Chinese Consumers Eager to Excel at the American Pastime

(By Andy Wong -- Associated Press)
By Ariana Eunjung Cha
Washington Post Foreign Service
Saturday, November 15, 2008

SHANGHAI -- Decked out in a stylish black suit and knee-high boots, Wang Yaping surveyed the scene at her favorite spot in the city for afternoon tea. It was packed, but there, in the back, was a single free table.

The waifish 26-year-old dropped her laptop bag on a chair, opened her menu and began ordering her favorites: milk tea, black forest cake, chicken wings, waffle fries. It was a typical Chinese order at a quintessential American chain: Pizza Hut.

"The food is good, but really I come here for the ambiance," said Wang, who is a client liaison for a construction company. The bill for her snack: more than $25, or 70 percent of her day's wages.

Wang and other Chinese consumers are the great hope of U.S. companies at a time when the economy back home is freezing up.

For generations, American consumers have been one of the most powerful economic forces on the planet. Whenever the U.S. economy went south, shoppers could be depended on to come to the rescue with their open wallets. With home values falling, credit running dry and jobs disappearing, that's not happening this time. Retail sales plunged by 2.8 percent -- the largest amount on record -- in October from the previous month, according to Commerce Department figures released Friday.

The opposite is true in China.

Long known for high saving rates, China's middle-class consumers are starting to spend like their American counterparts. Of China's 11.4 percent growth in the gross domestic product last year, the largest segment, 4.4 percent, was in consumer spending. That sector still represents just 38 percent of China's overall GDP, roughly half the percentage in more developed countries, but in the eyes of retailers that means more opportunity.

"Conspicuous consumerism is on the rise among Chinese," said Fu Hongchun, a business professor at East China Normal University in Shanghai. He said the trend is driven in part by competitiveness. "If one resident in a community buys a new TV, all residents in the same community will update their TVs," Fu said.

Increasing consumer spending is a key goal of the $586 billion economic stimulus package unveiled Sunday by China's leaders. China hopes the cash infusion will help offset slowing exports and investments, which were the foundation of the country's boom over the past decade.

Despite the cooling world economy, retail spending in October rose 22 percent from a year earlier, according to figures released this week. But there's a growing concern that mounting job losses and battered stock markets may weaken household spending. If that happens, U.S. companies could be in even more trouble than they are in now.

Meanwhile, some Chinese consumers are also adopting the biggest vice of American consumers: debt. Mesmerized by a banquet of Western-style financial products, some Chinese consumers are juggling multiple credit cards, consumer loans and installment plans to buy an ever-increasing quantity of cars, washing machines and vacations.

Even as the typically lucrative holiday season is approaching in the West, many global retailers have written off U.S. and European consumers as lost causes and are shifting their strategies to emerging economies.

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