Monday, December 28, 2015

Shanghai consumers make the turn to spending

The Chinese government is trying to move its economy from investment oriented to consumer spending. While that might not be working nationwide, in Shanghai the consumers certainly took up the challenge and are spending themselves silly, profiting from a very competitive climate. But is it enough to save the economy?

Just a few weeks running around in Shanghai cannot beat solid statistics, but consumer spending certainly does not seem to be hit here in China´s second largest city. On the contrary, a growing number of shopping malls serve a growing number of ready-to spend consumers.
A major exception are the high-end luxury goods. They are everywhere on display and the shopping corridor at the Peninsula Hotel at the Bund shows what Shanghainese like to see. But because of the high import taxes Shanghainese order purchases from friends and family abroad, where they can get identical products much cheaper. And the international brands probably do not mind if the Shanghainese buy their products in Paris or Milan, and not in Shanghai. As long as they sell, and not for nothing are the Chinese spending more than any tourist abroad.

But a lot of things are sold in Shanghai too. Here is a far from complete list on what Shanghainese today spend their money on, often unthinkable even five years ago.
High-profile concerts are doing pretty well. Friends gladly spend US$650 per ticket to attend a concert of Taylor Swift. More Shanghainese take a second international holiday, not only during Chinese New Year, but also during Christmas.
They visit blockbuster movies like Star Wars in high-end cinema´s, and are no longer happy with pirated copies on their TV. Extremely high-end dining is becoming a trend, like in Lei Garden. The so-called City Supers are supermarket that offer not only high end - often imported products - and are very busy, although they hurt your wallet severely.
Children are not only increasingly going abroad to attend middle-schools, also in Shanghai international middle schools, with annual fees up to US$50,000, are popular. Similar education abroad would still be more expensive.

Pollution is Shanghai, not as bad as in Beijing, but still regularly extremely unhealthy, would hold us back from returning to Shanghai, but for most of the Shanghainese - despite the worrisome figures - it is not reason con think of leaving. Many expats might have left, those who hang on just seem to live with it.
Also the increased prices seem to real deterrent. Apart from public transportation and taxis almost all costs seem to have gone up dramatically. But people seem to be able to afford it.

The retail infrastructure in Shanghai has been adopting dramatically over the past few years. Old first generation shopping malls got a firm make-over or existing ones got extended. We visited the now famous  K11 shopping mall at Huaihai Zhonglu, recently renovated, just like the famous New World Shopping mall at Nanjing Lu. Xintiandi got its third extension, and although we were not that impressed, it was obvious a heavy investment.
Big is also the IAMP mall at Huaihai Zhonglu, combining much of the previous mentioned products Shanghainese like: a huge cinema, one of the largest City Supers and regular promotional performances of celebrities.
Star Wars at IAMP shopping mall
All this justified optimism about Shanghai does not mean the rest of China is doing equally well. The country faces tough structural reforms. So, if your region is dependent on coal mines, steel factories, shipping or international trade, you might have to prepare for a few tough years. China has gone through structural changes quite a few times over the past thirty years, and has proven it can do the job. Although it might not be easy.
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