Temperatures were well over 100 degrees Fahrenheit and humidity was not far behind.

During Ramadan from sunrise to sundown the only restaurants open are at major hotels frequented by visitors. Those who are fasting do not drink or eat anything from about 4AM till 7:30PM. Not even water. So work hours are greatly reduced.

But my trip was for negotiations between one of our large US food sector Clients and the senior executives of the group that wishes to license the business of this Client across the Middle East. It was the right time for executives from both companies to meet.

We started each day about 10AM and finished well after 12 midnight each day. We were able to have breakfast and lunch at our western chain hotel during the day.

Fasting ends about 7:30PM and restaurants stay open till about 2AM. Restaurants have special Ramadan dinners and are very busy after the end of the fast each day.

Luckily everywhere is air conditioned, as are the nice cars. Ties are not used in this season. Sport shirts and slacks are best. Business is more casual during Ramadan.

Even in the very large malls, like Dubai Mall, restaurants are not open until 7:30PM except for a few that have a permit to sell take out food. http://www.thedubaimall.com/en

Due to the weather, large malls are where everyone goes for food and retail shopping. The malls are essentially empty during the day during Ramadan. Very crowded from 7:3-PM till 1-2AM.

Doing business with Middle Eastern executives who are fasting requires some cultural sensitivity. But we were received and treated extremely well by our hosts. We visited the restaurants in the malls during the day to see the facilities, not the operations. Our trip was extremely worthwhile.

It is my opinion, however, that the company you are visiting makes a very big difference in how business is done and how you are treated during this time of the year in the Middle East.

This blog contains some comments on what I saw and heard over a 10 day period visiting four Chinese cities and meeting with 20 companies of different types.

The Chinese Consumer

The Chinese consumer engine is alive and well. This is not a macro analysis but an on the ground analysis. The young Chinese consumer in major cities is well dressed, very busy and has discretionary income to spend. They are saving at a much lower rate than their parents.

But this consumer wants a known brand with quality, convenience and service. And the product or service needs to be different than what is typical in the marketplace

We see more companies seeking international brand licenses with more capital to invest than even earlier this year. We are seeing a focus on Tier 2 city company interest, as well as the standard Tier 1 city companies. These potential licensees are seeking brands with something different to attract the young, spending consumer.

The executives we meet seem bullish on the Chinese consumer and are willing to make large infrastructure investments to be ready to serve these consumers, who – as mentioned above – want higher quality, better service and more convenience than ever.

Another thing that is very evident is the national infrastructure improvement in travel and road areas. Quite a contrast to what we saw in the first quarter of 2011 in India. In China high speed trains between cities are in operation or will start operating by 2015 – already under construction. Major airports are state-of-the-art and convenient. Flights are full between cities.

On the investment front, we see two types of Chinese mainland companies. One wants to build brands and then go public. Another type wants to rapidly build and operate units and then go public fast to get a quick payday. This second type of company is not a good US brand licensee, as they are not focused on building a long term revenue stream but on a fairly quick pay off so they can move on to another business. The question we ask is what happens to the brand left behind?

The Chinese Food Consumer

Another new trend we are finding in major Chinese cities is a healthy food trend.

One of the food sector people I met on this trip said 10 years ago the Chinese consumer was trying to fill their bellies. 2 years ago they were eating at expensive restaurants to show they had money no matter what the food. Today the younger generation is looking for low calories, low or no fat food that has a good taste. They are voting for healthy food with their wallets.

This means meals with lower fat, a major cultural change for Chinese. This is generational – the 20 somethings with discretionary income.

The Chinese Overseas Investor

A recent BBC article stated, “No longer content to be known for their cut-price efficiency in stuffing Disney toys, Chinese companies now want to own high-end global brands and be at the forefront of major technological projects.”

http://www.bbc.co.uk/news/business-13911755

Everywhere around the world we are seeing Chinese companies buying or buying into western companies. This is partly due to their growing cash from exporting to the west.

But there may be another reason: a flight to quality like Japanese companies did in the 1970s and 1980s once they had cash from exports to the western world.

One question: is the cash being used for purchases private or government?

China’s economy is about to burst???

Every China hand in the investment sector believes the China economy bubble is about to burst. It is hard to tell this on the ground watching the Chinese consumer buy or Chinese companies invest in US licenses. 30,000′ analyses are seldom indicative of the real world.

Shanghai 100s year ago

Shanghai is today one of the most significant business centers on this planet. Airport, roads, infrastructure are in many cases better than the US. Decades ahead of India.

‘Visualizing China’ is a project to define China today and in the past on the ground and not at 30,000′.

http://www.businessinsider.com/historical-china-photos-2011-7?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+businessinsider+%28Business+Insider%29

EGS publishes a quarterly country ranking tool, GlobalVue™, which can be downloaded at the following link:

http://www.edwardsglobal.com/GlobalVue_EGS.pdf

Because we are very active in many countries seeking investors and licensees for our Clients, we see first hand what local economies are doing, long before this shows up in print and online.

As of the end of June 2011, our most active countries for investors seeking new businesses to start are in the following order:

China

Indonesia

India

The Middle East – Saudi Arabia, UAE

Viet Nam

Turkey

Mexico

Scandinavia

The Philippines

Colombia

Note the almost complete lack of European countries. With unemployment averaging over 1% in the European Union, few local companies are seeking new investments.

Note the absence of Brazil. While this country is growing fast, it is almost completely focused on internal brands.

The Population Reference Bureau (www.prb.org) has just released their World Population Data Sheet, which is actually a detailed report on population trends.

Here are some trends to be aware of:

(1) Low birth rates in developed countries are beginning to challenge the health and financial security of their elderly population;

(2) Developing countries are adding over 80 million to the population every year;

(3) The number of working-age adults available to support an older person Is declining globally;

(4) Because of a very high percentage of older people, by 2050, Japan’s population is projected to decline to 95 million from 127 million in 2010;

(5) The world reached a human population of 1 billion in about 1800, 4 billion in 1974 and will reach 7 billion in 2011; and

(5) The report states: “The Data Sheet lists all geopolitical entities with populations of 150,000 or more and all members of the UN. More developed regions, following the UN classification, comprise all of Europe and North America, plus Australia, Japan, and New Zealand. All other regions and countries are classified as less developed. The least developed countries consist of 49 countries with especially low incomes, high economic vulnerability, and poor human development indicators.”

This downloadable pdf report has great country by country and regional detail.

Retail – Retail – Retail

The growth of high-end shopping malls with high-end western brands and emerging high-end Chinese brands continues. There is little evidence of a recession in 2009 when it comes to shopping. The 2010 A. T. Kearney GRDI country attractiveness chart at the following link clearly shows China in a position for retail growth.

http://www.atkearney.com/index.php/Publications/global-retail-development-index.html

The Chinese Consumer

China is, today, all about the consumer. Various estimates place the middle class population, based on purchase power parity, between 250,000,00 and 300,000,000, primarily located in the eastern 1/3 of the country. This is largely a young, upwardly mobile, aspirational two-income family demographic with one or maybe two children and with discretionary income.

Everything in China today that related to business is consumer focused. And there is, again, little sign of a recession in the major eastern regions of this country. China is what we consider an ‘engine’ country: a country that has a rapidly growing middle class that is focused on buying and which to a great extent insulates it from global financial ups and downs. Brazil, China and India are examples of ‘engine’ countries.

Labor Costs & Strikes

The media has recently been full of mention of strikes at the Honda and Toyota factories in Southern China. Some western media have picked up on the shortfall of low-end labor for the factories in Guangdong, Jiangxi and Fujian provinces.

Southern China factories for decades have been able to count on rural population migrating from the west of China to find jobs in the east because there were no real jobs in their home provinces. Today you see ads in the papers seeking such workers and offering bonuses to come to the factory regions. The once rural migrant worked now finds good job opportunities at home.

So, relatively low wages will soon not be a reason for basing manufacturing in China. Low wage operations are already moving to Viet Nam.

10 Misconceptions About Doing Business In China

Finally, let me share with the reader one of the most important articles on doing business in China in many years.

Jeff Jiang, China Strategies Consultant, Lurie Besikof Lapidus & Company, in Minneapolis has written THE article on doing business in China myths, which can be downloaded at the following link:

http://www.lblco.com/documents/LE_China.pdf

The Bottom Line: Things are not always the way they are portrayed in the media when it comes to China!!

It also may be Asia’s decade. This is true in many ways.

Asia is leading the world out of recession, as the figures below show. A ‘1’ ranking is best. Countries with strong GDP growth will have businesses growing and adding jobs.

A recent article in the ‘Economist’ reviews a Manpower study that looks at which countries will seek strong job growth in 2010. China, India and Singapore will see strong 2010 job growth. Europe will not.

http://www.economist.com/daily/chartgallery/displaystory.cfm?story_id=15677079

‘Economist Intelligence Unit’ research indicates that in 2009, Asia had:

• 34% of the total global stock market capitalization
• 34% of the world’s economy (using Purchase Power Parity)
• 60% of the world’s population
• 33% of the world’s retail sales
• 35% of the world’s car sales
• 43% of the world’s mobile phone sales
• 40% of new global investment

This trend is expected to continue and by 2020 Asia may produce 50% of the Western multinationals’ sales and profits.

http://www.businessweek.com/magazine/content/10_05/b4165084462859.htm

The Beijing Municipal Development and Reform Commission announced in September 2009 that the gross domestic product (GDP) per capita in Beijing in 2008 was $9,075 and is likely to reach $10,000 by the end of 2009. (Stratfor)

AdAgeChina recently stated that over the next 15 years, China’s so-called gray market of consumers aged 50 plus will become the most potent spending demographic on the planet. By 2025, there will be more than 500 million “mature” Chinese consumers, or almost 36% of the Chinese population. Today, the country has 300 million Chinese over age 50, making up 21% of the population.

There would seem to be sufficient middle class for foreign companies to target in both countries currently, while many fully developed countries have consumers who are reluctant to spend.

Oil demand by developing countries is projected to rise 62% to about 56 million barrels a day by 2030.

In the developed world, however, oil demand is expected to decline – yes, decline – by 10% to about 40 million barrels a day.

This shift from the majority of today’s main oil need  going from developed countries to energy hungary developing countries is likely to have profound implications for the world trade balance.

And may result in potentially game changing political alliances as the developed world concentrates on other energy sources while the developing world seeks more and more oil.

Where will this oil come from? Will the same sources be providing energy as today?

Of course, this is very hard to predict. Recent projections that oil supply is about to peak globally are being proven wrong by immense deep water finds off the northwest coast of Brazil and in the supposedly fully explored US Gulf of Mexico. And much of the western coast of Africa remains unexplored based on current geophysical exploration technology.

And then there is the US gas component. Recent major discoveries in long explored areas of the US may result in a long term electric power generation solution through clean burning indigenous gas without expensive liquid imports that were thought necessary just a couple years ago. Perhaps the US’ energy ‘crisis’ once again will be solved by local, new sources of oil and gas – albeit at a price.

Meanwhile governments have gotten into the energy exploration business. The Chinese character for crisis also means opportunity. Government controlled Chinese companies are tying up major oil fields and exploration areas directly with other governments, essentially eliminating private oil and gas exploration companies.

And what does the projected 62% increase in oil demand for the developing world mean for all of us on this small blue planet???

* As reported in the November 10, 2009 edition of  ’The Economist’ magazine.

]]> http://edwardsglobal.com/blog/2009/11/16/the-coming-change-in-global-oil-usage/feed/ 0 http://edwardsglobal.com/blog/2009/05/10/half-the-world-is-middle-class/ http://edwardsglobal.com/blog/2009/05/10/half-the-world-is-middle-class/#comments Sun, 10 May 2009 22:02:41 +0000 Administrator http://edwardsglobal.com/blog/2009/05/10/half-the-world-is-middle-class/ The February 14, 2009 edition of ‘The Economist’ magazine had a special section on the world’s middle class.

If one defines the Middle Class as people with one third of their income left for discretionary spending after providing for basic food and shelter, new research -defined in detail in ‘The Economist’ – indicates that as of 2005 there were 2.6 billion people in the Middle Class – about 55% of the world’s population.

This has immense implications for companies selling their products and services on a global basis. And for the future development of the world, for that matter.

As people emerge into the Middle Class, they do not merely create a new market. They think and behave differently. They are more open-minded.

This aspirational, new to Middle Class population is more likely to invest in new products, new technologies and new businesses than the already rich, who tend to try to defend their existing assets.

This new Middle Class are now concerned about quality, brand and convenience for their discretionary spending. They often show they have ‘made it’ by frequenting western branded businesses, which are seen to have better quality and be more convenient than local brands.

And the newly Middle Class like to show off by being seen at western brands. How else can one explain almost 30 Starbuck’s in the Greater Shanghai Area with western prices and often busier than in the U.S.?

This changes countries and offer immense future opportunity for western brands on a global basis.

Last Saturday’s ‘Wall Street Journal’ had a front page article on this subject.

http://online.wsj.com/article/SB123934751932407099.html

Chinese demand for crude oil hit a one-year high in March. Steel mills imported record quantities of iron ore in March. Cars sales hit a monthly high.

Articles in today’s ‘Wall Street Journal’ highlight upbeat news on the China property market and stock market.