The Federal Reserve Bank of San Francisco just released good news for Americans: we're spending more domestically. Americans allocated 88.5 percent of their spending on goods and services made in the U.S.; surprisingly, only 2.7 percent on those made in China. These numbers hint at a trend that's developing: the Chinese are spending more money on American goods.
“Chinese people are less and less interested in bargains and cheap goods, and more and more interested in quality products, brand name labels and foreign products,” says Tony Watkins, an American who has lived and worked in China for nearly a decade and is opening a school in Mongolia called New York English. “They are very aware that Chinese products can have a very bad image. If they can afford it, they'd rather invest in higher quality goods, both domestic and foreign. And there is a growing interest in American products. Chinese people are spending more money than ever on them.”
Why the interest in American goods? Well, the Chinese economy now has a new emerging middle class who have money to spend.
“People have jobs and the propensity to spend,” says Pooja Gurbani, director of Buy Rite Global, a sourcing provider based in Hong Kong. “The Chinese are where the U.S. was when the economy was still developing; there was lots of infrastructure spending and the market was still emerging.”
According to the report, more than one-third of the money consumers shell out for goods imported from China and other places ultimately end up in the bank accounts of American businesses and employees.
So how is it the U.S. is so economically depressed when such a figure demonstrates how much more the U.S. is capturing in production, manufacturing and overall profit than we otherwise suspected?
“A lot of it has to do with the U.S.’s spending habits by individuals and the tremendous leverage U.S. citizens have taken on their personal balance sheet,” says Matthew Zaklad, who’s traveled between the U.S. and China for the last 16 years as an automotive marketing consultant: “the de-leveraging is just the beginning.”
Combine the debt with unemployment and rising costs, and it’s easy to see we’re in a tough position. "The statistics indicate that more manufacturing than perceived is produced in the U.S., in some sectors, but these numbers are a snapshot,” says Zaklad. “We need to focus less on percent of goods manufactured here and the aggregate increase in jobs, and other benefits to understand whether these figures should excite us. The average American is, and should be, more concerned about how to generate much less, increase earning power, and pay down their debt as fast as possible."
With little to no personal debt in China, it is easier for the Chinese government to then push for the public to spend more. Small businesses that focus on luxury goods like gourmet food products, wine, spirits, fashion, jewelry and perfume are all in demand by Chinese consumer when driven through the proper retail and distribution outlets, says Gurbani.
The best and most simple way to get started is to adapt packaging and products to suit Chinese culture, says Gurbani. Add Chinese labeling and instructions to packaging, use Chinese characters and icons. Because English isn’t widely spoken, it’s worth having a local Chinese partner who has the know how.
“We need them [the Chinese consumer] and should welcome them in so many aspects of our business lives as they are the engines to help drive our consumption and production," says Zaklad.