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Consumer tidal wave on the way: China's middle class

Due to the fruits of economic liberalization, analysts say that China is poised for a consumer-products revolution.

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Chen Juan has an unusual dream.

"My ideal picture," says the marketing director of Galanz, the largest microwave manufacturer in the world, "is of a Chinese peasant coming home after a day in the fields and cooking supper in a microwave."

Until recently, most people – including Chinese peasants – would have laughed at such a vision. Galanz built its brand, as did almost every other consumer goods company in China, by selling to the prosperous citizens of boomtowns on the east coast.

But now, say business analysts and economists, China is poised for a consumer-products revolution. Whereas the burgeoning elite in China's major industrial cities has spent the last several years cashing in on an export boom, an emerging middle class in the country's interior has only recently begun to see the fruits of economic liberalization. As government policies shift to encourage consumer spending, businessmen may finally realize their fantasies of an enormous, untapped consumer marketing frontier.

"We have to increase the number of people with a microwave oven from 200 million to 1.2 billion," says Ms. Chen, a gleam in her eye as she measures the prospect. "That's where our future lies."

And after many years of waiting the future has arrived, says Andrew Grant, head of McKinsey & Co., the consulting firm, in China.

"At the moment, China's consumer economy is about the size of Italy's, but in two years' time it is going to start adding an Italy every year," says Mr. Grant, noting that while the average Italian spends $11,511 on consumer goods each year to China's $543, the middle kingdom's enormous population makes up for the difference.

The emergence of a solid middle class, in cities and towns across the country, will transform the Chinese market, predicts Shaun Rein, founder of the Shanghai-based China Market Research Group.


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