level engineers, a more flexible workforce, and gigantic factories that can ramp up production at the drop of a hat. China also offers tech firms a one-stop solution. “The entire supply chain is in China now,” a former high-ranking Apple executive tells The Times. “You need a thousand rubber gaskets? That’s the factory next door. You need a million screws? That factory is a block away. You need that screw made a little bit different? It will take three hours.
American consumers probably do not have a full grasp of the significant changes that are taking place in China’s economy. Unlike the closed communist economy of North Korea, changes in Chinese law have made it possible for working class Chinese families to purchase homes, cars and a whole range of consumer goods, including smartphones. The pent-up demand for smartphones was shown very clearly in a report for The Financial Times.com by Kathrin Hille posted on January 13, 2012.
Apple’s strategy of fanning Chinese consumers’ desire for its products backfired as a riot at its flagship store in Beijing prompted police action.
The company stopped sales of the iPhone in its shops in China on Friday and the Apple store in the Sanlitun district in central Beijing stayed closed after a crowd waiting to buy the iPhone 4S on its launch in the country pelted the shop with eggs and started fighting with security guards.
In the last few years, many in the United States have been expressing great concern over China’s ownership of U.S. debt. The truth is that China is purchasing U.S Treasury Bonds and securities because of the significant levels of cash that are coming into the county’s banks from sales of consumer goods in the United States and around the world. The Chinese have come to the conclusion that U.S Treasury Bonds represent the safest investment for their new found wealth. The key to bringing some of this wealth back to the United States is for other companies to follow Apple’s lead, and take advantage of the unparalleled marketing opportunities that will exist in China for many years to come.