Special Report: Part 2

Five More Issues Chinese Marketers Will Face in 2010

Ogilvy PR Execs Scott Kronick and Jamie Moeller Predict China's Future

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BEIJING (AdAgeChina.com) -- In the second half of a two-part special report, these five predictions about China can help marketers understand key issues shaping that country's business environment.

The report was written by two executives at Ogilvy Public Relations Worldwide, Scott Kronick, president, North Asia in Beijing and Jamie Moeller, managing director, global public affairs in Washington, D.C.

(Read the first five predictions from last week's issue.)


6. Relationships with countries besides the U.S. will need mending

The U.S.-China relationship is not the only one under a microscope. Last year ended on a sour note for China-watchers in the U.K., too. On Dec. 20, The Guardian newspaper published an article accusing China of "hijacking" the climate change negotiations in Copenhagen.

Jamie Moeller
Jamie Moeller
Days later, Chinese Foreign Ministry Spokesperson Jiang Yu said such remarks "contained an obvious political scheme to steer responsibilities towards the developing countries."

Then China executed a British citizen, Akmal Shaikh, on drug smuggling charges despite strong objections by British politicians.

China's relationship "down under" was also under pressure last year, primarily relating to the demand and pricing of natural resources. However, 2010 is expected to be significantly different. Not only has China become Australia's leading trade partner, but there is an unquenchable thirst for Australian products in China, be it energy, resources or agriculture. Bilateral ties are therefore critical.

One area to watch will be China's "outbound" intentions this year. Not only are Chinese companies looking to extend their reach, but Chinese cities and provinces are working to upgrade their "investment" or "tourist" brands with advertising and PR campaigns aimed at the outside world. This type of activity will tell a different story about China, one that steers clear of any political context.


7. Companies will intensify geographic expansion plans

China initiated its "Go West" campaign a decade ago in an effort to reduce the income disparity between the relatively poor western areas and their wealthier neighbors to the east. The campaign has helped grow the economies of such cities as Chongqing into an investment target for domestic and overseas investors.

As China's urbanization moves forward, brands that are reaching maturity in first and second-tier cities will accelerate their move to third and fourth-tier cities and beyond, where disposable income per capita is rising quickly, and the creation of new wealth has had profound impact on consumer behaviors.

In 2010, focused marketing efforts on emerging cities will become the norm. Looking forward, we also expect the flight to cities by rural residents to continue, and small and medium-size cities will feel the impact.

The central government sees such cities as a good choice for migrant workers to settle in. Recently, the government promised to allow more rural people, mainly migrant workers, to settle in cities, increasing their access to social resources.


8. Green will be the new red

During Chinese New Year celebrations, the color red symbolizes luck, but in 2010, green is the color symbolizing China's future.

In December 2009, the Copenhagen climate conference brought global attention to environmental issues, with China playing a major role in the talks. Despite widespread criticism that China, the world's largest emitter of carbon dioxide, has not done enough to meet climate change goals, the government has promised to cut carbon output by as much as 45% by 2020.

Scott Kronick
Scott Kronick
China has evolved considerably in terms of recognizing the serious consequences of environmental issues. The 2009 economic stimulus plan, for example, included a special budget for subsidizing consumers willing to upgrade their less energy-efficient home appliances.

China has emerged as the world's largest manufacturer of solar panels, and is well positioned to lead the production of electric cars.

The government also established the National Energy Commission, a "super-ministry" under the direct leadership of Premier Wen Jiabao and Vice Premier Li Keqiang. The move indicates that energy has been identified as key to China's future development, and requires coordination by multiple ministries. In 2010, expect to see China continue to promote a "low carbon society." As part of this, China will continue to encourage eco-friendly innovations and invest heavily in renewable energy.

Despite China's efforts in sustainable development, the disconnect between the country's energy and environmental policies remains an issue. China recently released its first national pollution census to selected audiences. The report, including detailed mapping of the country's environmental issues, suggests China still has a long way to go.


9. Grey will represent gold

The size of China's "grey" population, a group comprised of around 300 million people aged 50+, makes it one of the most important demographics in the world.

What's more, the impact of China's one-child policy and a lower mortality rate are causing this group to grow rapidly in relation to the overall population. Without siblings to share the burden of care, young families in China are under heavy pressure to support two sets of parents; some may even be caring for up to four sets of grandparents.

"Without siblings to share the burden of care, young families in China are under heavy pressure to support two sets of parents."
This year we will see a greater focus on the increasing number of elderly needing support, and the declining proportion of young people.

While the threat this poses to economic growth will cause headaches for China's policy makers, opportunities will emerge as more affluent-yet-busy young earners look to companies they trust to help them care for their graying loved ones.

Despite being such an important demographic, China's older population has been largely overlooked by marketers.

According to the National Seniors Bureau, only 10% of products and services bought by senior citizens are actually targeted at them.

While the elderly are known to be keen savers, China's older generations still spend, with per capita annual spending of senior citizens predicted to increase from $1,620 in 2005 to $4,112 in 2015.


10. The 2010 World Expo in Shanghai will define the future

China's government has reportedly spent over $45 billion on the 2010 World Expo, taking place from May 1 through Oct. 31, 2010 in Shanghai. China hopes the event will bring China as much attention as the 2008 Olympic Games in Beijing.

With the theme "Better City, Better Life," the World Expo is evolving as a platform for companies and countries to impress upon attendees and the media how their products, services and locations address the way we live in an increasingly urbanized world.

The big question for many is who will attend the Expo? Estimates of the number of foreign visitors who will travel to China for the event fluctuate, but there is no question that it will be filled with Chinese tourists.

"Who will attend the World Expo and what will they look for?"
Of the 14,000 respondents nationwide who took part in an Ogilvy survey in December 2009, 42% say they plan to attend, and 87% of Shanghai residents say they will go.

What is critical to many of the sponsors, however, is the attention given to the Expo by government officials. One insider commented that provincial and municipal officials will come in droves on fact-finding tours that will tell them how best to prepare their locations for the future.

One thing that is certain about working in China is that it promises to be interesting. We believe preparation and being proactive are the best ways to address the challenges.


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