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March 31, 2010

Credit Cards, Rising Minimum Wages and More McDonalds in China in 2013

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The articles that are cited here show in a more detailed way how China compares to the US and developed countries and how fast people in China are catching up. Normally this is indicated with statistics like per capita GDP. Here we look at numbers of credit cards, numbers of McDonald restuarants, mobile phones, minimum wages, some less common demographics and prescription pharmacy drug markets.

1. McKinsey Consulting - China’s card market: Primed for rapid evolution (7 page pdf)

China’s credit card market is at the center of an evolving, high-stakes competition among domestic and foreign financial institutions. Although still relatively small, it is growing rapidly and may soon become Asia’s most important card market. In 2008, China issued approximately 50 million cards, more than any other market and about equal to the total number of cards presently active in France. By 2013, total cards issued in China will likely surpass 300 million – more than double today’s level.

Today, approximately 5 percent of Chinese have credit cards, a sharp contrast with the U.S., where about 60 percent of the population has one or more

Allowing for owners of multiple cards, the number of cardholders should more than double to about 130 million (in China in 2013). Our research suggests that card spending will more than triple over the next five years – from RMB 640 billion ($92 billion) to RMB 2.2 trillion ($316 billion) – as issuance and increasing spend-per-card drive volumes higher.

2. South China's industrial heartland of province of Guangdong is going to raise the minimum wage by average of 21% to range of $96 to $150 a month.



The adjusted minimum wage is divided into five categories ranging from RMB660 to 1,030 yuan/renminbi ($96 to $ 150) a month, depending on the financial situation in different cities in the province. The move came a month after the country's second biggest exporter, Jiangsu Province, raised its minimum wage by about 12 per cent to 960 yuan ($140.64) from the current 850 yuan ($124). East China's Fujian Province increased its minimum wage by 24.5 per cent from March 1st.

3. McDonald's, which has about 1,100 outlets in China expects to boost that number to a total of 2,000 by the end of 2013, said Tim Fenton, the company's president of Asia Pacific, Middle East and Africa

China accounts for around 23% of McDonald's revenue from the Asia Pacific, Middle East and Africa regions, and its share is growing, Mr. Fenton said.

"The informal eating-out industry in China is about $300 billion right now, and it will grow about 10% this year," Mr. Fenton said, attributing the projected growth to the country's growing middle class.

There are about 31,000 McDonald's restaurants in the world and about 13,400 of them are in the USA Even doubling every three or four years, it will take China until about 2020-2025 to equal the total number of McDonald's restaurants in the USA.

4. Mobile Phones made and designed by these Chinese vendors waccounted for about a third of the 1.1 billion cell phones that were sold around the world in 2009 The world's urban poor and rural residents are expected to represent 60 percent of global mobile-phone sales by 2013.

5. The future demographics of Brazil, Russia, India and China

The working-age population in India will increase by a stunning 240 million (equivalent to four times the total population of the UK) over the next two decades, compared with 20 millino in Brazil. The working-age population in Russia, by contrast, will decline sharply by almost 20 millino, according to UN projections. China’s working-age population will peak in 2015 and then gradually decline. By 2030 it will be merely 10 million larger than today.


It is the dependency ratio (that is, dependent population relative to the working-age population) rather than the absolute increase (or decrease) in the size of the working-age population that is the economically most relevant variable. If the dependency ratio declines, i.e. the working-age population as a share of the total population increases, per-capita growth accelerates. By the same token, a rising dependency ratio is a “drag” on growth. He says interestingly, empirical research suggests that the drag stemming from a rise in the dependency ratio due to rising old-age dependency seems to be somewhat smaller than the “dividend” stemming from an equivalent decline in the dependency ratio due to falling youth dependency.

China's dependent ratio should not become a drag until about 2025 and does not start to really impact until 2030.

6. There are varying definitions of global middle class

The World Bank defines the global middle class as those earning between $10 and $20 a day. MIT economist Banerjee defines middle-class people as those living on $6 to $10 a day.

Half the world is middle class by the $6-10 per day definition

7. The seven countries IMS Health (Consultancy) dubs "pharmemerging markets" - China, Brazil, Mexico, Turkey, India, South Korea and Russia - will expand by 13-14 per cent in 2009, accounting for half of all global growth.

IMS forecasts similar growth over the coming five years, as rising incomes and expanding health insurance cover combine with a growing desire to seek treatments for an ever broader range of chronic as well as infectious diseases.

Global sales in the pharmaceutical industry will grow by just 2.5-3.5 per cent this year, the lowest expansion it has yet recorded. The US - which still accounts for two-fifths of all revenues - will decline by 1-2 per cent.


FURTHER READING

China and the World's emerging middle class

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