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China's Illusive Billion Customers Phil BrennanFor the last 700 years Western businessmen have lusted over the prospect of selling goods in what they saw as the world's largest market, with China's teeming millions just waiting for an opportunity to buy their wares. In a revealing story in the July 16 issue of the New Yorker magazine, writer James Surowieki puts a damper on the myth that has driven Western business for centuries - that there are billions of Chinese over there and every one of them is a potential customer. He cites the dream of English textile manufacturers back in the 1850s who somehow convinced themselves that if every one of those millions of Chinese men added a single inch to the length of their shirttails the textile makers would strike it dazzlingly rich. It appears nobody succeeded in convincing the Chinese to wear longer shirts. But the dream of tapping that huge market never died, and today it is a vision dancing before the eyes of America's business moguls, who fantasize about making enormous profits out of selling their wares to that mythical billion-person market. The dream was sparked by China's late dictator Deng Xiaoping when he threw the doors open to capitalism, Surowieki wrote, and it caught hold of the imaginations of the U.S. business community, which echoed the 19th-century shirttail slogan, saying "If just 1 percent of the Chinese buy our products we'll be rich." The dream is quickly shattered by reality. That 1.3-billion-person market shrinks dramatically once it is looked at with cooler eyes:
Using any arithmetic, that's a cool billion right there driven from the equation. The 1.3 billion shrinks to 300 million, a population roughly equivalent to our own. Among them is an emerging middle class with incomes a fraction of that of Americans. Unlike the American middle class, however, the Chinese are thrifty. They don't live up to their incomes, salting away a hefty 40 percent of their incomes while Americans blow 95 percent of what they earn and bank or invest a mere 5 percent. Surowieki admits that some U.S. companies such as Coke and Motorola have cracked the Chinese market, but notes that the rate of return such companies earn on their investment is only 5 percent - far less that it would be anywhere else in Asia. One of the biggest stumbling blocks to realizing the shirttail dream is the fact that "The Chinese have companies too." China, he adds, is "not a commercial void. Chinese businessmen are just as interested as American businessmen in selling to the Chinese. And they're better positioned." Finally, there is that matter U.S. businessmen are not prone to talk about: China is a communist dictatorship with a huge and corrupt bureaucracy that tends to stick its fingers into every phase of Chinese life. Yet despite all these drawbacks, American business continues to dream about the modern equivalent of the dream of a billion shirttails growing longer, largely ignoring such markets as India, which the New Yorker points out also has a billion people who are better educated and many of whom speak English.
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