A week ago, at a wet and cold Sunday BBQ in Shanghai, a friend of mine was commenting that her daughter is one of the only children in her class without a brother or a sister. This may not be surprising if you have presumed that my friend was another foreigner. But no - she is Chinese, and her daughter goes to a Chinese school in Shanghai.
Having a second child in today's urban China is the most obvious display of wealth, aside from the de rigueur Porsche Cayenne. But there is also a more discreet side to wealthy Chinese, and one which was reinforced at this same BBQ party. Whilst we sat enjoying the delights of an American-style cook out in their US$500,000 Shanghai villa, our Shanghainese friends shared some pictures from their recent Gold Coast Australian holiday. Among the obvious tourist photographs was a picture of a towering new apartment complex. A casual enquiry resulted in the revelation that they had bought a luxury apartment on day 3 of their holiday, spontaneously, for cash.
I think I was the only one in the room who was not surprised, as the other guests started describing their own foreign property, either bought, or the in advanced stages of being bought. Canada, Australia, USA and UK were all highlighted as being on the shopping list.
Since the appreciation of the RMB started in 2005, the disposable income of the Chinese has grown by 20% in US$ and over 40% in GB£. With salaries rising well above inflation in China over this same period, the wealth of prudent middle class Chinese families is now more than sufficient to play on a global stage.
The Chinese government has also demonstrated that the well known Chinese habit of saving is not unique to housewives. The bulging foreign reserves of the Middle Kingdom should ensure a (unique?) soft landing for this economy as road, rail and airport infrastructure projects are ramped up. At the same time, China's place in the world order will rise as it bankrolls the wider economic recovery buying up the newly issued foreign government bonds. And on a corporate level, the economic madness of the last 6 months is likely to be the prelude to Chinese companies (many of which remain state owned) acquiring or taking major stakes in International commodity, industrial and consumer companies (protectionist objections aside, such as the Oz Minerals deal blocked last week by the Australian Government).
The fiduciary care of the Chinese has long been respected by the world, but now is about to be felt by the world. The foreign home owning, Porsche driving, two kid Chinese family is here, and here to stay.
David King
RAPP China, DDB China Group
28th March 2009
