The End of Cheap China

PUBLISHED : Sunday, 27 May, 2012, 12:00am
UPDATED : Sunday, 27 May, 2012, 12:00am


The End of Cheap China
by Shaun Rein
John Wiley & Sons

This is a lively, well-written book about the transformation of China's economy and how it will change the world profoundly.

Author Shaun Rein is the founder and managing director of China Market Research Group, which advises Fortune 500 companies. The quality of the book comes from Rein's interviews with Chinese people and companies, and his working in the country for several years. It has chapters on billionaires, labour, women, food, corruption, real estate, education and overseas expansion.

'The rise of Chinese firms will disrupt world markets in a way most never could have imagined just a decade ago ... The end of cheap China means that Western executives need to be prepared to fend off increased competition from their aggressive, battle-hardened, well-capitalised counterparts,' Rein writes.

He illustrates the transformation with the change in prostitutes. One night in a hotel in Changchun in 1998, his sleep was constantly interrupted by offers of sex, including a woman at his door who could have been a model for a fashion magazine and was available for 20-25 yuan.

In October 2011, on a street in Shanghai, he was accosted by a badly dressed middle-aged woman with no teeth and her face covered in make-up; she was offering her services for 100 yuan.

In those 13 years, the economy has exploded and women have been among the main beneficiaries. In the 1950s, Chinese women accounted for 20 per cent of household income, in the '90s 30 per cent: 'Now women account for more than half of income. Women account for 55 per cent of the US$15.6 billion of luxury items bought by mainlanders in 2011,' he writes.

The best chapters are those on the Chinese market and the companies in which Rein has first-hand expertise.

He describes well the mainland's transformation from a low-cost producer into one of the world's biggest consumer markets.

In the '90s, fewer than 10 per cent of Western brands selling in China made money, in part because no-one could afford their products. But, in its 2010-11 report, the US Chamber of Commerce in Shanghai found that 79 per cent of American companies made money in China, with 87 per cent reporting revenue growth in 2010, up from 47 per cent in 2009. 'A thriving middle class with the desire and the money to sustain brands that focus on more than just price, is fuelling these profits.'

Rein describes with admiration some of the entrepreneurs he has met and advised; they have built their fortunes in a difficult financial and regulatory environment, creating brands that have earned the trust of Chinese consumers and defeating the entrenched state companies.

The book is a wake-up call to Western companies to recognise the 'giant wave' that is approaching them - and they have no hope of turning back this wave.