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Africa Weekly\Comment

2017 will be the Year of Chinese Consumers

By Jeffrey Towson | China Daily Africa | Updated: 2016-12-30 07:10

Increasingly prosperous spenders will become an important driving force for businesses at home and throughout the world

In the past one or two years, Chinese consumers have arrived as a significant economic force. They have become a real driver of China's GDP growth. Their spending is fueling local companies and minting millionaire and billionaire entrepreneurs. And they have become a significant part of business in markets around the world.

But this is just the beginning. In fact, what we have been seeing is just the laying of the foundation for the eventual impact of Chinese consumers on the world. I believe their real impact will begin to show itself in 2017, which will be the Year of the Chinese Consumer.

Here are my predictions:

1. Chinese and foreign businesses will increasingly follow Chinese consumers around the world.

Last year over 110 million Chinese tourists flew outbound into the world. More than half of all tourists in Asia were from China. An estimated 950,000 Chinese tourists visited New York City in 2016, up 700 percent from 2007. The favorite destination, Thailand, received around 8 million Chinese tourists.

While this large outbound migration initially caused some friction with local cultures - resulting in some humorous stories and occasional blacklistings - international Chinese tourists have matured. They are now more sophisticated and experienced international consumers.

2017 will be the Year of Chinese Consumers

In short, the Chinese tourism phenomenon has matured and has become routine.

As a result, businesses everywhere are now investing and making strategic decisions based on this now stable economic phenomenon. And that is what I predict we are going to see in 2017 lots of businesses making increasingly significant investments to support and service Chinese international tourists as a permanent fixture of the global economy.

One example of this is that Chinese companies are now going international to follow their Chinese customers. While Chinese CEOs have for a long time expressed their intention to go global, this has largely not happened. With the exception of Huawei and a few others in the natural resources and infrastructure sectors, most Chinese companies have remained focused on winning in China. And many of their international moves, such as technology, brand and natural resource acquisitions, were really about competing more effectively back in China.

This is now finally changing. Chinese companies are seeing their customers traveling abroad in large numbers, and they know if they don't continue to serve them overseas then someone else will. Chinese companies are going international out of necessity.

Examples of this have been accumulating recently. In November, Chinese travel platform Ctrip announced its acquisition of UK-based flight search engine Skyscanner. This will let it expand its offerings to include foreign flights.

In August, Chinese taxi-hailing leader Didi Chuxing purchased Uber China and then promptly refocused on its international investments, including Indian Ola, American Lyft and SE Asian Grab.

Throughout 2016, Alibaba's Jack Ma has repeatedly said that 50 percent of Alibaba's revenue will be international by 2025.

And most recently, the Plough at Cadsden pub, where UK Prime Minister David Cameron and Chinese President Xi Jinping drank beer together, has just been purchased by a Chinese-backed SinoFortone Group.

All of these international moves are about following Chinese consumers.

One area where Chinese companies are going international in a particularly aggressively fashion is in payments and credit cards. In November, Ant Financial invested in Thailand's Ascend Money. In September, UnionPay announced that its card is now accepted at 80 percent of US merchants and 100 percent of US ATMs. And virtually everyone from Huawei and Xiaomei to Apple is jumping into e-payments for Chinese consumers.

We can see foreign companies behaving the same way. They are also investing to benefit from the emergence of more international Chinese consumers. Signs saying we accept Alipay and TenPay are now ubiquitous across Thailand. In vitro fertilization clinics in Los Angeles are building new facilities and hiring full-time Mandarin-speaking staff specifically to accommodate the influx of expectant Chinese women.

And so on.

Overall, in the past three years, more than 360 million Chinese consumers have traveled out of China. This now-stable economic phenomenon will increasingly influence business decision-making around the world.

2. Mobile and O2O applications will show hyper-adoption by Chinese consumers.

That Chinese consumers like buying things on their phones is not news. What is going to be different in 2017 is the speed of adoption of mobile applications and services. The already fast adoption rate appears to be accelerating, including the online-to-offline, or O2O model.

Mobike and Ofo are the newest examples of the hyper-adoption of mobile applications by Chinese consumers. Twelve months ago, you could find some Mobikes and Ofo bikes scattered around Beijing and Shanghai. Now they are everywhere. Shanghai, in particular, seems almost overrun with Mobikes. Yet both companies were founded less than two years ago .

Chinese company Meitu, which is currently preparing for a Hong Kong IPO, offers a mobile photo editing application that lets you alter your appearance - such as making your chin narrower, your eyes larger, and so on. Its use by Chinese women who want to "beautify" their selfies has surged to stunning numbers. More than 440 million Chinese women are now using the application. This is remarkable growth for this kind of app. Like bicycle sharing, it serves a market that virtually nobody saw coming.

On a side note, in September 2016, a woman was pulled over for drunk driving in the Xinjiang Uygur autonomous region. After a breathalyzer confirmed intoxication, the police began taking photos for evidence. The woman then demanded that they use Meitu for their photos, so she would look better.

3. Chinese women - moms in particular - will increase their influence as consumers.

I have argued that Chinese moms are the most important consumers on the planet. They typically generate 50 percent of household income in China. They were estimated by Mastercard to control over 75 percent of Chinese household spending. And they are far more attuned to health, education and safety issues, particularly regarding their one child in a country with food, water and air quality issues. They are a major force among rising Chinese consumers. I expect this to increase in 2017.

First, like most Chinese consumers and households, they are increasing in wealth. This has a lot to do with the ongoing urbanization. For example, in the past three years, over 30 million people moved into Chinese cities. And by 2025, China will likely have 10 New York-size cities. So the pure number of Chinese urban households is growing - and Chinese women are still the biggest force within urban household spending.

However, Chinese women themselves are also changing rapidly, not just becoming more numerous. They are getting married later, now at an average age of 27 instead of 24. They are beginning to have more children. There is now a mini baby boom following the changes to the one-child policy. They are increasingly focused on health and healthy living. They are increasingly worldly, with young women being a significant portion of Chinese tourists.

All of these things, and others, are changing the lifestyles, priorities and spending habits of arguably China's most important consumer demographic. This is a phenomenon to watch in 2017.

4. Increasingly emotional Chinese consumers will increasingly surprise the world.

Chinese urban households have largely passed the point where they worry about paying for the necessities of life. They can now afford food, shelter, clothing and the other basic necessities. They are now focusing more on what to do with their increasing disposable income. They are thinking more about occasional luxuries, travel destinations, sports sneakers and other semi-necessities.

In marketing terms, they have moved from being value consumers to mainstream consumers. Basically, they have stopped buying based mostly on what they need and are now buying more based on what they want. And "want" is much more about emotions, aspirations and impulses. Basically, Chinese are becoming much more emotional consumers.

Given their growing impact on the world, this increasingly emotional consumer behavior is increasingly impacting other markets, often in real time.

The author is professor of investment at Peking University and author of the One Hour China Consumer Book.

(China Daily Africa Weekly 12/30/2016 page10)

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