China'S Mode: From "Made In China" To "Consumption In China"

Will next step be "China investment"?

If so, China's.Inc business model really achieves a "three level jump".

In June, China's foreign exchange reserves increased by US $11 billion 900 million to a new high of US $1 trillion and 809 billion.

Shen Ming Gao, an economist at Citibank in Beijing, predicts that China's foreign reserves will exceed 2 trillion dollars in the year.

1978 was the first year of China's reform and opening up. At that time, China's external savings balance was only 176 million dollars; from 100 billion dollars in 1996 to 1 trillion dollars at the end of 2006, it only took 10 years; from 2006 1 trillion to 2 trillion, it may take only two years.

Behind the "crazy growth" of China's foreign exchange reserves is the so-called cheap "made in China" which is popular in the world.

However, in recent years, due to rising energy prices, new labor law constraints, rising wage costs and the appreciation of the RMB exchange rate, Zhejiang, Guangdong and other coastal provinces and cities export-oriented enterprises are in a difficult situation. Some SMEs are forced to shut down due to overburdened, and small foreign enterprises are also more obvious.

The "made in China" market that won the global market with low cost advantage has almost reached the end of its decline.

High foreign exchange reserves are a huge stone of China's economic burden.

However, it also has a "tender" side.

Some analysts pointed out that China's national wealth accumulated through trade surplus and the increase in purchasing power due to the appreciation of the local currency will pform the Chinese economy towards a consumption oriented growth mode.

Dr. Lester Brown, director of the US Earth Policy Research Institute, believes that China's consumption has made the United States dim and China should be seen as a big consumer country.

"China is no longer a developing country. It is becoming an economic superpower, and it is also writing economic history."

The huge population and scale of domestic demand make domestic consumption the most important driving force for China's sustained economic growth.

According to the data released by the World Luxury Association, the total consumption of luxury goods such as jewellery, clothing, leather goods, perfume and so on in 2007 reached US $8 billion, accounting for 18% of the global luxury consumer market share, which excludes private aircraft and yachts.

At the Shanghai international yacht exhibition in 2008, almost all the more than 90 yachts were found to be buyers, and 14 million yuan Atlantis luxury yacht was ordered on the spot.

At the Beijing International Motor Show, sports cars worth more than 20 million yuan are also famous.

More and more Chinese rich people are paying more attention to their pockets, and of course, the larger and faster middle class.

From "made in China" to "consumption in China" is almost homeopathic.

Of course, the promotion of China's rich consumption is not equal to the upgrading of "Chinese consumption" with the overwhelming majority of consumers in China.

At the same time, we can not simply think that the "made in China" of independent brands has no chance to upgrade to high-end.

To solve the practical problems from "made in China" to "Chinese consumption", we need to strengthen a comprehensive understanding of Chinese consumers. The high-end consumers not only attach importance to the functional quality of products, but also pay more attention to the value of emotions.

"Made in China" needs to turn inland to meet the local high-end demand. We should fully study and deeply subdivide the demand psychology of consumer groups, and create a unique product concept and service mode for customers who have considerable knowledge and special local consumption psychology.

In this regard, the gap between Chinese companies and American companies is obvious.

The ratio of GDP between China and the United States is 1:5, while the market research input is 1:50, which fully shows that there is much room for upgrading the market base and demand orientation of products.

To achieve the upgrading of consumption, enterprises should attach importance to market research and pay attention to the characteristics and trends of market data.

On the other hand, the government, enterprises and consumers need to consider each other systematically.

2008 the Beijing Olympics provided a historic opportunity for the media and public opinion to further cultivate and encourage the awareness of new consumerism in the mainland.

Looking back at the Tokyo Olympic Games in Japan and the Seoul Olympic Games in South Korea, we left the impression that the Olympic Games greatly promoted the development of Japanese made and Korean manufacturing, enhanced their competitiveness and global influence with European and American enterprises, greatly increased the consumption level of Japan and Korea, and laid the foundation for the economic and social development.

Drawing lessons from the upsurge of consumer awareness of Tokyo brought about by the "Olympic Games" and "Seoul Olympics", we have reason to expect more and more Chinese brands to lead the growth of "Chinese consumption" in the future.

Let's go back to the topic of foreign exchange reserve at the beginning of this article.

In January 2004, China used foreign exchange reserves for the first time, and spent 45 billion US dollars to replenish the capital of the Bank of China and China Construction Bank. In the following years, it invested a total of US $67 billion through the Huijin Company to state-owned commercial banks and securities companies.

As a more daring exploration, China Investment Corp, which has $200 billion in foreign capital, was set up last year, and has spent $3 billion to buy Black Stone, less than 10% of the US private equity firms. It bought a 9.9% stake in Morgan Stanley (Morgan Stanley) at a slightly above $5 billion, invested 200 million dollars in IPO of Visa, and invested 100 million dollars in China Railway Hongkong IPO.

But then, CIC's young and impulsive investment was cooled by the outbreak of the US subprime mortgage crisis. Its first two investments were shrunk to varying degrees, which aroused a voice of accountability in China.

At the same time, several investments made in the form of China's sovereign wealth funds have also been questioned by western countries politically.

Shen Minggao agreed that the establishment of sovereign wealth funds is a relatively mature way to use foreign reserves, but he suggested that it should not limit its excessive attention to overseas markets.

"In fact, the growth of China's market is far better than that of foreign countries. We are now equivalent to pferring domestic growth earnings to foreign capital, instead of supporting our growth with their own funds."

It can be corroborated by Shen's view that at present Huijin's return on investment is much better than that of CIC's overseas investment.

Singapore has similar experience: in the two sovereign funds of Temasek and GIC, the former is not limited by domestic and foreign investment, while GIC is limited to investing abroad. In the past twenty or thirty years of Singapore's rapid growth, Temasek's average return on investment was 18%, while GIC was only 9%.

In March this year, Zheng Bingwen, director of the Latin American Research Institute of the Chinese Academy of Social Sciences, wrote that the use of foreign exchange reserves to establish China's "reserve" sovereign pension fund.

At the Asian innovation forum held in Fukuoka, Japan, many people, including Huang Yasheng, talked to Chinese entrepreneurs about foreign reserves, and they invariably pointed to domestic infrastructure and social security.