fallon brainfood: dragon (china) rising

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::Brainfood::

Dragon Rising

15 February, 2007

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Thanks for coming. So, let’s talk about China.

Dragon Rising: The New China

Changing cultural and economic landscape.

The role of government in today’s China.

Business and the booming consumer market.

A cultural evolution.

A company that’s doing it right.

What could it mean for you?

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“The world has never seen such a suddenand sustained rise of an economy that

was so desperately poor just threedecades ago.”

Brian BremnerBusinessWeek: Why Taming the Dragon is Tricky

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Everyday, we read about the incredible story thatis China but without a clear understanding ofhow it affects our lives.

As a global company, it’s a topic that’s more relevant than ever.

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And with the 2008 Olympics being describedas China’s “coming out” party, the buzzwill only increase.

The event will be the most profitable in Olympic history—over $1 billion in revenue from local sponsorships.

Source: International Olympic Committee Statistics

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The nation’s growth has been staggering inrecent years, sometimes beyond comprehension.

Annual economic growth rate over the past 25 years: +9%.

Urban population: 2001-2006 annual income growth +9%.

Economy will become 2nd largest market in the world this year.

More than 660 cities: 49 have +1 million people.

Sources: The Economist

Money Management Feb 2007 AdMap China Supplement Feb 2007

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It’s a complex nation, full of contradictions andconstantly changing market dynamics.

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At the core of everything is the people. Theirculture, values, aspirations and ambitions aredramatically shifting, and understanding themis key in figuring out how we fit in.

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Chinese consumers are finally seeing theircountry taken seriously on the global stage.

Aspire to be political, business, and cultural trendsetters.

And they know the world is watching.

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We’re witnessing the rise in national desireto be a country led by innovation,not just manufacturing.

Leading the charge in areas such as stem cell research and theexploration of space.

By 2050, they seek to be the global leader in science.

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People are optimistic about the future, and seetheir government as a positive force.

Source: Pew Research Global Attitudes Project July 2007

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While getting softer, the realities of a communistgovernment often impede growing cravings forfreedom and creative expression.

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But despite some ugly realities, Chinese peopletoday have a government more open toWestern style consumption than ever.

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While the future will be led by business andconsumer culture in cities like Shanghai, peopleacross the country are following the trends.

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“Marketers who ignore the pent-up demandof 1.3 billion emerging consumersspending more than $700 billion

do so at their own peril.”

Noreen O’LearyAdWeek China Series

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Brands are being redefined through a uniquecultural lens.

In many ways still new to a consumption culture, people are seekingout brands that align with their aspirations.

U.S. China

Status, “face”Cheap, quick

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An unprecedented level of freedom is spurringreal world business training and education.

Border restrictions continue to loosen, benefiting all of us.

6.8 million Chinese traveled to Hong Kong in 2006.

80 million Visas were granted to residents previouslyunable to visit Hong Kong.

Influx into China as well: 2nd biggest tourist spot by 2010,world’s premier destination (will pass France) by 2020.

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At the heart of this is the emergence of a culturethat is fueled by its aspirations for success.

The auto industry is a particularly telling example.

Fastest growing auto market in the world.

Number of cars sold grew 22% in 2007 (8.8 million sold).

Source: AdWeek China Series 2007 People’s Daily Feb 2007

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“Consumer psychology is hierarchal here.Brands are markers in this

ambitious society.”

Tom DoctoroffJWT

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Years of association with “cheap” and “fake” haslead to a craving for authenticity.

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Source: AdWeek China series

We’re witnessing the rise of a middle classstarved for branded consumption.

Current urban population with significant discretionary spendingpower is estimated to be around 125 million people.

Projected to grow to 650 million by 2015.

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And the wealth of this group is expected to growat astronomical rates.

Source: AdWeek China series

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Status brands are the new badge of honor, and inmany ways have created new lifestyles.

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It’s indicative of a broad cultural shift: a historicallythrifty populace now eager to spend their cash.

Source: AdMap China Supplement Feb 2007

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Driven by curiosity (and ability) to explore theworld beyond China, they’ve rapidly adoptedtechnology and new media.

More than 135 million Chinese are online.

43% use message boards.

76% are on video sharing.

24% are active bloggers.

400 million mobile phone users (compared to US: 250 million).

Source: CIC Data

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Nearly 80% of Chinese Web sites have some form of bulletinboard system.

Daily page views across boards: 1.6 billion (10 million newposts published every day).

45% of Chinese people who use bulletin boards spend 3-8hours per day.

47% of users have bought products directly through abulletin board.

Source: iResearch Consulting Group 2007

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In such a short period of time, they’ve more orless caught up with the developed world in themedia they choose to engage with.

Social Networking Professional Networks

Online Video

Source: China Internet Network Information Center Jan 2008

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Young people in particular have leapfroggedtechnology adoption at incredible rates.

In a survey of 15-21 year olds…

Used IM Yesterday

Engaged with Virtual Worlds

Watched TV yesterday

Read magazines

Source: Harris Interactive China YouthPulse 2007

China (Shanghai) U.S.

91% 59%

64% 22%

19% 68%

81% 20%

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The flip side to this amazing story is that,for much of China, this is all still a doton the horizon.

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To help put what we’ve talked about today intocontext, let’s look at a company that’s shown itknows how to engage people in China.

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An incredibly complex and diverse nation ofpeople demands a China strategy just as intricate.

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We’re seeing a generation of entrepreneurial andcreative minds redefining what it means to be aChinese company.

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The emerging young and affluent are poisedto define China’s global future.

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And developing a deeper understanding of thisnew generation is critical for our own future.

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“To be successful in China, businesses needto stop lusting after the billions, and take

time to understand the one.”

Sandy Thompson, Head of Planning (Asia)—Saatchi & SaatchiAuthor: “One in A Billion—Xploring the New China”

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Check the blog and keep the conversation going:http://fallontrendpoint.blogspot.com

Middle Class Virtual Worlds

Virtual Life

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Avatar

Instant Message

Brainfood

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Chery

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eBay

Brands

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Environmentalism

Brand Evangelists

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Early Adopter

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Connections

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Co-Created

Going Local

Brandz

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Agency Culture

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Black Gold

Income Divide

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Guanxi

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QQ Coins

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Community

Futurist

Customization

ChinaStarbucks

Made in ChinaTelecom

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Watch for next month’s invite to Brainfood.