China has long been an entrepreneurs daydream If I could sell one pair of underwear each to a billion Chinese. Now, after almost 25 years of opening its gates to the outside world, how well are things working?
In practice, there have always been two clearly separate strategies for taking advantage of Chinas 1.3 billion people – (1) to use Chinas low labor costs to produce cheaply and then export to more affluent markets for a higher mark-up, and (2) to sell products to Chinese people. There is no debate over the fact that up until now, strategy (1) has worked better over most of the last 25 years the average Chinese consumer hasnt had enough disposable income to buy Western products in any significant quantities. But all that is changing. Chinas emerging middle class is now estimated to be larger than the entire population of the United States (although their purchasing power is nowhere near that of the American middle class). So are foreign investors raking in their long dreamed-of windfall products by selling their products to the middle class? Well, not exactly
Information on corporate profits broken down for affiliates in China is surprisingly hard to...
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