Shanghai skyline at night by Healthycliff Syndor/ Unsplash
Sylva Wood 2018 returns to Shanghai from 25 to 27 June. China still remains one of the biggest markets for timber, with imports expected to increase by 60 million cubic metres by 2025. This will eventually account for about 12 to 13 per cent of the global timber harvest. What can we expect from the behemoth and its seemingly insatiable appetite? Lee Zhuomin reports.
Zhongguo, or the Middle Kingdom, was so called because the ancient civilisation believed it to be at the centre of the universe.
Evidence of life in China can be traced as far back as 1500 BC, along the Yellow and Yangtze Rivers where most scholars agree formed the cradles of civilisation.
The country flourished under several emperors and reached a golden age during the Tang Dynasty. Literature, science, religion and philosophy made significant breakthroughs. Society prospered as peoples, goods and ideologies exchanged hands along the Silk Road—an early form of globalisation. Blue dye from the indigo plant apparently travelled along this ancient route from India to Japan, giving the Japanese their tradition of indigo fabrics.
It was China that gave the world paper, silk, tea, gun powder, alcohol, the printing press and the compass. Today this country still supplies us clothes, shoes, furniture, electronics and food. It is the world’s second largest economy and one of the top consumer markets in the world.
Thousands of years after the birth of an ancient civilisation, the behemoth now lies at the centre of the world economy again. Most companies recognise they will need the effervescent Chinese consumer market to power growth. The question is, how?
Chasing the consumer
From 2011 to 2016, China’s per capita income and expenditure growth rates were among the highest in the world, according to data from Euromonitor. Although GDP growth now averages around 6 – 7 per cent, McKinsey expects per household disposable income will double between 2010 and 2020, from about $4,000 to about $8,000. And urban consumers will just get richer, capable of affording small luxuries like cars and holidays.
As the propensity to spend increases, another likely trend to expect is the desire to trade up. Semi-basic necessities such as furniture may have little room for growth because people already have what they need and are unlikely to buy more. But brand, quality and carbon footprint will matter when people realise their social standing is judged on what they wear and use—in other words, solid oak impresses more than a brown wash of paint over a plastic composite panel.
Between 2010 and 2020, spending on semi-basic necessities will climb 10.2 per cent, according to McKinsey research. It just means that businesses that used to focus on mass market consumers will have to reposition their brand to cater to different consumer segments.
One Belt One Road
Before national borders became walls that had to be broken through, the Silk Road was a corridor that connected Eurasia, South Asia and China. Its impact would be felt for generations after, its transformation, vast.
In 2013, Chinese President Xi Jinping proposed a modern equivalent, an ambitious infrastructure project comprising both land and sea routes. The 21st century highway will connect over 60 countries via a labyrinth of roads, railways, pipelines and power grids. Collaborations on trade, policy, finance are under negotiation.
From a geo-economic perspective, OBOR “promotes development and a joint enjoyment of development’s fruits,” President Xi has insisted. Yet political scientists opine that the move in itself has political inclinations. China now assumes leadership of the free trade world (vs USA’s rejection of the Trans-Pacific Partnership) and not only offers an alternative, it also drives and funds the physical infrastructure that lubricates trade among 65 per cent of the world’s population that comprises 40 per cent of the global GDP.
In January, President Xi announced ambitions to extend OBOR by opening up shipping routes via the Arctic Circle, in what it calls the “Polar Silk Road”. Cutting through the ice would shorten freight time up to 20 days compared to the traditional sea route via the Suez Canal.
Arguably, China is not everyone’s cup of tea. There are businesses that do enough in their own respective markets and are happy with it the returns. Others are unable to compete price-wise or just do not have enough capacity to deliver volumes.
Yet those who find themselves gazing in the eyes of the behemoth are confronted with more questions than can be answered. They have to traverse cultural norms, niche consumer demographics, spending propensities and regions.
Here in Shanghai, the stage is set for dialogue. Here in the belly of the beast, we hope you find your answers.
This article is part of a longer series in the Sylva Wood 2018 show preview. It was first published in Panels & Furniture Asia (May/Jun Issue). Sylva Wood 2018 runs from 25 – 27 June in Shanghai.