Increasing prosperity will bring business opportuniteis across China, but Europeans need to understand traditional loyalties

Chinese consumer spending across many of the mainland's hitherto less developed interior cities is set to increase exponentially, even though modest gross domestic product figures continue to make front page news.

Despite considerable attention being paid to short-term economic issues and challenges facing China and the wider world economy, it is vital for the business community and business leaders in particular to retain a long-term perspective.

Competitive strategy and brand building always require a long-term perspective, and it is with this in mind that considerable attention should also be paid to a recently published paper by the The Economist Intelligence Unit.

The EIU is the research and analysis division of The Economist Group, sister company to The Economist magazine. Its most recent publication, The Chinese Consumer in 2030, presents a fascinating long-term insight into the emergence of Chinese consumer behavior and spending power.

European businesses aiming to secure long-term competitive advantage across mainland China should see this as essential reading. Industry leaders need look no further than the report's headline, which states that the rise in spending by Chinese households over the next 15 years will be greater than the level of household spending in the European Union today.

More specifically, the report highlights the fact that by 2030 more than a third of China's consumers will have a disposable annual income level in excess of 67,600 yuan ($10,000; 9,000 euros; 8,000). Only 10 percent of China's population enjoys that level of disposable income today.

Such growth in disposable income, spread over an increasing geographically dispersed Chinese consumer group can only lead to increased consumer spending across a range of products and services, creating attractive opportunities for European industries.

With a current population of 1.357 billion, China is expected to reach 1.415 billion by 2030.

The report also forecasts that private consumption should rise by a healthy 5.5 percent year-on-year from now until 2030, which is a bigger increase than forecast GDP growth over this time period.

But perhaps most significant of all is the report's prediction of consumption changes across the Chinese mainland's relatively less-developed regions and cities. Major centers of consumption could emerge in Southwest China: Neighboring provinces of Sichuan and Hunan are highlighted in the report, with the respective capital cities Chengdu and Changsha predicted to emerge as major economic and consumption hubs across the wider western China region. Southwest China's municipality of Chongqing is considered a major growth area too.

Central China's Hubei province is also forecast to emerge as a major consumption center with its focal point the provincial capital of Wuhan.

Each of these cities is set to have a massive 2 million high-income consumers by 2030.

European brand managers should read very carefully and review business plans and strategies accordingly. They need also look beyond the modest economic growth record in recent years across the Chinese mainland. It is important to be aware of the fact that China is still in the early to middle stages of developments in terms of its consumer spending. Across many product and service categories the country is still only approaching the stage at which consumer spending increases exponentially.

The report not only highlights increases in income and, consequentially, consumer spending but also points out that as this happens over the next 15 years there will also be an upgrade in consumption habits. Chinese consumers are set to switch to increasingly expensive, premium brands. European brand managers need, therefore, to take into consideration far more than just first-tier Chinese cities when reviewing and ring-fencing their target markets.

Specific areas that should see significant increases in consumer spending are the leisure and tourism sectors, consistent with changes in lifestyles generally during the typical economic industrialization and modernization process.

Brand managers should cast their eyes far and wide across China's vast mainland, the report said. Not only are many second-tier cities set to become attractive market opportunities with significant increases in consumer spending but even smaller and lesser known cities will emerge over the next 15 years. Shaoxing, situated in Zhejiang province and Nantong, Jiangsu province, are both identified as major growth areas.

The city of Zhuhai, Guangdong province, is also predicted to take off soon and fast become a major consumption city, rivaling the province's two first-tier cities of Guangzhou and Shenzhen.

But when reading this and other related reports, European brand managers must avoid falling into the trap of associating automatically the process of modernization in Chinese consumer spending and lifestyles with any decline in traditional habits and lifestyle patterns.

In the case of Chinese consumers, any increase in the modernization of spending behavior and lifestyle values does not lead consequentially to a decline in traditional values and lifestyle habits and patterns. In fact, my research in recent years has revealed consistently that younger Chinese consumers retain a very strong sense of tradition and value more and more the branded goods and services that evoke nostalgic memories of ancient Chinese history.

It is with this in mind that European brand managers should consider repositioning their brands, attaching important aspects of traditional Chinese culture to the brand image. For example, only a few years ago celebrity endorsements and brand ambassadors were the preserve of Western celebrities, mainly from the entertainment and sports industries. But in recent times Chinese film stars can be found promoting Western brands to a Chinese target market. European brand managers should take note.

Emotional brand attachment should no longer be seen as simply promoting a brand's Western origin, or its origin in any country or geographically defined region in particular. For example, French and Italian fashion brands will carry decreasing emotional meaning over the next 15 years and will need to counter this change in the Chinese consumer interpretation with subtle references to the brand's history and more overt visual imagery related to traditional Chinese history.

Finally, and perhaps most important, European brand managers should be searching for suitable Chinese companies with which to forge long-lasting, symbiotic partnerships. Of course Chinese companies that are based in what are considered to be the new wave of major consumption cities across the Chinese mainland would appear to be the starting point.

National culture across China will always remain dominant, but so will regional subcultures. European companies can best engage with these often very different subcultures by embarking early on a long-term tie-in with a local company.

The phrase "first mover advantage" has never been more appropriate. Those European brand managers who invest significantly - and soonest - across the Chinese mainland could reap huge rewards for many years to come.

The author is a visiting professor at the University of International Business and Economics in Beijing and a senior lecturer at Southampton University. The views do not necessarily reflect those of China Daily.

(China Daily European Weekly 11/11/2016 page10)