The Chinese economy is growing at a rate of 7.5% and while it is slowly decreasing it still
surpasses all other developed markets in the world. This together with the size of the
Chinese domestic market, makes doing business in China important. In recent years, there
is a change in the Chinese consumption pattern, as income growth outpaces inflation more
people are engaging in higher consumption as a result of more discretionary income.
According to a survey by Mintel Lifestyles, the Chinese consumers spend 9.2 % of their
income on vacation and tourism and 9% on clothing and accessories, indicating second
and third highest allocation of income. An increase in the middle class sector provides
opportunities to explore new, emerging markets such as the good-enough market. The
positive impacts of the good-enough market can be exemplified in automotive,
infrastructure and even piano industry, where companies conduct market segmentation and
develop a new line of value-oriented products. These products can be further launched in
other emerging markets.
However an increasing threat is that rapid economic growth breeds risk of economic
bottlenecks. There are environmental bottlenecks such as pollution, traffic congestion and
shortages of water. These problems can create social unrest and further lead to economic
slowdown. The capital allocation system also has bottlenecks as issues of non-performing
loans are arising. Labour shortage problems will also occur as Chinese demographics shift
towards ageing population. In response to these issues, the 12th 5-year plan brings radical