Drastic Demographic Changes in China Bring Business Opportunities - Coursework Example

Drastic Demographic Changes in China Bring Business Opportunities Employees Drastic Demographic Changes in China Bring Business Opportunities From a business entity’s point of view, the economic conditions and the regional demographics of a country are key in forming judgments and decisions about investing and starting up new businesses in that country. This report presents a review of the demographic changes, which have been taking place in China. On the basis of this review of demographic changes, the report also highlights the business opportunities, which have resulted as a consequence to these demographic changes. Although, there are numerous demographic changes taking place in the country, this report considers only three of them, which include changes in urbanization trends in the country, increase in the per capita income of households and continuous growth in the country’s population. Three changes in the demographic conditions of China are covered in this paper including increase in urbanization, income, and overall population of the country. These changes are considered for the discussion due to major concerns associated with them. The increase in urbanization in China is considered from a point of view that due to the economic growth concentrating in the urban areas of China thousands of Chinese citizens living in the rural area move to the bigger cities in order to earn better living. Limited space and lack of accommodation in the urban areas can create problems for city authorities and management. Furthermore, increase in income and savings of individuals have pushed upward the demand for luxury items, which imply that more imported goods, will be sold in the Chinese market. Moreover, the disparity of income between rural and urban areas of China is increasing which could also create certain social and economical problems. Finally, increase in overall population of the country could have devastating effects on the provision of services such as health, housing, education, and security etc. The government of China has long maintained population growth control policy restricting the number of children per family but the population in the country is still increasing rapidly which could definitely lead to major problems in the future. Increase in Urbanization In the past few years, China has experienced a significant rise in the urbanization trend due to significant economic activities taking place in the cities of the country. In this regard, the focus of the Chinese government has been to make sure that basic needs of every individual are satisfied which include food, shelter, clothing, health and education. These demographic changes can be viewed as presenting significant business opportunities in the country (Hao 2009). The migration of rural population in large numbers to the urban areas in the past years has raised the issues related to accommodation, health care, recreation, education, and other household facilities. China has been persuading numerous educational, health, housing and other reforms in the economy to meet the demands of migrants. Keeping in view these changes in the demographics of the country, there is a huge scope of establishing businesses in housing sector. This massive increase in urbanization trend has created copious prospect for the business and investors in china and diverted the attention of investors towards injecting their capital in Chinese heath sectors as well as in the construction and communication industry. In such a scenario, a business can also provide private loans to the local vendors, homebuyers, and invest in the educational system of china on sufficient terms of return (Yanyun and Man 2011). The efforts involved, lapsing the previous methods of allocation of housing units and developing new market-based systems of housing provisions, creating new educational opportunities and expanding school systems, improving communication mediums, increasing resource storage and management. It has also focused on providing affordable houses to the low or middle- income families by subsidizing the commercial housing purchase. On the other side, to meet the need of higher income groups, relies on the private commercial housing markets. To accommodate the rural shift China aims to provide nearly 70% of the urban affordable housing systems and other facilities. An energetically fast growing housing market was had been observed in Urban area along with improvised housing conditions. By the end of 1978, in the urbanized area, floor area increased by 6.7 square meters per capita (Chow 2009). According to the census of 2007, the floor area has increased by 28.3 square meters per capita and the home ownership in china has reached 82.3% (Yu 1999). Contractors and house builders may also find excellent opportunities in the construction markets of China and work independently or collaborating with government (Du and Han 2001). The massive migration also increased the need of improved channels of communications, such as, railways, airways, and roads. These requirements of china welcome investment in the communication sector and the increased demand of transportation, shifting, and hauling turned the eyeballs of manufacturers and retailers towards China (Yanyun and Man 2011). These investment prospects can increase the rotation of money in the market and result in fair returns to the investors. International markets can outsource the labour from urban areas of china at considerable rates. Increase in per Capita Income After the global financial meltdown, China’s economy expanded at a rapid pace and piled up its GDP growth with a double-digit. The number of millionaires in China grew up by 391,000 millionaires in 2008, which is considered to be the fastest growing population of millionaires. The annual income per capita is about US$4,260 in 2010. This increase in wealth has created opportunities for various industries exploiting the resources (Zhu 2011). Increase in the standard of living and wealth for the people of China will give rise to the opportunity of creating financial investment institutions because there has been a trend developed that Chinese people are heavily relying on the professional wealth institutes to manage their wealth instead of managing it themselves (Barth 2009). Investment institutes could target the high-end customers in effectively managing their savings which could offer them high returns. The institutions should encourage customers to deposit more funds as to get more benefits. Even the banking industry will be on the boost, so it is required for the business people to target their segment and gain competitive advantage. Furthermore, to enhance the customer experience the financial institutions should target more towards the high net worth individuals (HNWI) who have investable finance in excess. Understanding the customers better will help the domestic financial institutions in developing their brands and to manage the wealth more effectively (Fang 2010). The diversified nature of Chinese people also gives birth to the increase in the individual spending on the luxury items. The observers predict that soon China will become a biggest place for the high-end consumer goods (Zhuoqiong 2012). In 2011, the wealthy Chinese bought luxury items of more than 100 billion Yuan with an increment of 25% each year and is expected to rise in the future. The companies could find opportunities in setting up their business in luxury watches, designer clothes, perfumes, cosmetics and leather bags. As Chinese people purchase from both the overseas and from the domestic market, the companies should try minimizing the purchase of Chinese people from the overseas market and should grab the opportunity of producing luxury brands in its domestic market (Teacup Marketing 2011). In the next few years China has the capability to surpass Japan as the world’s biggest market for luxury goods, so the demand of the finer products will maintain a strong growth despite of the fact that the neighboring countries’ luxury market is also up on the rise. China constitutes over 20% of the total luxury market in the world and this figure is likely to increase, so the opportunity lies in approaching to these customers by opening up business which would target these customers by providing them with fine products that would remain durable for the longer period of time (Zhuoqiong 2012). As the buying behavior of people of China is changing due to the increase in wealth, more and better opportunities are on the verge and the people should adopt early changes in order to get a competitive advantage (Teacup Marketing 2011). Increase in Population Size Apart from significant increase in the urbanization trends in China and rise in the income of households, one other area of significant importance is the rise in population of the country. Population increase, apart from its negative connotations, also influences the economy of a country in a positive manner. As for instance, increase in population results in increase in demand of goods and services and hence increased productivity which in turn boost the overall economy. In China, population growth rate has been regarded as an issue most of the times rather than as an opportunity (Hou 2011). However, from a business centric point of view this issue can be constructively transformed into an opportunity whereby the businesses can seek and work out opportunities for expanding their existing setups or establishing new ones to cater the needs and requirements of the growing population of the country. Undoubtedly, manufacturing sector in any country is the foremost area, which is influenced due to steep rise in population and same is the case in the People’s Republic of China. The pace at which population has grown tells the story as to why businesses in China have flourished. Keeping in view the past trends of population growth in China, the population in China has been increasing on a consistent basis. Although there have been strict measures and initiatives taken by the government to control the steep rise in population which has reduced the growth rate of population, but still the population is increasing every year (National Bureau of Statistics of China 2011). Taking into account the increasing population size of the country and considering the future forecasts as to the population growth rates, there are immense opportunities for businesses to establish themselves in Chinese markets. As per the 2011 consensus in the People Republic of China, the population of the country has increased in 2011 by 73.9 million as compared to the figures reported in the year 2000 and the total population has climbed over the figure of 1.37 billion (China Today 2011, Riley 2004). The growing population suggests that there is or will be a significant rise in the demands of different types of products and services. As for instance, in the automobile sector there are large opportunities for automobile manufacturers since with the increase in the population, the annual disposable income of the citizens of China is also growing. On the other hand, internet and other communication services is also an area which shall be considered by the potential investors in China (Hou 2011). In order to cater the communication needs of the growing population in China, internet service providers and mobile communication companies can find a very vibrant market. Apart from this, the outsourcing of business related services and manufacturing processes to Chinese market is another big opportunity, which the businessman can avail while considering the huge labor force emerging from the gigantic population of China. This strategy could be viewed as making use of the growing population size in China rather than establishing businesses to cater the demands of the Chinese people. Many businesses around the world are already benefiting from the cheap labor in China and the increased population means that there is a further increase in the availability of this cheap labor and henceforth there are more opportunities for the businesses and manufacturing concerns to outsource their manufacturing processes to Chinese vendors (Hou 2011, Yanbin 2008). Keeping in the discussion presented above, it can be concluded that significant variations in the demographics in China offer an opportunity for the businesses to grow and establish themselves. These opportunities will not only allow the businesses to expand and flourish but also ensure that the demands and requirements of the Chinese people are met. References Barth, J., 2009. Chinas Emerging Financial Markets: Challenges and Opportunities. 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