China racing to establish a giant consumer market
Thomas Russell, Associate editor -- Furniture Today, August 11, 2008
Whenever we at Furniture/Today visit furniture shows in China or other parts of the world, it's always an eye-opening experience. We get to see how product is sourced and developed in those areas, and we get to meet a host of new industry faces.
Things were no different at the latest round of shows I visited in southern China in March, including the Shenzhen International Furniture Exhibition. While furniture took center stage, another less visible part of the show was just as important, if not more so, in helping us understand the China market and the opportunities there over the short and long term. The presentation, part of the First International Furniture Forum, was hosted by Oliver Zou, secretary general of the Shenzhen Furniture Trade Assn., and business consultant Noah Vogelsang. It was called “The Race for China Begins” — not a reference to the discovery of China as a sourcing platform but to the way China is beginning to discover its potential. (For a copy of the presentation, contact Vogelsang at noah@szfa.com.)
For a long time, China had focused so much on exports that it almost overlooked the huge buying power within its borders. With a population of 1.3 billion, China is fast becoming the largest consumer market in the world.
And the number of people isn't the only driving factor. Government policies are creating a larger middle class and in turn, helping boost buying power. They include:
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The tightening of labor laws to increase minimum pay scales and require the payment of overtime. These policies already were in place but were not enforced, according to industry officials.
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The creation of a Ministry of Housing and Rural Construction. This agency aims to boost home ownership in small and mid-sized cities as China adds 80 million new homes in five years, up from 348.5 million currently.
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An increased distribution of tax revenues to rural areas. This will help create the infrastructure required to support housing and other development.
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The provision of government rebates for appliances such as washers, dryers and refrigerators.
Furniture stands to gain from this focus on China's middle class. That's because the Chinese are believed to update their furniture every 10 years. Based on the current number of households, that translates into some 35 million homes needing new furniture each year.
All this has huge implications for U.S. buyers sourcing from Chinese furniture factories. The more Chinese producers are making for the domestic market, the less capacity available for U.S. buyers.
However, China's growing buying power also offers an opportunity, particularly for U.S. furniture companies that want to sell their brand name goods in China.
This week, all eyes are on the Beijing Olympics. But once the Olympics is over, there's another race to watch out for on the horizon, as the Shenzhen officials so wisely note.
