Chinese misconceptions

A 10-year survey (to 2004) by Gallup of the habits, hopes and plans of Chinese consumers identifies four key misconceptions among Western businesses.

by Harvard Business Review, March 2006
Last Updated: 23 Jul 2013

The first is the idea that the primary aim of Chinese workers is to work hard and get rich. While these are certainly priorities for most Chinese, there has been a significant fall-off in this attitude between 1994 and 2004, as standards of living have risen and an offsetting growth in the proportion of Chinese saying their personals goal are about self-satisfaction and self-expression. This is now the number one motivator in the key cities of Beijing, Giangzhou and Shanghai, as well as for the young and the affluent - a Chinese 'me' generation is said to be emerging.

The second misconception is that Chinese workers are highly dedicated. Chinese workers may be flooding the factories and offices of the big cities, but an army of labour does not necessarily mean high morale. Gallup figures for 2004 found 68% do not feel engaged with their work - they don't have any passion for their work or feel a personal connection to their job.

A further 20% of employees are said to hate their jobs and may consequently undermine the work of their co-workers. The likely result of this disengagement is lower productivity and potentially lower quality products and services. Unenlightened Chinese management practices may at least be partly to blame; harnessing the real output potential of Chinese factories will require more advanced human resource management and skill development.

Third is the belief that Chinese consumers generally now have a lot of money to spend. While China is an enormous consumer market and incomes are rising, most Chinese are still too poor to buy what they want - the average annual income in 2004 was still less than $1,800. The wealth is in the cities: urban dwellers earn three times that of rural Chinese, and as well as the big three cities, there is growing affluence in mid-sized metropolises such as Xi'an, Nanjing and Wuhan.

Fourth is the related view that the biggest consumer markets are for basic household goods. A decade ago only 6% of Chinese households owned a vacuum cleaner and 25% a refrigerator, clearly suggesting huge growth potential. But demand for higher-technology products - computers and mobile phones - has soared in recent times, and half of all households now own DVD players and/or mobile phones.

Companies should bear in mind that affluent Chinese consumers now want more than function, and many opportunities among urban dwellers may be for upgrades rather than first-time sales.

Cars are an exception: as of 2004 only 10% in the highest income bracket were car-owners and cars cost two to three times most people's annual income. This market remains about first-time purchases and creative financing options may be the key to growth.

Source: Inside the mind of the Chinese consumer
William McEwen, Xiaoguang Fang, Chuanping Zhang and Richard Burkholder
Harvard Business Review, March 2006

Review by Steve Lodge

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