China's Lust for Overseas Property
In the first four weeks of January this year, the air quality in Beijing was 16.6% worse than the shrouded confines of an airport smoking lounge. Last month in the Northeast city of Harbin, pollution led to visibility at less than 10 metres in places. The PM2.5 levels reached 1,000, forty times the rate that the World Health Organisation deems safe, and as high as Fairbanks, Alaska during the 2004 wildfires. Lung cancer deaths in China have grown by more than 400% in China in the past three decades, and recently, an 8-year old girl was diagnosed with lung cancer. Couple that with food scandals such as tainted rice, rat dressed as beef and lamb and toxic preserved eggs, all within the space of a few weeks, and it's little surprise that more than a few Chinese are looking to buy homes abroad.
Tier 1 cities are said to be the safest residential property investments in China, where prices have grown more than 20% in the past year. Even still, the price to income ratio in Shanghai is 27:1, 31:1 in Guangzhou and 33:1 in Beijing, versus less than 9:1 in New York and Sydney. When prices are reaching those levels, and commentators start speaking of property bubbles, added to purchasing restrictions put in place trying to curb constantly-rising house prices, a growing group of cashed-up Chinese are going to diversify their property investments elsewhere. Chinese have become a force to be reckoned with in many property markets they consider safe and transparent, buying houses where the air is clean, the food won't poison them and their child can get a good education. They can wash their hands of 'grey' money in some cases, and get residency if everything goes pear-shaped in the homeland.
Whilst residential markets such as London, New York, California and Sydney are being driven up by Chinese purchasers, less-traditional markets are also starting to feel the presence, with countries like Germany and Belgium experiencing exponential growth in Chinese buyers and Portugal seeing 80% of its Property Investor Visas going to Chinese. It's unlikely to slow down any time soon. China's rising affluent classes are getting wealthier, and the air quality and food safety doesn't appear to be improving, in the medium-term at least. If you're hoping to sell property to Chinese, it's a good time to do it, but it's also more competitive than it's ever been. Nevertheless, like most things in China, it comes down to the right messaging and channels .
Clarifying last week's Skinny on the Singles' Day boom: the ¥35 billion ($5.7 billion) figure quoted, was just the sales on Alibaba's Tmall and Taobao. JD.com clocked in an additional ¥9.8 billion ($1.6 billion) and autohome.com banked some 17,776 vehicle orders worth ¥2.6 billion ($433 million). Along with the other stores participating, sales were around the ¥50 billion ($8.2 billion) mark. Quite a day!
For Weekly Skinny readers and friends in Shanghai or nearby, next Wednesday 27 November at 7pm you are invited join China Skinny's founder Mark Tanner as he talks about leveraging social media to create brand champions in China. Mark will discuss how to best use social media as a tool to break through clutter, educate consumers, build trust and create brand champions in China, and how it integrates with your other marketing channels. Visit the Irish Chamber of Commerce for more information. We hope you enjoy this week's Skinny.
See below highlights of the news this week:
Chinese Consumers
Chinese Value Honesty More than Price: 91% of Chinese consumers value product quality when buying, 79% value the business's transparency and honesty, ahead of 65% placing value on price.
4 Types of Chinese Consumers by Attitude to Brands: Analysis into four types of Chinese consumers. 'Loyalists' make up 24% of the market, are much more likely to be female and are especially strong in cosmetics and milk powder brands. 'Indifferent' are 17% and probably male. 39% are 'Switchers', with FMCG particularly high, and 'Explorers' make up 30%.
Furniture Giant IKEA sees Rapid Growth in China: Ikea's sales surged 17% in China this year. It has moved its production to China to lower costs and tweaked furniture for the local market, such as balcony and hallway furniture.
Mattel Gives Barbie A China-Friendly Makeover: Now Equipped With Violin and Cheaper Price Tag: Mattel wants Chinese children to have a doll that emulates what their parents want, but with the signature Barbie flair. Unlike many other Western products, Barbie is selling for less than half the price of Barbies elsewhere.
Who needs Uber? This Chinese Startup Lets You Connect with a Designated Drive: Not long after Uber launched in China, there's a new app from Beijing where passengers can book a cab. The difference here is that anyone with a car can sign up and effectively be a taxi driver, with driver location related to the would-be passenger. Interested to find out the how they screen their drivers?
Property
Chinese Property Buyers go Beyond New York and London, Grab Bargains from Scotland to Florida: In 2013 so far this year, property sales in Germany to Asian buyers, largely Chinese, are ten times what they were in 2012 according to JLL. The $453 million spent in Belgium is twenty times [WSJ subscription required].
Why Chinese People Buy So Many Homes in Palo Alto: Chinese buyers have tripled their purchases of home purchases in Palo Alto since 2011, and now account for 15% of transactions, helped along by education, investment and immigration opportunities.
Chinese Get 80% of Portugal Property-Investor Visas: 248 went to Chinese, with 15 to Russians, the next biggest group. A minimum property investment of 500,000 Euros ($668,000) is needed for the residents visa for Portugal.
Internet, eCommerce, Mobile & Social Media
‘Social Shopping’ is All the Rage Now in China: China's social media see's more integration with online shopping, from Weibo users being able to make purchases from Taobao & Tmall, to Douban's new Pinterest photo sharing that allows users to categorise products by 'recommend', 'want' or 'own', and Mogujie having a leaderboard for products based on user ratings.
Qihoo Takes 20% of Chinese Search Market in October, but Baidu Slips: Baidu's China search engine search share dropped to 62% last month, whereas Qihoo broke 21% - more than double its share a year ago. Sogou came in at number 3 at 10%.
China App Index October 2013: Three of China's top downloaded apps in October were integrated into WeChat. Six of the ten fastest growing mobile games were from foreign developers.
Explaining China’s Mobile App Ecosystem: the Potential, Players, and Pain Points: China has hundreds of app stores, but only about 20 main players, all with different billing and approval processes. Many apps beyond games are making traction in China.
Food and Beverage
Fonterra on Track in China: Fonterra has launched the instant formula brand Anmum in China, hoping to be in 70 Chinese cities within 3 years. 55% of Chinese consumers remained unaware that the Botulism botch-up was a false alarm and smaller baby milk exporters from NZ claim to be losing $1.65 million a week from it.
Fashion
75% of Chinese Consumers Interested in Buying Wearables, According to Baidu Report: 75% of Chinese consumers could be interested in a wearable device according to a Baidu poll. 48% would use it to keep fit, 37% to overcome laziness and implement a sports plan and 26% to share sports results with friends.
The Former English Tutor With One Million Weibo Fans: Fashion Blogger Peter Xu: Peter Xu, a former English tutor, is now a fashion opinion leader with 1.3 million followers on Weibo - more than Vogue China. His popularity has been helped by TV, magazines and other media.
Beauty
Korean Cosmetics in China: 89% of Chinese 20s & 30s Like Korean Cosmetics: 89% of Chinese consumers between 20-30 are satisfied with the quality of Korean cosmetics. 26% preferred to buy them online. 70% of Chinese cosmetics are currently bought in department stores or large markets.
Finance
Alibaba Lends Smarter in China: Alipay's lending arm assesses prospective borrowers using data from Taobao and Tmall sales, how much business they do, and their credibility with customers. Alipay has 45% of the online payments processing market, and it also uses this history to evaluate borrowers . Alibaba is expected to have issued $2 billion worth of loans by the end of the year.
Entertainment
China and Hollywood by the Numbers: There are 7,914 people for every movie screen in the USA versus 103,923 people per screen in China. Plenty of room for growth. China's box office is picked to surpass the US in 2018.
China Demands 'Positive Images' in Return for Access to Markets: Speaking from the US/China film summit in Hollywood, a senior figure in the Chinese industry outlined the conditions it is setting for Hollywood to have access to its market: "We have a huge market and we want to share it with you [but] we want films that are heavily invested in Chinese culture, not one or two shots ... We want to see positive Chinese images."
Luxury Goods
China Luxury Forecast: Expect Sophistication To Grow In 2014: 49% of Chinese luxury shoppers cited uniqueness as the reason for wanting to buy abroad. Last year it was 41%.
Weird & Wonderful
China's Top-Secret Nuclear Base to be Revived as £30m Communist Party Theme Park: 300 million RMB ($50 million) is being spent to convert the former nuclear base in Xinjiang into a Communist theme park, complete with a Communist-themed shopping precinct, military vehicle display, spa-like resort, and even a bit of horse riding.
That's The Skinny for the week! China Skinny would love to discuss how we could help with your marketing, online initiatives or research to take advantage of China's opportunities. Just email us at info@chinaskinny.com or call us at +86 21 3221 0273 so we can learn more about your objectives and let you know how we can help.
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