Bears have become fashionable in China these days, and we don't mean those cuddly pandas. Slowing GDP growth, high inflation, rising public debt and sluggish stock performance are the current buzz words of China watchers.
Marketers, meanwhile, are trying to make sense of mixed signals. Analysts may be pessimistic, but Chinese consumers are still spending. Retail sales in the mainland topped $2 trillion in the first nine months of the year -- that 's growth of 17% compared with the same period a year earlier, according to China's National Bureau of Statistics.
Discussions about advertising budgets for next year reflect this edgy optimism.
China is still one of the fastest growing economies in the world, said Justin Billingsley, Saatchi & Saatchi's CEO, Greater China, this month on "Thoughtful China," an online marketing-affairs talk show produced in Shanghai. "It's nice for our China clients to go to global and regional meetings with confidence about growth and some proven numbers," he said.
At the same time, said Tom Doctoroff, JWT's Area Director for Northeast Asia, advertisers are exhibiting "quite a bit of nervousness" and taking a "wait-and-see approach. Nobody is bullish in our forecasting right now and I think there's a lot of rationalization going on with some of our financial service clients and IT clients. They're really waiting to see what's going to happen and structuring themselves more efficiently."
One of the challenges facing advertisers next year is the "skyrocketing" cost of media in China, Mr. Doctoroff said. Inflation rates for TV advertising are still reaching 30% annual growth, while media budgets are increasing 12% on average.
State-owned China Central Television (CCTV) raised $2.25 billion at its annual advertising auction in Beijing on Nov. 8, up 12% over the previous year. Local and provincial broadcasters usually take their cues from CCTV, so media buyers can expect rising rates across the board.
"You can already see that dollars are stretching much less further, so this is putting pressure on a lot of marketers to explore non-traditional approaches to building brands," Mr. Doctoroff said, although inflation is also hitting digital media rates.
In a separate move that may impact ad rates next year, China will ban TV stations from airing commercials during broadcasts of TV dramas starting Jan. 1, as the government tightens control over media and the internet. TV stations could face a reprimand or the loss of their commercial broadcast rights if they air any advertising during the 45-minute episodes, the State Administration of Radio, Film and Television said in a statement on its website.
"Clients are starting to spend more and more in digital media, using video sites as an alternative channel for their video content and telling brand stories," said Wayne Fan, managing director at Wwwins Isobar in Shanghai.
While Mr. Fan sees "a lot of confidence" at advertisers such as Coca-Cola Co. and Procter & Gamble Co., "they are being very conservative at this point in time" in budget planning for next year, he said.
Normandy Madden is senior VP-content development, Asia/Pacific at Thoughtful China, and Ad Age 's former Asia Editor. See earlier episodes of Thoughtful China at www.thoughtfulchina.com.