Hi everyone,

It’s good to be back home in Sydney, Australia, after our 3 week vacation in Hong Kong, Macau and Malaysia. During our trip I noticed the rise of the China middle-class in action first-hand, and it was an eye-opener!

Here are a few insights:

• China is still predominently a cash society. Their consumers pay for everything in cash, including cars! At Sydney airport I noticed what looked like someone from China pay for over $2000 worth of Paul Smith clothing in cash. It took a while for the cashier to count and double check the money was right.
• I noticed far more jewelry stores in Hong Kong that my last visit 3 years ago: Apparently people from China are buying watches and jewelry, sometimes in bulk – 5 or 6 watches at a time.
• Prices in Hong Kong have increased, sometimes dramatically, since our last visit 3 years ago. Friends tell us that some brands have increased by 50% or more, and the most popular sizes are often sold out. Popular brands don’t need to have Sales as consumers from China are shopping like crazy.
• Macau is fast becoming the Las Vegas of Asia. It’s not quite there yet – probably needs another 5 to 10 years of development. It has lots of new casinos, but needs more entertainment and family attractions. We stayed there 2 days and noticed that most of the visitors spoke Mandarin and were probably from mainland China.
• An article in one of the local newspapers said that the jewelry stores in hotel lobbies in Macau can attract as little as 25 to 30 walk-in customers a day. Yet they would sell as many as 10 to 12 watches to those customers. I guess the mark-up is sufficient to cover the rent and staff and still make a profit. What an easy job!
• China has restrictions on how much cash a resident can take out of the country. To get around this people from China who go to Macau to gamble use jewelry stores as ATMs. How? When they arrive in Macau they head to a jewelry store and buy an expensive watch or jewelry with a credit card, and immediately sell it back to the jewelry store in return for cash, minus a ‘transaction fee’. Consequently Macau now sells more watches and jewellery than it does clothing, supermarket goods and motor vehicles combined.
• A couple of mates and I popped into the casino after the family went to bed. I think every punter was Asian – I didn’t see a single Westerner. Chinese people LOVE to gamble. That’s why all the major hotels and casinos are investing billions in Macau.
• Poker machines are the most popular games in Las Vegas. In Macau, it’s Baccarat.
• Did you know that people in Hong Kong love to go to China to buy cheap pirated DVDs and imitation designer goods? At the same time the upcoming middle-class in China shop in Hong Kong to ensure the designer products they buy are genuine and for its tax-free shopping. Isn’t that funny? :-)

These first-hand insights fits in with the constant data and news that’s showing China’s upcoming middle-class is where the money is. Whilst consumers in the United States are cutting back. China’s middle-class is shopping like crazy.

Experts expect China’s middle-class to increase to between 500 and 700 million consumers by 2020. That’s double the population of the United States. I wouldn’t be surprised if China surpasses the U.S. in Billionaires and Millionaires by then.

If I didn’t have a family with kids in school, I would jump on the next plane and go make my fortune in China.

All the big brands are already in China. It’s only a matter of time before smaller companies follow suit. It’s not easy to do business in China. But the rewards are there for those who take the risks.

How is your company planning to profit from the rising China middle-class?