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1、Number Talks Insight ChinaMarch 2014Contentu Sustainable Development in Frugal Environmentu Opportunities And Challenges of Air Pollutionu Growing Entertainment Consumptionu Rapid Development of Online Paymentu AppendixSustainable Development in Frugal EnvironmentThe anti-corruption and anti-waste i

2、ssues continue to draw attentions in the Third Plenary Session of the 18th Central Committee. Luxury goods and dining industries are influenced consequently. However, China economy is still growing steadily. China is under sustainable development in the frugal environment.China GDP Growth Still Tops

3、 Major EconomiesData Source: IMF World Economy Outlook(Jan 2014)4Half Provinces GDP Exceeded Two Trillion Guangdong GDP Exceed That of South KoreaData Source: Provincial Statistical Bureau5GDP Growth TOP10 ProvincesRankRegion（GDP MB） YOY（%）trillion RNational56.887.71Guizhou0.8012.72Tianjin1.4412.53C

4、hongqing1.2612.340.0812.15Yunnan1.1712.16Gansu0.6312.17Shaanxi1.6011.18Xinjiang0.8511.19Fujian2.1711.010Qinghai0.2111.0GDP TOP10 ProvincesRankRegion（GDP MB） YOY（%）trillion RNational56.887.71Guangdong6.228.52Jiangsu5.909.63 Shandong5.479.64 Zhejiang3.768.25Henan3.229.06Hebei2.836.57Sichuan2.6310.08Li

5、aoning2.489.59Hubei2.4710.010Hunan2.4510.1Imports And Exports, Surpass U.S Rank First In 2013, Chinas total imports and exports volume was 25.8 trillion RMB with a YOY increase of 7.6% after adjusting for foreign exchange factors. Total exports was 13.7 trillion with a YOY growth of 7.9% while total

6、 imports was 12.1 trillion with a YOY growth of 7.3%. Chinas foreign exchange reserves reached 3.8 trillion. The aggregate imports and exports of 7 coastal provinces accounted for 79% of the whole country, which was 0.9% lower than last year. However, the proportion of middle and west regions increa

7、sed slightly. The total imports and exports accounted for 5.7%, which climbed 0.6%.Data Source: General Administration of Customs of the PRC6Construction of Free Trade Zone Is Accelerating The communique of the Third Plenary Session of the 18th Central Committee pointed out to “accelerate the constr

8、uction of free trade zone”, indicating that Shanghai free trade zone was recognized by central government. The mode will be replicated and promoted more rapidly. By March 2014, there have been 18 free trade zones under construction in China, which involved 31 countries and regions. Among them, 12 fr

9、ee trade zones have signed Free Trade Agreement , involving 20 countries and regions. Another 6 free trade zones were negotiating, involving 22 countries.Data Source: China FTA Network7Luxury Market Hardly Grew The anti-corruption policy had a significant impact on “the common practice to send luxur

10、y gifts”. The China luxury market is expected to grow at 2% in 2013, even lower than 2012. The growth in 2010 was 30%. Shoppers in department stores and shopping malls reduced sharply especially in holidays. Watches and mens clothing categories were most adversely affected.Data source: Bain 2013 Mar

11、ket Research of China Luxury Market8Purchasing Luxury Goods Overseas Still Trendy The Chinese are still the first luxury goods consumer group - accounted for 29% of global luxury consumption. Oversea consumption of luxury goods contributed to 2/3of domestic consumers total luxury expenditure.Data so

12、urce: Bain 2013 Market Research of China Luxury Market9China Affluent Consumers* Important Future Buyers of Luxury Goods China affluent consumers have reached 120 million. By 2020, they are expected to reach 280 million, accounting for 20% of total population. More affluent consumers live in smaller

13、 cities, which locate in inland and west regions of China.Notes*：consumers who will buy premium products and services with a minimum disposable household yearly income of 125 thousand RMBData source: Boston Consulting Group Impetus of new China consumers10China Affluent Consumers ￥3.7 Trillion Purch

14、asing Power The purchasing power of China affluent consumers was about 3.7 trillion RMB. By 2020, the consumption of China affluent people will account for 35% of Chinas total consumption and over 5% of global consumption. The most effective way for affluent consumers to show off their status is to

15、buy products with affordable brands. Hence, affluent people are the important entry-level buyers of luxury goods.Data source: Boston Consulting Group Impetus of new China consumers11Catering Revenue Growth Below 10% For The First Time Price of Cigarette And Alcohol Increased By Only 0.3% Under the c

16、ircumstance of anti-waste, many catering companies lost a large number of government orders of banquet. Food safety, consumer complaints and risk of media exposure etc. are all risks that slow down the growth of catering market.Data source: National Bureau of Statistics12TV Galas Are Not Allowed To

17、Exceed Three In Important Holidays Every Day The anti-waste policy is also reflected in the new regulations of SAPPRFT. Unauthorized TV galas and festival performance are not permitted to be broadcast and marketed. SAPPRFT will select one singing talent show program to be broadcast in prime time thr

18、ough assessment meeting every quarter. Other similar programs cannot be broadcast between 7:30 p.m and 10:30 p.m.Data source: SAPPRFT13The Users of Digital TV Grew Steadily By the end of 2013, national cable TV subscribers reached 220 million households. Digital TV and IPTV subscribers respectively

19、reached 170 million and 30 million. By the Jan 2014, the smart terminals of LeTV broke through 1.2 million. Mi-box exceeded 1 million. The shipment of smart TV in 2013 is expected to be 26 million.Data source: SAPPRFT; National Bureau of Statistics14Summary And ImplicationsThe development of free tr

20、ade zones not only brings about business opportunities but also creates new jobs for middle and west regions.Consumers of luxury goods gradually changed from government officers who give gifts to affluent people with true consumption needs. In the next few years, the trump cards of brand communicati

21、on strategies to enhance sales of luxury brands are to improve brand identity and awareness.Under the circumstance of anti-corruption, most of the cigarette and alcohol consumers buy are for their personal use. As a result, the alcohol brands relying on the huge investment on brand awareness to enha

22、nce sales, especially for China liquor have to upgrade their brand message and brand image as soon as possible.With the development of smart TV and policies released by SAPPRFT, the growth rate of ads revenue of satellite TVs in 2014 will probably slow down.15Opportunities And Challenges of Air Poll

23、utionIn 2013, smog weather days in middle and east of China reached 35.9, with a proportion of 10%. China government implemented Action Plan for Prevention and Control of Atmospheric Pollution. The next twenty years will be full of opportunities and challenges.Property Market Grew Steadily The real

24、estate market has a negative impact on air quality because of construction of buildings. The national real estate development investment in 2013 reached 8.6 trillion, increasing by 19.8% compared with last year. It included 5.9 trillion resident investment which increased by 19.4%, 0.5 trillion offi

25、ce buildings investment which increased by 38.2% and 1.2 trillion business buildings which increased by 28.3%.Data resource: National Bureau of Statistics17Automobile Market Grew Rapidly The fast development of automobile market also aggravates the smog weather. Automobile production and sales were

26、respectively 22.1 million and 22.0 million in 2013, increased by 14.8% and 13.9%. It has topped the global market in 5 consecutive years. In 2013, the production and sales of passenger vehicles was respectively18.1 million and 17.9 million, increased by 16.5% and 15.7%；7.2 million passenger cars of

27、local brand was sold, accounting for 40.3% of total passenger cars. The proportion declined by 1.6% compared with last year.Data source: China Association of Automobile Manufacturers18Almost All Cities Implement Air Quality Standard* Failed to Meet The StandardNotes*：According to the “three-step” ac

28、tion plan of new air quality standard enacted by Ministry of Environmental Protection on March 2013, 74 cities will implement first.Data source: Green Peace calculates the average and maximal PM2.5 concentration through arithmetic average method, based on the public information of national and local

29、 ministry of environmental protection1910 Cities with lowest PM2.5concentrationPM2.5 annual avg.RankCityProvinceconcentration(microgram/cubic meter)48ShanghaiShanghai6165 ZhangjiakouHebei4366 ShenzhenGuangdong4067 ZhuhaiGuangdong3868 HuizhouGuangdong3769 KunmingYunnan3670 FuzhouFujian3371 ZhoushanZh

30、ejiang3272 XiamenFujian3173 Lhasa2674 HaikouHainan2610 Cities with highest PM2.5concentrationPM2.5 annual avg.RankCityProvinceconcentration(microgram/cubic meter)1 XingtaiHebei1552 ShijiazhuangHebei1483 BaodingHebei1274 HandanHebei1275 HengshuiHebei1206 TangshanHebei1147 JinanShandong1148 LangfangHe

31、bei1149 XianShaanxi10410 ZhengzhouHenan10213BeijingBeijing90Oil Price Continuously Climbed On Sep 2013, to implement the requirement of Action Plan for Prevention and Control of Atmospheric Pollution, National Development and Reform Commission decided to upgrade gasoline and diesel quality standards

32、 to the 4th stage, which would respectively marked up by RMB 290 and 370；Gasoline and diesel price in 5th stage will be 170 and 160 RMB higher than in 4th stage. The mark-up is based on the principles of reasonably compensating costs, premium price for high quality products, and polluter-pays.20Rail

33、 Transit Will Still SeeA 10-Year Fast Development Till the end of 2013, China is expected to operate 80 rail transit lines. The total mileage will reach 2,400 km, while stations will reach 1600. 37 cities have obtained the approval to build rail transit lines. In the next 3 years, at least another 1

34、0 cities will get approval.Data Source: 2013 Beijing Traffic Operation Analysis Report; 20122013 Development Reports on China Urban Metro Transportation21Sales Volume of New Energy Cars Is Expected To Triple Or Quadruple Subsidy to new energy cars stimulates the rapid growth of its sales. In 2013, n

35、ew energy cars including hybrid energy cars achieved a sales volume of 17 thousand. It is expected to reach 60 to 80 thousand in 2014, triple or quadruple that in 2013. When buying new energy car, consumers can pay the car price after deducting subsidy.Data source: China Association of Automobile ma

36、nufacturers, Ministry of finance, Ministry of Science and Technology, MIIT and China Development and Reform Commission22Beijing Will Accomplish The Construction of 1000 Public Fast Charging Piles in 2014 Beijing will build charging piles of new energy cars for the first time in 2014. 1000 public fas

37、t-charging piles will be accomplished within this year to cover urban and suburban areas. Meanwhile, Beijing will build a 5km-radius of the service charge circle in the center of the city. Half-hour charge can support100km range for the common new energy cars.Data source: Beijing Municipal Science &

38、 Technology Commission23Sales Volume of Air Purifiers Doubled In 2013, the sales volume increased to 2.4 million, with a YOY growth of 90.5%. Total sales reached about RMB 2.6 billion, with a YOY growth of 160%. Major consumers of air purifiers are 80s and 90s who are marriageable or of childbearing

39、 age. Online channel is the mainstream. In 2013, the market share of low-end products, cheaper than 1000 Yuan, exceeded 50% while premium market with over 3000 Yuan products saw a rapid growth of sales volume, accounting for 23% of the market.Data source: China Market Monitor Co. ; CCID24Netizens Sp

40、ent 870+ Million To Prevent Smog Users of Taobao spent RMB 870 million nationwide in 2013 to buy masks, air purifiers, indoor running machine to protect smog weather. Trading times were up to 4.5 million, and buyers of masks increased by 181% compared with last year while buyers of air purifiers als

41、o increased by 131%.Data source: Taobao25Summary And ImplicationsIn addition to the governments active promotion of public transport, aggravated air pollution also enhanced public awareness of public transport. Hence, the subway ads in OOH category will embrace its golden period of development in th

42、e next 10 years.With the strong support of policy, it will benefit to automobile brands if they enhance the promotion of new energy cars in the next 3 years.The penetration rate of air purifiers in China household is less than 1%. There are still space and potential in this market. Marketers should

43、understand the drivers for consumers to buy these products so that they are able to win the tangled competition.26Growing Entertainment ConsumptionAccording to American scholars prediction that the entertainment economy (leisure and tourism) will be the next economic tide sweeping the world. With th

44、e increase of entertainment consumption, the prediction starts to emerge in China.Income grew steadily In 2013, total income per capita of urban residents was 29,547 RMB. Urban disposable income reached 26,955 RMB, with a YOY growth of 9.7%. Chinas employment was 769.8 million, increasing 2.7 millio

45、n compared with the end of last year.Data resource: National Bureau of Statistics28CPI Growth Slowed Down In 2013, the Consumer Price Index was 2.6%. Urban residents cash consumption per capita was 18,023 RMB, increasing by 5.4%. Total Retail Sales of Consumer Goods was 23.4 trillion RMB. The real g

46、rowth was 11.5% after adjusting for foreign exchange factors.Data resource: National Bureau of Statistics29Consumer Confidence Index Hits A Five-Year High in 2013Q4Data source: Survey of China Consumer Confidence Index30Average Consumption of Bank Cards Increased 28% In 2013,total 50.2 billion trans

47、actions of non-cash payment services, with the value of 1,608 trillion RMB were handled. The volume and value respectively increased by 21.9% and 25.0%. The number of debit card issued in 2013 was 3.8 billion, with a YOY growth of 19.4%. The number of credit card issued was 400 million, increasing b

48、y 18.0%. Average consumption of bank cards was RMB 7,554, increasing by 28.2%.Data source: Overall Operation of The Payment System In 201331The Final Redemption Credit Amount of Credit Card Increased By 62% By the end of 2013, total credit line of credit card reached 4.6 trillion RMB, increasing by

49、31.2%; The final redemption credit amount was 1.8 trillion, with a YOY growth of 61.8%. The average number of credit cards per capita was 0.3, increasing by 16.0%.Data source: overall operation of the payment system in 201332Number of Domestic Tourism Increased By 14%The total tourism revenue in 201

50、3 is expected to reach 2.9 trillion RMB, with a YOY growth rate of 11.5%. Domestic tourism revenue can reach 2.6 trillion, with a YOY growth rate of 18.2% while foreign tourism exchange earnings was about $47.8 billion.The number of domestic tourism in 2013 reached 3.3 billion, increasing by 13.8%;

51、Inbound tourists staying overnight were about 55.7 million.Data Source: China Tourism Academy; Provincial Tourism Academies332013 TOP10 Tourism RevenueProvinceRankProvince(1RevenueYOY（%）00 million)National2900011.51Guangdong830512.42Jiangsu719514.13 Zhejiang55369.64 Shandong51848.25Sichuan387718.26H

52、ubei320621.97Guizhou237027.48Shanxi230527.29Fujian228616.110Shaanxi213524.6The Number of Outbound Tourism Will Exceed 100 Million In 2014 The number of outbound tourism in 2013 was about 97.3 million, increasing by 21.6%. It is expected to exceed 110 million in 2014, with a YOY growth of 13%.Data So

53、urce: China Tourism Academy34Transaction Scale of Online Tourism Grew 29%The transaction scale of online tourism in 2013 was 220.5 billion,increasing by 29.0%.The growth of online tourism depends on the growth of online air tickets, hotels and travelling business. With the emerging of online short-t

54、erm rental and taxi services, online tourism market will see a new growth point.Data source: iResearch35Domestic Movie Box Exceeded 20 Billion National movie box in 2013 reached 21.8 billion RMB, with a YOY growth of 27.5%, among which 12.8 billion came from China movies, increased by 54.3%, account

55、ing for 58.7%.Data source: SAPPRFT36The Share of Effective Viewing Time of Mobile Video Increased To 18% By the end of 2013, the China online video users reached 430 million, increasing by 15.2%. The penetration rate of online video reached 69.3%, increasing by 3.4 percent points compared with 2012.

56、 Till the end of 2013, mobile video users reached 250 million, increasing by 110 million compared with the end of 2012. Growth rate was 83.8%. The share of effective viewing time of mobile video increased to 18%.Data source: CNNIC37VAS Revenue of Online Video Increased By 99% In 2013, market size of China online video reached 12.8 billion, increasing by 41.9%. VAS revenue of video was 850 million RMB, accounting for 6.6%, increasing by 99.2% compared with 2012.Data source: iResearch38Revenue of Online Games Increased By 69