My three friends, working for a Swedish corporation in HCM were worried as they are frequent flyers to Sweden for business reason. Where to get the next visa? For me, I had a confused thinking, why‘s Vietnam now as I remember the Swedish government closing its embassy in Laos in 2008, a Vietnam’s comrade.

Sweden is one of the very first countries establishing its diplomatic relation with Vietnam since Vietnam War. This Scandinavian country was most actively contributing to the development of Vietnam through its financial assistance (ODA), human resources development (SIDA training program) and diplomatic encouragement for Vietnam to shine outside Vietnam.

Why a friend indeed has to say goodbye to a friend with a pretext of tight budget? Is it because

-          WE corrupt until the last dime contributed by Swedish people

-          Some VALUES WE committed but WE failed to deliver

-          Vietnamese (WE) say one thing and do something else

-          And a lot of other reasons.

Who is next? With this question, I don’t dare to think of tomorrow, other country (or countries) will follow our Swedish friend. God bless Vietnam!

What WE should do differently to gain more friends,

How WE win friends and influence people

What WE should do to make sure that will not happen again

That is “Do what WE said WE are going to do and WE do it on time”

According to local newspapers, DVD was charged for stock manipulation, setting up subsidiary companies to inflate revenue…The police is investigating if such crime does exist.

Based on facts, prospectus of DVD, information published by the Company, i have a different or even strange view as the following.

Hostile take over DHT
- Most of the transactions were put through and all informed publicly by DVD. If charged for manipulation, many should be in prison not only DVD’s team? Why they want to take over DHT, some DVD senior managers were ex managers of DHT and they know what value DHT has. Is there any one behind the scene want DHT as well?
- In their Annual general shareholder meeting, documented in the resolution, they aimed to buy 2-3 companies per year. So their target is not only DHT. Currently they are holding 20% of savipharm (HCM based pharma, in Tan Thuan IZ)

Fake revenue (informed by SSC and newspapers):
- fact is: DVD has 3 companies (E&Y audit 2009)
- in pharma industry, to legalize the commission to doctors (no invoice) the company has to sell to different companies, different layers to record the expenses, especially local pharmaceutical companies.
- At the end of the day, we see the consolidated report rather than separate one, in consolidated one, they will adjust double income if any.
- If fake revenue, where do they pay corporate income tax (CIT) which is corresponding to the income (25 billion vnd in 2009 and 45 billion vnd in first 9 months), the 1H10 was audited by E&Y also.
- 1Q10, they paid out 25% dividend in cash

No transparency
- Not so many companies like DVD has quarterly report on time and in detail to sub categories
- Audited by E&Y, the big 4, and they said it is true and fair (so we might question E&Y capability)
- what they said in AGM resolution, they all informed

Cheating
5 big names are cheated when doing business with DVD. If that is the case, the guys are genius. This is also a lesson for me to evaluate a business as well
- 3 foreign banks with strict credit assessment failed to assess their clients (names of these are in audit report)
- A Scandinavian institution is a shareholder of many local companies, holding 3M shares (~15%) of DVD, failed the DD test?
- A big 4 (E&Y) audit team was unable to recognize false statement
- Tax department only like money, they don’t need to know what income generates such tax. In other words, does tax department know if the income was not real?

Question?
- why only DVD team is in jail while many obvious cases are available?
- 500 billion (25 m usd) was evaporated due to technical price adjustment. Who will pay for those unlucky shareholders?
- is there anyone benefit behind this case?
- DHT has many valuable piece of land in HN (DHT prospectus)?

The pessimist sees risk in opportunity; the optimist sees opportunity in the risk.   “In Vietnam, anything can happen, but nothing is impossible” 

Watch the interview, or read the transcript below.

The Quarterly: What’s in this book for business readers? Why should they take a look at it? 

Ian Bremmer: The Fat Tail really explains how politics increasingly is affecting the markets. And that’s creating a new set of winners and losers-short term, long term. If you are an investor, if you are a business executive in the most volatile and fast-moving world that we have had in the post-War period, you desperately need to know what is determining the likelihood of an exposure that you have to a country, to a sector, to a joint venture partner, to an individual investment. What’s the likelihood that that will stay in place and intact given a shock hitting it, given a change that you weren’t expecting?

You can count on changes that you weren’t expecting hitting your investments. You want to know how likely it is they’re going to stay in place. And I think that likelihood is increasingly going to be determined by political-and not economic-inputs. The Fat Tail focuses on those political inputs. I hope the business community gets a lot out of it.

The Quarterly: The name of the book: I assume this is a reference to statistics and not anatomy, but could you explain what is The Fat Tail? What’s the point?

Ian Bremmer: It’s certainly not a reference to anatomy. You know, the fat tail, simply put, are these 1-in-100-year storms that seem to be hitting us every 15 minutes nowadays in this global economic crisis. And we all know that the world has become more volatile. We know that shocks, fat-tail shocks-in other words, those that are larger than expected-come with greater frequency. But, the point of the book is that these shocks that many believe are not possible to be measured, that they’re impossible to predict and expect, they are increasingly about politics. They are about global political risk. And once you understand that, you realize that you can actually do a better job understanding them and a better job managing them.

The Quarterly: What does an executive do if he buys the idea that we’re moving into a period of greater volatility, where the political risks should be more on his or her radar than ever before?

Ian Bremmer: Well, I think there are a bunch of things an executive should do. The first thing an executive should do is recognize that those 10- and 20-year scenarios that they were spending a lot of time working on can be thrown out the window, because it is increasingly impossible to project those kinds of distances into the future. They need to spend an enormous time focusing on scenarios for 12, 18, 24 months, but they need to recognize that the breadth of potential outcomes is much greater than it used to be. So these fat tails, the size of these fat tails, has grown. The order of magnitude of the impact they can have has grown.

We’re in the middle of a global economic crisis right now. And there will be serious social discontent in developing markets all around the world. But they don’t typically hit at the same time as an economic crisis. They’re lagging indicators. They take 12, 18 months to really play through individual economies, after the economy starts to seriously slow. So, if you’re an executive right now and you have exposures in countries like Turkey, Ukraine, Thailand, Argentina, even Russia, you need to recognize that, in the short- to medium-term, the range of possible outcomes in those countries is far greater than it used to be.

And we need to recognize that in some countries there’s greater resilience, some less. Some institutions allow for greater efficiency, some less. In this environment, with politics trumping economics, you better know that. That’s something that effective decision makers can actually learn, they can apply, they can manage.

The Quarterly: How do businesses eliminate, minimize, avoid-which is the terminology you use in your book-how do they approach these kinds of issues around risk?

Ian Bremmer: First of all, in this sort of environment, diversification can really help you. I mean, there are a lot of companies out there that take [the approach], “We’re going to be in China and only in China. We’ll take one really big bet.” But there’s an enormous fat tail around both Chinese growth long term and also, more importantly, around whether or not Western corporations are able to take advantage of Chinese growth.

There’s also the question of corporate structure. Structure of organizations matters a lot to be able to have an effective filter, to use this information usefully, and to have it actually then work its way through actual decision processes in the organization. But still, as a political scientist, the funny thing is-I’m not a management consultant-but well before you get to the point that you can actually make a more useful decision, you need to actually understand what’s going on. And a big part of The Fat Tail is actually not the management consulting part, because corporations have so gotten this wrong. They have so missed just paying attention to these variables that I think that we need to first get back to basics and say, “OK, what is political risk? What are the kinds of risks that are out there, from macro to micro, from social revolutions, geopolitical conflict, and terrorism to regulatory policies and nationalizations? And how do we identify them? And how do we understand where we might be facing them?”

Natural colours such as sand, terracotta, greys and browns dominate the product offerings, whilst white is still a core colour in most households. Young and cheerful colour ranges, inspired by fashion, are also growing. Creativity in a number of products now comes in design and special paint effects such as metallic, etched, chameleon, or pearl.
Style matters

Consumer tastes in housewares and home furnishings are becoming more sophisticated, as potential purchasers now pay more attention to design, style and quality. This has had an impact on many subsectors, including glassware, cookware and tableware, where the availability of more stylish quality products has stimulated growth in value sales.

Fashion is increasingly playing a part in consumers’ lives and interior design is also considered something that needs to be updated regularly. For this reason, the popular colours and styles of today will likely be updated with new colours and materials on a far more regular basis than in the past. Retailers are likely to look to global sourcing to provide ethnic and regional designs. Turkish carpets, Mexican furniture and Indian silk throw-cushions are likely to be attractive to more globally aware consumers.

Increasingly, home furnishings companies are likely to turn to clothes fashion designers to bring style and focus to their products. This is expected to help fight margin pressures as well by providing a “plus” to consumers.

The home furnishings market in Singapore seen a drastic drop in sales in 2006, with the value of retail sales falling by 3.0% in year-on-year prices.

Household textiles and soft furnishings have been the highest-growth sector over the review period in constant value terms at 2001 prices, posting a total growth of 7.8% or a CAGR of 1.5%.

IKEA – fully owned by Inter Ikea Systems BV – dominated the home furnishings market in Singapore over the review period, being the clear market leader with a share of 10.1% in 2006. Barang Barang was the only other significant brand in the home furnishings market in Singapore, with a market share of 0.4%.

The home furnishings market in Singapore is expected to grow by 19.1% over the forecast period, 2006-2011, in year-on-year prices, or a CAGR of 3.5%. Much of this is attributable to a forecast boost in the demands for furniture, household textiles and soft furnishings.

TRENDS
The year 2006 was one of decline for the home furnishings market in Singapore, which experienced a 3.0% fall in the value of retail sales in year-on-year prices. A number of well-known retailers in the Singapore market closed their businesses during the review period, including Homestead Furniture, Ideal Home, Actus and Pennsylvania House. This decline is expected to be temporary, however, and sales are expected to improve over the forecast period as the economy continues to recover, the property market experiences a surge in activity, and consumers become more confident about spending.

Household textiles and soft furnishings has been the fastest-growing subsector in this market, which is mainly attributable to the increasing uptake of high-quality, premium bedding and bed linen, which are usually made of fine cotton with a very high thread count. The major department stores either have their own in-house lines of bedding and bed linen, or retail brands exclusive to their outlets, and these have proven to be especially popular with consumers.

The furniture and carpets and other floor coverings subsectors also experienced reasonable growth over the review period, as the values of their retail sales increased by 6.1% and 6.3% respectively at constant 2001 prices. This is hardly surprising, since furniture accounts for the lion’s share of sales, or 59.0% of the entire Singapore home furnishings market, in 2006. Furthermore, demand for furniture products is more recession proof and less elastic than those of other subsectors in this market as it is basically an essential good. Carpets and other floor coverings remain a niche market in Singapore, and a small one at that, as the flooring of the majority of homes has been decided and laid during the design, construction and renovation of these properties. The number of consumers who purchase and carpets and floorings in the after-market and lay them in their homes remains small.

Specialist retailers of home furnishings products, such as the megastores IKEA and Courts, as well as independent retailers, remain the dominant distribution channels in the Singapore market. This is largely because they are able to offer a wide range of specialised goods and services under one roof.

COMPETITIVE LANDSCAPE
IKEA is the leading home furnishings brand – and retailer – in the Singapore market, and its wide popularity with consumers hinges on the fact that IKEA sells more than home furnishings products. It sells integrated home furnishings solutions based on its various design themes, which are set up and put on display through its multiple room-setting displays in its showrooms.

IKEA’s room-setting displays allow consumers to picture and visualise how they want their homes to look before committing to a purchase, which is invaluable to the mass market consumers who do not have the luxury of having an interior designer provide them with professional advice and help. Once the consumer has committed to a particular design theme, he or she can purchase the whole room setting straight from IKEA as an integrated solution and have it installed, rather than buying the different components separately.
bulleted icon Mega-retailers IKEA and Courts have expanded during the review period, with IKEA opening a second retail warehouse at the cost of S$125 million in 2006, which boasts 58 different room-setting displays, a playground themed after a Swedish forest, a 550-seat restaurant, and a self-service warehouse where customers can walk in and pick up large furniture items. Courts has also opened its self-titled megastore in the same location spanning 116,000 square feet of retail space. This is its largest outlet in Singapore and intended to be its flagship store.

The market shares of the major retailers and brands in the home furnishings market have changed little over the review period. No significant new player entered the market during this time, and there was no significant development among the major retailers and brands leading to changes in their market shares.

The home furnishings market in Singapore includes both international corporations and brands and local, home-grown retailers and brands as major players. IKEA and Harvey Norman are the most visible international brands and retailers in the Singapore market, with the heavyweight Courts, Barang Barang and V Hive making up the local brands and retailers. There is no outright dominance by either international or local brands/retailers, with intense competition between the major players.

There has been no significant M&A activity in the home furnishings market over the review period.

PROSPECTS

The home furnishings sector is expected to undergo a period of increasing growth over the forecast period, with almost double the growth experienced in the review period. Much of this is will be attributable to a booming economy, increased activity in the property market, consumers’ growing affluence, and their increased willingness to spend more of their income in an upbeat and confident climate.

The furniture subsector is expected to be the star performer of the home furnishings sector during the forecast period, with overall forecast growth of 21.9% in year-on-year prices, or a CAGR of 3.5%. This is attributable to the expected strong performance of the property market, which will result in an increase in the number of new homes to be furnished and decorated – and to expectations of increased consumer spending in a growing economy.
bulleted icon The household textiles and soft furnishings subsector has been forecast to experience significant growth in the future, and demand for up-market and premium bedding and bed linen – among other products – is expected to grow to meet the needs of an increasingly affluent and sophisticated consumer base. The carpets and other floor coverings subsector is also expected to grow, albeit at a slower rate, as there is limited scope for such a niche market to expand even in the current climate.

1. Political

Businesses can expect to experience difficulties that are caused by the distinctive way in which the federal political system in Canada works. Provinces enjoy a great deal of policy-making and regulatory autonomy, and form an additional administrative layer beneath the Federal Government. This, in practice, means that businesses are subject to more regulations, which are often inconsistent from one jurisdiction to another. Some businessmen have described this situation as feeling as if they are doing business in different countries. For example, products have to comply with different packaging and labelling requirements depending on the province where they are sold, and food product specification approvals also vary across provinces. The red tape also adds to the time it takes to deal with bureaucracy and have contracts enforced.

Further political fragmentation arises from the Canadian federal structure, and this makes it very difficult for the Government to implement nationwide policies. This, in turn, has deterred most attempts to harmonise and reduce regulations across provinces. However, businesses have received a boost from the western provinces of British Columbia and Alberta, in the form of a bilateral Trade, Investment and Labour Mobility Agreement, effective as of April 1, 2007. This initiative is receiving strong support from the business community nationwide, and is of critical importance as any future attempts to improve the regulatory framework at a national level will depend to a large extent on the success of this agreement.

Canada has two official languages – French and English. Most French speakers are located in the province of Quebec, which is the only state to make French the sole official language. However, there are also significant numbers of French speakers in Eastern Ontario and New Brunswick. This adds some costs and complications with regard to translating commercial documents, invoices, product labelling and other essential literature. Although English is widely spoken, rules and regulations pertaining to the written language used in trade documents must be respected in order to prevent shipments being refused at the border by Canada Customs.

Government effectiveness and regulatory quality: 2006

Source: World Economic ForumNotes: Government effectiveness and Regulatory quality measured in a 0-10 scale, where 0 indicates a lower level and 10 a higher level.

2. Labour

Canada has a well educated labour force and in general workers are available at all skill levels. Productivity increased at an 8.1% average annual rate during the period 2001-2006, before reaching US$76,136 in 2007 when measured as GDP per person employed. However, the growth in productivity lags behind those of other industrialised countries, largely as a result of barriers to human capital mobility arising from inconsistent regulations. For example, professional qualifications are not recognised across provinces, so employers have to invest in additional training so that workers are able to obtain a qualification valid in the region. This, in practice, increases costs for companies and has created skill shortages in some regions, such as the western provinces, which lack personnel in science and engineering for the oil industry.

Another problem is the ageing labour force in Canada; the proportion of workers aged 45 and over has increased from 33.1% in 2001 to 38.7% in 2007, in spite of high levels of young, working immigrants. This is likely to raise unit labour costs for companies as it will be increasingly difficult to fill vacancies, particularly in labour-intensive sectors. The British Columbia-Alberta Agreement includes provisions for free labour mobility, and this could alleviate some of the wage pressures on the growing western provinces in the short term, and be the basis of a national-level labour mobility initiative in the long term.

Labour productivity: 2007

Source: Euromonitor International from trade sources/national statisticsNotes: Labour productivity level measured as GDP per person employed, indicated in US$ Labour productivity growth indicates the CAGR for the period 2001-2007.

3. Tax

Companies operating in Canada face one of the highest corporate tax rates among industrialised countries, and this adds significantly to their costs. The General Corporate Income Tax Rate (CITR) rose to 34.2% in 2006, placing Canada at disadvantage even in relation to many developing countries. Besides the corporate income tax, there are a variety of provincial taxes on investment that affect a company, such as sales taxes on capital goods and capital gains taxes. These further increase the effective tax rate on capital for companies, and at 36.6% in 2006, it is the highest in the industrialised world. The CITR is set to progressively decrease to about 31% by 2010, but that is unlikely to be enough to considerably improve Canada’s position relative to other OECD countries.

Other problems relating to tax include insufficient recognition of tax credit for companies in some provinces and longer depreciation periods on investments in comparison to other countries. In practice, these increase the amount of tax paid by businesses in Canada. The tax problem is largely due to the political structure in Canada, which allows provinces to establish their own taxes and regional governments to block reforms at a national level. As a result, significant reforms are unlikely in the medium term.

Tax rates: 2006

Source: CD Howe InstituteNotes: General Corporate Income Tax Rate (CITR) includes federal and jurisdictional taxes. Effective Tax Rate on Capital indicates the amount paid by a company as General Corporate Income Tax (CITR) and other capital-related taxes, expressed as a percent of profit.

4. Trade

Canada’s international trade levels are booming as a result of its growing economy and high international commodity prices. Total foreign trade increased at an 11.7% annual average rate during the period 2002-2006. Canada is the largest trading partner of the US – this accounted for 68.8% of total Canadian trade in 2006, down from 77.0% in 2001. It has resulted in a large number of companies setting up operations in Canada in order to access the US market, especially in the machinery and equipment sector. This has been facilitated by the North American Free Trade Agreement (NAFTA), which includes Canada, USA and Mexico. The agreement allows tariff-free trade within the zone. However, Canada still places some non-tariff barriers on NAFTA imports, in the form of special packaging and product specifications for its provinces, and sanitary certifications and quotas for certain agricultural products. Canada is diversifying its trade pattern to make it less dependent on the US and markets like Europe, whereas Asia-Pacific and Latin America are gaining importance.

Trade within borders in Canada is affected by the inconsistent regulations across provinces. For example, it is common that transporters shipping goods from one province to another stop at the border in order to rearrange or repack the shipment to comply with the different transportation requirements. This creates additional costs for businesses and extends shipment periods. The British Columbia – Alberta Agreement provides a base for the bilateral free mobility of goods, and could also be used to ease trade flows across the country.

Foreign trade participation: 2006

Source: Euromonitor International from IMF/IFSNote: Foreign trade participation includes exports and imports, indicated in US$ at current exchange rates.

5. Investment

Canada has fairly open policies towards foreign investment although restrictions still exist in some sectors. The country screens investments in the energy, mining, banking, publishing, fishing, telecommunications, media, transportation and real estate sectors. In addition, foreigners must notify the Canadian Government when they establish a new business, regardless of its size, or when they gain control of Canadian companies with assets above a certain threshold. Investment levels in Canada are booming due mainly to the strong Canadian dollar and the massive oil extraction projects in the western provinces. Total investment in the country grew at an average annual rate of 17.1% during the period 2003-2006.

The energy activity in the western provinces is a major development in the Canadian economy. The oil sands of the region, with 174 billion barrels of proven reserves, which make of Canada the country with second largest reserves in the world, are beginning to be exploited and this is changing the economic landscape of the country. There are many businesses opportunities in this region, which is in need of infrastructure and is drawing resources and labour at high salaries that are raising regional income levels. With oil reserves that will last at least thirty years, the region is expected to continue growing unless a marked reduction in international oil prices occurs. In the long term, this will offer opportunities for companies in the still relatively underdeveloped western provinces.

Investment levels and GDP growth: 2000-2006

Source: Euromonitor International from IMF/IFSNotes: Investment level values converted at current exchange rates. GDP growth indicated in real terms (Nominal GDP growth minus inflation).

6. Demographics

Canada’s rate of population growth is among the highest in industrialised countries. The average between 2000 and 2007 was 1.1%, largely as a result of high immigration levels. The net migration rate in Canada stood at 61.3 per 10,000 inhabitants in 2007, the highest in the industrialised world. Immigration involves skilled workers primarily, although companies complain that the excessive regulations imposed by the government mean they cannot readily access the skills the immigrants bring. These young, skilled immigrants also help to reduce the rate of labour force ageing and increase productivity. In addition, there is a demographic shift in location, as skilled workers are attracted by the economic boom of the western provinces. In 2006, more than 60,000 workers relocated to Alberta and British Columbia, creating skills shortages in some of the other provinces. This trend is expected to continue given the likely long-term nature of the economic growth in the west and the need for skilled labour.

Net migration rate: 1997 – 2007

Source: Euromonitor International from national statistics/UNNote: Net migration rate indicated as total immigration minus total emigration, per 10,000 inhabitants.

The undeniably strong spending power demonstrated by Chinese consumers both domestically and abroad has held the attention of all market watchers in the past decade. They are more liberal than those of their savings-minded parents. The new consumers are trendy, hold white-collar jobs, own an apartment and a car and travel abroad extensively. Following these trends, what will the Chinese consumers of tomorrow be like? Will they ride over the economic crisis and continue to spend big

CHINESE CONSUMERS TODAY

Growing affluence

China’s total consumer expenditure by 2008 was RMB10.4 billion (US$1.52 billion). At present, Chinese families generally save or invest a quarter of their total income and spend almost the same proportion on food. Chinese Generation Yers enjoy the most buoyant income growth and tend to splash out more on clothes and entertainment, making them the prime target group for China-bound retailers.

As the Chinese consumer grows more affluent with the emphasis of the Chinese Government on promoting quality of life and increasing per capita income, the insatiable urge for image and upmarket goods will continue to be an increasing trend. According to Goldman Sachs, China is now the third biggest consumer of luxury goods, just next to Japan and the United States, accounting for 12% worldwide. Currently, the Chinese market generates more than US$2 million in luxury consumer goods sales a year and sales are growing 20-30% per year.

Love of travel

The market for outbound tourism is expected to increase substantially. The RMB is expected to appreciate on the US dollar, which will continue to reduce costs for outbound travellers. A greater number of middle income travellers have begun to join outbound tour groups, and those whose monthly family income ranges from RMB5,000 to RMB30,000 are the main consumer base of short holiday outbound travel not exceeding three days, the most popular destination being border nations or one of the SARs. European destinations are also expected to grow in popularity, due to the widespread Approved Destination Status amongst EU nations. The US also hopes to attract a large segment of the Chinese outbound market.

Buying property

China’s property market has grown strongly in all sectors amid robust demographic and economic growth. Just two years ago, overseas investors were responsible for more than half of the country’s high-end housing sales. Today, the home-grown new rich account for more than 70% of luxury home transactions, according to real estate services firm Jones Lang LaSalle. Transactions involving high-end residential properties such as villas, luxury flats and serviced apartments, stayed active on the back of market liquidity, a growing influx of expatriates, the rising affluence of residents and also the wealth effect of the stock market.

EMERGING CHINESE CONSUMER TRENDS

Strong brand loyalty

A majority of the shoppers surveyed by McKinsey – 63% in 2008, still enter a shop with a shortlist of favourite brands or a single preferred one and will not stray from it when making purchases. Although this percentage dropped from 73% in 2007, getting onto that shortlist remains an essential step for any consumer product trying to get a foothold in China. Chinese shoppers are becoming less comfortable about buying unfamiliar products. In 2008, only 18% of respondents indicated that they were always willing to try new packaged foods, compared with 29% two years earlier. When Chinese consumers try new products, they are twice as likely to grab those introduced under a familiar brand than under an entirely new one. Such reluctance is understandable in China, where many cheaper goods are of poor quality and the consequences of the wrong choice can be drastic, especially with food purchases. Once Chinese consumers recognise a brand, they are likely to assume that it offers better quality and are willing to pay a premium for it.

Big internet users

In 2008 there are 180 million internet users in China and this figure is expected to reach close to 500 million by 2020. China has already overtaken the United States in 2007 as the country with the most internet usage, with 180.2 million users. China is experiencing a breathtaking rise in internet usage (a 126.7% increase in users between 2003-2008 according to Euromonitor International figures) despite the Government’s supervision of web content. According to the Chinese Government, there are now 20 million Chinese bloggers and more than three million active writers. There is also the phenomenon of many Chinese teens being addicted to the net by being hooked on online games and instant messaging. The internet has been the gateway for almost any Chinese citizen to the world beyond the once Forbidden City and its attractions. This awareness alongside with increased knowledge and purchasing power are the powerful ingredients of strong demand for travel, luxury goods, modern technology gadgets, cars and housing.

CHINESE CONSUMERS IN 2020

Living in what is becoming a well-off society

By the year 2020, China will have a population of more than 1.4 billion people that will make up a significant portion in the world’s consumer market. The annual disposable income of Chinese consumers is forecasted to increase to 65.4 billion yuan (US$9.57 billion) by 2020 compared with 15 billion yuan (US$2.19) in 2008. The National Bureau of Statistics of China announced that the country would be considered a moderately affluent society by 2020, if development trends since the year 2000 continue. The estimate was made taking into account progress in the fields of the economy, social harmony, quality of life, democracy and law enforcement, culture and education, as well as resources and the environment. Zheng Xinli, Vice-Minister of the Communist Party’s central policy research office, said that taking price changes into account, 55% of the population will be middle class by 2020, with 78% of city dwellers and 30% of those in rural areas reaching that status. Middle class is currently defined as having an annual household income of between RMB60,000 (US$8,700) and RMB200,000 (US$29,215). In 2008 prices, the annual disposable income per household will be RMB98,956 (US$14,900) in 2020.

A sustained desire to see the world

Travel will always be on the agenda, particularly among the white-collar working class population due to companies’ annual leave privileges in addition to “arranged” long weekends and public holidays. Public holidays are often arranged in such a way that they fall on either side of a weekend to prolong the break. Even if travelling abroad proves to be an obstacle to most Chinese due to visa restrictions etc. domestic intercity trips are most common as each city in the country always boasts several inherent attractions. China is seen as one of the world’s most attractive outbound tourism markets, as evidenced by campaigns that have continued to appear in large cities, most notably, Shanghai, Guangzhou and Beijing, often in banner format and television advertising format to boost awareness of destinations available to Chinese travellers.

Mass urbanisation

An annual average of 12 million people per year will migrate from China’s rural areas to become urban dwellers. Such mass urbanisation, coupled with China’s robust economic growth, will result in a surge in demand for housing in urban areas. This equates to a phenomenal demand for housing of approxi¬mately 14.4 billion square feet annually compared to a supply of only 6.5 billion square feet, representing a 7.9 billion square feet shortfall. In a report from the Federal Reserve Bank of San Francisco, it is estimated that China each year from now until 2020 will need to construct 209 square miles of new urban residential floor space to keep pace with the estimated annual influx of migrants. Residential developers in China are finding a profit niche building affordable and dream homes for Chinese double-income Gen Y couples.

By 2020, China’s per capita GDP is expected to reach over US$10,000, comparable to Europe, Japan and the USA in the middle of the 20th century. These growth periods are generally characterised by a surge in demand for cars. In a report by NBC News, carmaker Buick’s excellent sales have propelled General Motors (GM), even as it closes plants and lays off workers at home, to the top of the pack in China, the world’s fastest-growing car market.

Boys will be boys

Forecasts show that by 2020 there will be over 18 million more men than women aged 20-34. This figure provides a solid opportunity for digital media and gaming products that will serve to occupy their bachelorhood evenings. Immersive entertainment experiences for China’s young consumers will help drive PC, media, wireless and broadband usage in China over the next 10 years.

We want everything

By and large, any commodities or consumables that are associated with providing quality of life and meeting physical and mental needs will be in great demand among the Chinese as they mature as sophisticated and educated consumers. With economic growth expected to exceed 9% annually, year after year, well-managed companies will reap huge profits as China’s 1.3 billion increasingly affluent consumers exercise their collective economic clout to purchase enormous quantities of every conceivable consumer product.