Chinese Consumers Care About Price More Than the Environment

The Government Is Really Driving Change, Says Synovate's Darryl Andrew

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SHANGHAI (AdAgeChina.com) -- Take pity on Mercedes-Benz, Bentley and BMW.

Just after China's government increased the sales tax to 40% on luxury cars with 4-liter engines as a deterrent to rich Communist cadres buying these gas-guzzling behemoths, the bottom fell out of Shanghai's stock market, causing the size of the market for these status symbols to shrink quickly--but not disappear.

I have to question the effectiveness of the government's efforts. As long as a big car says, "I am rich and successful," a mere tax hike won't cause the buyer to suddenly turn over a green leaf. At this stage among affluent Chinese, face is still more important than preserving the environment for generations to come.

Nonetheless, we have seen dramatic changes in behavior in the past few months. For example, plastic bags have virtually vanished as the carrier of choice for customers at supermarkets, convenience stores and quick service restaurants.

What was the cause of this groundswell of change? Did Shanghai housewives suddenly wake to the horror of seeing ubiquitous pink plastic "blossoms" on trees down Fuxing Lu? Did she cringe at the sight of Carrefour's blue arrow on white plastic carriers wafting among low flying kites above Zhongshan Park? Did she hate the mini floods that inundated the alley of her lane house as drains overflowed after being blocked by Lianhua's plastic?
Darryl Andrew
Darryl Andrew
No. The supply of plastic was halted at source. On June 1, 2008, a nationwide law went into effect banning all stores from giving away free plastic bags. It was an astute government initiative based on the understanding of how tightly the average housewife, student and young office worker clutch on to their wallet. The government introduced a plastic "tax" that will save China 37 million barrels of oil per year and stop cluttering landfills.

Fiscal stimulus drove this desired behavior, not a pervasive sense of consumer guilt about plastic and its effect on the environment. After all, the extra 50 fen (nine U.S. cents) one had to pay for a plastic bag quickly built up to be the equivalent cost one would have to pay for a tasty bowl of dumplings with chili sauce.

What do Chinese really think about environmental issues? The results of some surveys, including our own, suggest China's consumers are greener than a one dollar bill. But I suggest they have greater empathy with the dollar than the environmental consciousness that the color connotes.

But it's a different story for the government. This institution is igniting patches of light to illuminate the path to protect the environment. The plastic bag tax is a fine case in point, but it's not the only one. China's government is rationalizing the coal at power stations and driving out the worst polluters. It is providing cash incentives to allow solar energy to enter the main grid. And it's giving preferential treatment to small-engine cars.

This paradigm is only filtering down to Mr. and Mrs. Wong in dribs and drabs. The slow uptake of the Prius is testament to this. No matter how good this great little symbol of green is, our fiscally-driven driver is not going to pay a 50% premium above another car in the same engine class to reduce their carbon footprint.

We do see consumer products promoted on the natural platform moving off supermarket shelves pretty quickly -- but the motivation is not environmental protection. On the contrary, the natural platform has strong associations that the ingredients will be safer and healthier for those consuming them. There is such a pervasive concern about health and food in China.

But let's get back to the auto market. After four years with Shanghai taxi drivers, and their all-in-one package of roller-coaster-like driving experiences, and scenic routes, this month I finally decided to get a car.

I procrastinated over my decision. I was torn between my ego -- to get a car of CEO status -- or opt for something more functional as well as a car that Mother Nature would thank me for.

I soon had to give up on technical environment-speak to gauge the green creds of my short-listed vehicles. No matter how hard I tried, I could not get a good translation for "carbon emission."

I ended up going for a more obvious sign of fuel efficiency -- how many people it could move on a single trip, and opted for the FirstLander, Buick's high-end SUV. (How can I call this environmentally friendly? Well, I can take six people to a client meeting in one car!)

But back to the Wongs, at this stage, purchasing decisions really depend on what is right for Mrs. Wong and her wallet, rather than the environment. At least for now.

Darryl Andrew is Shanghai-based CEO, China of Synovate, an Aegis-owned market research company.

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