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Douglas Allen

The answer to this question depends very much on the product or service. For instance the population that is ready to buy a car is much smaller than the population which is ready to buy an air-conditioner or digital camera. My understanding is that there are currently an estimated 400 million cell phones in use in China. While many of these may be purchased by individuals who have no land line, it still helps gauge the purchasing power in China both in terms of hardware purchase and ongoing service purchase.

China is expected to overtake Japan fairly soon (I haven't seen an exact year) as the second largest market for cars in the world.

We also have to recognize that even the 800-900 million rural Chinese are potential consumers of some products. The industrialized world often subscribes to an economic model that a several thousand year agricultural revolution is followed by a 200 year industrial revolution followed by perhaps an 80 year information age revolution. They see oxen-drawn plows in China and say so... how many centuries before we sell computers?

Long ago, Alvin Toffler made the point that all three of these revolutions are reaching much of the developing world simultaneously. In my experience (over 30 trips to China since 1992) it is not uncommon to travel to rural China and find oxen-drawn plows being operated by farmers who go home and watch color TV via satellite. They may have other high tech products such as cell phones and computers as well.

The purchasing threshold for various products is very different as well. I saw one paper which cited BMW's target market for new cars in China as anyone with an income of over $600 per month. This may be a reflection of the 40% savings level for which China is famous as well as the fact that many Chinese have informal sources of income that may represent substantially more than their formal income.

Anyone who visits the major cities of China today will be immediately struck by the number of high-end stores which are successfully addressing the needs and desires of an increasingly affluent population.

In case it is useful, another datapoint for consideration is the fact that a typical MBA graduate from a top-tier program is probably expecting to earn at graduation, 10-20,000 RMB per month (USD 1250-2500 per month). Of course individual salaries will vary as they do in the US and elsewhere.

In rough numbers, I would estimate that of the 4-500 million urban dwellers, over half can already be considered to be consuming at significant levels. The remaining 8-900 million rural dwellers have much more modest purchasing capability and far less discretionary income, but should not be ignored. Many have family members in the city who are sending substantial sums back to the countryside.

I offer these thoughts as a way of expanding the discussion and to encourage some creativity in estimating the market for a given product in China.

Doug Allen
Department of Management
University of Denver

China Law Blog

China has more than 400 million cell phone subscribers. I actually did a post a few weeks ago where I talked about how that number might be a good measure of China's middle class. Many wrote in to dispute that. I thought it would be a good measure because it seemed to me that the people I saw with cell phones in China's cities were middle class, but it was pointed out to me that many in the villages buy used cell phones as a necessity for their work and have little to no disposable income. I am constantly looking for a way to measure China's consumer class, but I have yet to find a foolproof method.

Going Global

Both Doug Allen and Dan Harris in their comments have suggested that the numnber of cell phone users in China today is approximately 400 million. Based on recent data released by the Chinese government, I think their number is clearly more accurate than the 240 million cited in the original post based on the China Daily News report. So for sake in calibrating furture comments, unless someone else has a different number, let's go with the 400 million cell phone users in China vs. 90 million in Japan. The question remains of course what does that say about the size of the consumer market in China. My thanks to Doug and Dan to this point for their insights.

Craig

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