China Consumer Market: Asian Perspective Helps

The rise of China since 1989 has been the most remarkable development story of our times. The number of people lifted out of poverty is historically unprecedented: 65 percent of Chinese people lived below the poverty line in 1981; in 2007 it was 4 percent (World Bank).

Many commentators have focused on China’s astonishing work ethic, vast labour resources and ability to export great quantities of products. But while China has been busy meeting the needs of the world economy, domestic Chinese consumption has received less attention.

Yet, with the Chinese firmly established as keen savers and very ambitious to improve their living standards, a vast new opportunity has emerged: the Chinese consumer market. But it will be a tricky market to tap. Chinese consumers are notorious bargain hunters and prefer to save and invest rather than consume. Poor rural families earning less than US $200 per person a year still are able to save 18 percent of their income.

This makes a lot of sense: social supports have been stripped away as China’s economy embraced the market system. If you do not save and invest, then you will not have the resources to meet the costs of education and health care, for example. China has also seen a dramatic move to urban areas, with over 43 percent of the population now urban.

China, despite all the hype, is still a marketplace that is difficult to easily enter for Western brands and businesses. And this makes for an opportunity for local brands to raise their game.

In order to compete in the consumer market, businesses need to do more than compete on price: they need to also offer something more and that usually involves building a strong brand.

The Chinese urban consumer market could grow from around US $570 billion in 2005 to around US $4.7 trillion by 2025 (PWC) (http://www.pwc.co.uk). Fast growth will be seen in discretionary spending, things other than food, clothing and utilities.

While Chinese businesses have focused on export markets and meeting the needs of the global marketplace – a focus which has been very successful and led to remarkable wealth gains – the Chinese consumer has come lower down the list of priorities. 

 Growing the domestic consumer market offers a substantial wealth-creating opportunity. Since the global economic crisis erupted in 2008, it has become apparent that the old model of exporting vast quantities of products to Western consumers alone will not be enough to keep living standards rising. Western economies are highly indebted and will take many years to recover from the mistakes and debts from the boom years and the economic crisis. 

 This is an opportunity for South-South trade, which made up 20 percent of global exports by 2010. Foreign direct investment to developing economies rose by 10 percent in 2010 due to a rapid economic recovery and increasing South-South flows. 

 One company successfully targeting this market is the Singapore-based Banyan Tree Hotels and Resorts brand (www.banyantree.com), which bills itself as specializing in luxury sanctuaries to rejuvenate the body, mind and soul. It is notable for deliberately not competing on price but on its brand reputation and for tailoring its offering explicitly to Asian tastes. The company claims its resorts are “naturally-luxurious, ecologically sensitive, culture-aware experiences for the discerning, responsible traveller.” 

 The first Banyan Tree resort was built in Phuket, Thailand in 1987. It now employs 8,200 people from 50 nationalities in 26 resorts. Founder and executive chairman Ho Kwon Ping focused from the start on the business’s brand as critical to driving the growth of the company. 

 He told INSEAD Knowledge: “The difference between us and some others is that, for many other companies having a strong brand is a reward for being successful in many things that you do but it’s sort of coincidental. It comes afterward; it’s a reward for success in other areas. For us, we’ve always said from the very beginning – having a strong brand is imperative for our survival.” 

 Banyan Tree has also eschewed quick-growth models, instead trying to do as little environmental damage as possible and to include community development and environmental projects at each resort. 

 Its Banyan Tree Ringha resort in China’s Yunnan province tries to bring the atmosphere of the fictional earthly paradise of Shangri-La to China. Ringha Valley sits near the Temple of the Five Wisdom Buddhas, 3,600 meters above sea level. The resort has 15 one-bedroom suites, 11 two-bedroom lodges, and six spa suites, decorated in a Tibetan style. The area is home to the Naxi people who trace their origins to nearby Tibet (http://en.wikipedia.org/wiki/Naxi_people). 

 The accommodation is rustic and the resort is located in the middle of a village. Visitors can see farmers at work right from the resort. Overlooked by Tibetan mountains and settled in a lush, fertile valley the sight was picked for its tranquillity and isolation. The appeal of the area to tourists is clear: mountain peaks, deep canyons, rivers, valleys, streams and tranquil lakes. And in polluted urban China, it is an area free from pollution. 

 The resort is built from transplanted Tibetan farm houses and offers hikes, mountain lakes, hot springs, gorges, forests. There are Asian touches like a welcome at the resort of Tibetan horns, songs and a tea ceremony. 

 Tourism is transforming the area. Towns and villages have been renovated to showcase traditional architecture. 

 The hotel and resort chain gets its name from the tradition of ancient merchants gathering under the branches of the banyan tree to conduct business in the cool shade.

“The 21st century is really going to be the age of Asia – both India and China,” said Ho Kwon Ping. “The huge consumer markets are going to be Asian … Now there’s a real opportunity for people of Asian origin, who have an instinctive cultural feel for where their consumers are moving towards, to come out and create a brand which can be primarily rooted in their own Asian context, but have a global relevance.”

By David South, Development Challenges, South-South Solutions

Published: March 2011

Development Challenges, South-South Solutions was launched as an e-newsletter in 2006 by UNDP's South-South Cooperation Unit (now the United Nations Office for South-South Cooperation) based in New York, USA. It led on profiling the rise of the global South as an economic powerhouse and was one of the first regular publications to champion the global South's innovators, entrepreneurs, and pioneers. It tracked the key trends that are now so profoundly reshaping how development is seen and done. This includes the rapid take-up of mobile phones and information technology in the global South (as profiled in the first issue of magazine Southern Innovator), the move to becoming a majority urban world, a growing global innovator culture, and the plethora of solutions being developed in the global South to tackle its problems and improve living conditions and boost human development. The success of the e-newsletter led to the launch of the magazine Southern Innovator.  

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Model Indian Villages to Keep Rural Relevant

 

The world’s rush to urban centres is the great challenge of the 21st century. In 2007, the world became a majority urban place. The consequences of this shift can be seen in the blight of urban poverty, with its slums and squalor, environmental degradation, and rising social tensions. But there are people working on keeping rural areas relevant and pleasant places to live. These rural advocates see a vibrant countryside as part of the solution to the world’s plethora of crises.

In India, a pioneering initiative is reviving impoverished rural villages. Drawing on self-organizing methods used in India since 1200 BC, the Model Village India (www.modelvillageindia.org.in) is based around India’s democratic system of Panchayats: a village assembly of people stemming back to pre-colonial times.

“Decentralizing is necessary if development is to reach the grassroots,” said the concept’s founder, Rangeswamy Elango, a head of the village of Kuthampakkam, 20 kilometres (12 miles) from the bustling city of Chennai, and one of the 12,600 Panchayats in the Indian state of Tamil Nadu.

While all villages have the ability to use the Panchayat system to improve their lives, few are making the most of this system. The model villages are about showing other villages the true power they have at their disposal. And that with a plan and determination, they can increase their income and improve their quality of life, attracting more money from government and other sources to do so.

The concept has now expanded to 30 model villages. At its core it is about being positive, eschewing griping about problems and instead getting down to work to solve them.

“We demonstrate the basic infrastructure, sustainable housing, food security,” said Elango. “If the government is not bothering, maybe through the local people’s efforts, we can try to demonstrate a variety of development models.”

As India’s economy has boomed, its small towns and villages have withered. Home to the majority of the country’s population, they are in crisis, with declining populations and high suicide rates. India’s urban slums are where people are going – they are growing 250 percent faster than the country’s population. India is a country in danger of neither having a viable rural economy, nor viable cities, but just vast tracts of slums.

Originally left out of the first draft of India’s constitution, Panchayats became legitimized in 1992. They are now elected in every one of the 260,000 villages in India. If they use them, the local Panchayats have extensive powers to transform the destiny of a village, with control of budgets, and decision-making power on how services are to be delivered. This ranges from the provision of clean water, to burying the dead and building roads. The trick is in getting people to realize the power they wield over their destiny and how it can transform their economic situation.

“The village-level local governments are constitutionally important bodies,” said Elango, “but the way it is implemented is not good. The system is unable to deliver the goods to the people.”

The model village approach has revived once-declining villages plagued with high unemployment, chronic alcohol abuse, and domestic violence. The residents are involved in the building of new and healthier homes, providing clean drinking water, waste facilities, education services – including an academy dedicated to teaching the skills and lessons leaned by the villagers to other villages – and even trying to break down the barriers between people because of India’s caste social hierarchy.

“Instead of having a big college, this is a practical people’s model,” Elango said. “It is not done by an academic but by a layman. The learning is spontaneous and emotional.”

Elango is driven by making his village a model that works, and in turn, becoming a magnet for others wishing to improve their lives and their villages.

Elango’s village was not able to support itself with its two crop harvests a year and the villagers resorted to illegal alcohol production instead to make a living. Despite being well connected by highway with nearby Chennai, the village was socially and economically dying.

Like a spreading ink spot, the concept is to create a network of like-minded villages that act as self-reinforcing positive role models, spreading the prosperity and stability outwards. The “Network Growth Economy Model” is a direct challenge to the “special economic zones that benefit only capitalist owners,” said Elango.

Ambitious, Elango is hoping to draw in 2,000 villages over the next 10 years, until a tipping point is reached, and the model explodes across India.

A native of the village, Elango became saddened by the community’s decline, including widespread domestic violence against women. The booming city of Chennai’s prosperity had not rippled out to the village, and it was still lacking good infrastructure and sanitation. A trained chemical engineer, he was elected the President of the Kuthambakkam Panchayat in 1996, and set about using his engineer’s perspective to draft the village’s five-year plan from 1996 to 2001.

But the budget was tight. And he had to turn to innovative solutions: recycling building materials, conserving water and reducing electricity consumption. But the resourcefulness paid off, and the state of Tamil Nadu provided the money to upgrade roads, drains, build a community centre, child care facilities, 200 low cost toilets, and work sheds for the village’s industries. By the end of 2001, most basic needs were being met. He then turned to providing good quality housing for the villagers still living in thatch huts.

He has used the “Network Growth Economy Model” to tackle the unemployment and low incomes. It works like this: rather than buying food and other products from outside the village, the villages band together to establish industries to provide those products to each other. This creates jobs and increases income by keeping the wealth within the network of villages, rather than it benefiting far-away companies. The new businesses include Thoor dhal processing, dairies, soap making, bakeries, ground nut oil production, and leather making.

“India was strong when this model was in place – we had strong villages,” said Elango. “Globalization’s trickle down is not working for India.”

By David South, Development Challenges, South-South Solutions

Published: November 2008

Development Challenges, South-South Solutions was launched as an e-newsletter in 2006 by UNDP's South-South Cooperation Unit (now the United Nations Office for South-South Cooperation) based in New York, USA. It led on profiling the rise of the global South as an economic powerhouse and was one of the first regular publications to champion the global South's innovators, entrepreneurs, and pioneers. It tracked the key trends that are now so profoundly reshaping how development is seen and done. This includes the rapid take-up of mobile phones and information technology in the global South (as profiled in the first issue of magazine Southern Innovator), the move to becoming a majority urban world, a growing global innovator culture, and the plethora of solutions being developed in the global South to tackle its problems and improve living conditions and boost human development. The success of the e-newsletter led to the launch of the magazine Southern Innovator.  

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Record-breaking Wireless Internet to Help Rural Areas

 

Many initiatives seek to bring inexpensive access to the Internet to rural and remote regions around the world. One of the most successful ways to rapidly expand access is to offer wireless  Internet so that anyone can use a laptop computer, a PC or a mobile phone to quickly access the Net. Access to wireless Internet is being rolled out in cities around the world with so-called ‘hot spots’, but the thornier issue of improving access in rural or remote regions could get better, thanks to a Venezuelan team.

The rapid expansion of mobile phones has done much to reduce the digital divide in Africa, for example, where the number has grown from just 15 million in 2000 to more than 160 million by the end of 2006, according to the International Telecommunications Union. This rapid growth has paid off: Morocco, Senegal, Ghana, Gabon and Cote d’Ivoire are in the top ten gainers of the Digital Opportunity Index, 2004-2006 (http://www.itu.int). The proliferation of Wi-Fi-enabled mobile phones combined with the spread of inexpensive wireless access has the potential to close the digital divide between rural and urban areas.

The issue of inequality in access to the Internet has stark consequences for global economic development. Already, according to the World Information Society Report 2007, “Europe has achieved the largest overall gain in digital opportunity over the last two years, followed by the Americas… Asia and Africa have witnessed smaller gains in digital opportunity. The implications for the digital divide are clear: digital opportunity is becoming more sharply divided by region, not less.”

As the Digital Divide campaign learned, it is more important to keep in mind “Internet kiosks or rental of cell phones and other devices hold great promise for the poor. But shared use is a complement to a strategy that involves giving each person their own wireless device. Eventually, the price of such devices will be low enough so that everyone can have their own device.”

A Venezuelan team led by Ermanno Pietrosemoli, president of the Latin American networking association Escuela Latinoamericana de Redes, has broken the world record for unamplified broadcasting of a Wi-Fi (wireless Internet) signal. The signal was broadcast in June from two mountains 282 kilometres apart in the Venezuelan Andes. Importantly, they did this using equipment costing only just over US $360, while producing a signal strong enough to send video messages. The former record was 220 kilometres set in 2005.

The consequence of this achievement for entrepreneurs is important: It means inexpensive wireless signals can now reach further into remote and rural regions for a small investment.

“We we’re able to transmit voice and video with both,” said Professor Pietrosemoli. “280 kilometres is pushing the envelope, but the same technique can be used at distances of some 150 kilometres by people with some basic training provided there is uninterrupted line of sight between the end points. This usually means shooting from hills or using them as repeater points. For distances up to 80 kilometres, towers can be used to provide connectivity even in flat land”

Pietrosemoli is willing to train people in the techniques he has developed for transmitting wireless over large distances (https://wireless.ictp.it or www.eslareed.org.ve).

The advantages of this approach include cost and simplicity. The more commercial WiMax technology costs more and is usually installed by large companies. Pietrosemoli’s technique is for people who lack those technical and financial advantages.

“I have been installing wireless networks for some 20 years,” he continued, “and reckon that wireless is the only viable alternative to ameliorate the digital divide in developing countries. For rural areas, the challenge is to use as little repeater sites as possible, as each repeater adds costs, delay and powering issues.”

Pietrosemoli said the only other obstacle to setting these networks up is the availability of unlicensed radio frequency spectrum in the 2,4 and 5 Ghz bands. The International Telecommunications Union has recommended that countries make these free for the use of data networks, but some countries are still blocking this.

By David South, Development Challenges, South-South Solutions

Published: July 2007

Development Challenges, South-South Solutions was launched as an e-newsletter in 2006 by UNDP's South-South Cooperation Unit (now the United Nations Office for South-South Cooperation) based in New York, USA. It led on profiling the rise of the global South as an economic powerhouse and was one of the first regular publications to champion the global South's innovators, entrepreneurs, and pioneers. It tracked the key trends that are now so profoundly reshaping how development is seen and done. This includes the rapid take-up of mobile phones and information technology in the global South (as profiled in the first issue of magazine Southern Innovator), the move to becoming a majority urban world, a growing global innovator culture, and the plethora of solutions being developed in the global South to tackle its problems and improve living conditions and boost human development. The success of the e-newsletter led to the launch of the magazine Southern Innovator.  

Follow @SouthSouth1

Like this story? Here is a dirty secret: this website is packed with stories about global South innovators. We spent 7 years researching and documenting these stories around the world. We interviewed the innovators to learn from them and we visited them to see how they did it. Why not use the Search bar at the top and tap in a topic and see what stories come up? As for my work, I have been involved with start-ups and media ventures since the early 1990s. While most tech entrepreneurs were either still in their nappies in the 1990s (or just a drunken night away from being conceived in the 2000s), I was developing content for this new thing they called the "Internet". In the years since I have learned a great deal about innovation and digital and have shared these insights in the stories on this website as well as in the 5 issues of Southern Innovator magazine. So, stick around and read some more!    

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Creative Use of Wi-Fi to Reach the Poor

In 2003 former UN Secretary-General Kofi Annan called for greater access to wi-fi, or wireless internet networks, as a mechanism to help poorer regions catch up with the pace of technological change in developed countries. Wireless networks remove the need to lay costly wires and can quickly bring fast and convenient internet access to large populations currently denied access. By removing the need to lay lots of cables to get communities online, wireless could help poorer nations narrow the digital divide and catch up with countries where the technology has already taken hold. Social entrepreneurs are stepping in to fill the gap between the promise of wi-fi and the reality.

A contemporary take on the mobile library, where a bus travels to remote or under serviced areas to lend books, is being used to bring wi-fi and web content to remote villages in India, Rwanda, Cambodia and Paraguay lacking internet access. United Villages and its subsidiary First Mile Solutions cleverly targets only the content the villagers really want and then provides it to them for a fee. Using a fleet of buses and motorcycles, they upload in the city before going to the countryside popular pages and pages previously requested. “There’s only 0.003 percent of the web that rural Indians care about,” founder Amir Hassan told the BBC. “They want to know the cricket scores, they want to see the new Aishwarya Rai photos, and they want to hear a sample of the latest Bollywood tunes.”

Once in the countryside, a small box with an antenna onboard the buses or a motorcycle communicates with the rural computers, sometimes up to six times a day. Special content requests can be made for a few rupees, and emails are collected and delivered. Not only do the buses deliver web content, they also act as a courier service, picking up and delivering products ordered via the web for the villagers. “We-re bringing e-commerce to rural India,” said Hassan.

“My objective is to show to the village youth that having a PC with connectivity is a viable business, so that more and more unemployed youth can take up this as a self-employment opportunity,” remarks villager Raj Kishor Swain, who helps with United Villages.

Green WiFi, based in San Francisco, has a simple aim: to provide children in developing countries with access to the internet. But the difference is that they have developed a solution to the biggest problem in most remote regions: reliable electricity supply. Their invention is intended to partner with the US $100 laptop computers being rolled out in the developing countries by the One Laptop Per Child Project. Green WiFi has developed a low cost, solar-powered, standardized wi-fi access solution that runs out-of-the-box with no systems integration or power requirements. All that is required is a single source of broadband access and light.

In a further boost to internet access in Africa, the World Bank is also funding US $164.5 million in high-speed internet access for Kenya, Burundi and Madagascar to boost regional competitiveness. Eastern and much of Southern Africa is the only region in the world not connected to the global broadband infrastructure.

By David South, Development Challenges, South-South Solutions

Published: April 2007

Development Challenges, South-South Solutions was launched as an e-newsletter in 2006 by UNDP's South-South Cooperation Unit (now the United Nations Office for South-South Cooperation) based in New York, USA. It led on profiling the rise of the global South as an economic powerhouse and was one of the first regular publications to champion the global South's innovators, entrepreneurs, and pioneers. It tracked the key trends that are now so profoundly reshaping how development is seen and done. This includes the rapid take-up of mobile phones and information technology in the global South (as profiled in the first issue of magazine Southern Innovator), the move to becoming a majority urban world, a growing global innovator culture, and the plethora of solutions being developed in the global South to tackle its problems and improve living conditions and boost human development. The success of the e-newsletter led to the launch of the magazine Southern Innovator.  

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