Fallon Brainfood: Dragon (China) Rising

Thanks for coming. So, let’s talk about China. Dragon Rising: The New China Changing cultural and economic landscape. The role of government in today’s China. Business and the booming consumer market. A cultural evolution. A company that’s doing it right. What could it mean for you? Copyright ©2007 Fallon Worldwide. All rights reserved. 4

“The world has never seen such a sudden and sustained rise of an economy that was so desperately poor just three decades ago.” Brian Bremner BusinessWeek: Why Taming the Dragon is Tricky Copyright ©2007 Fallon Worldwide. All rights reserved.

Everyday, we read about the incredible story that is China but without a clear understanding of how it affects our lives. As a global company, it’s a topic that’s more relevant than ever. Copyright ©2007 Fallon Worldwide. All rights reserved. 6

And with the 2008 Olympics being described as China’s “coming out” party, the buzz will only increase. The event will be the most profitable in Olympic history— over $1 billion in revenue from local sponsorships. Copyright ©2007 Fallon Worldwide. All rights reserved. 7 Source: International Olympic Committee Statistics

The nation’s growth has been staggering in recent years, sometimes beyond comprehension. Annual economic growth rate over the past 25 years: +9%. Urban population: 2001-2006 annual income growth +9%. Economy will become 2nd largest market in the world this year. More than 660 cities: 49 have +1 million people. Copyright ©2007 Fallon Worldwide. All rights reserved. Sources: The Economist Money Management Feb 2007 AdMap China Supplement Feb 2007 8

At the core of everything is the people. Their culture, values, aspirations and ambitions are dramatically shifting, and understanding them is key in figuring out how we fit in. Copyright ©2007 Fallon Worldwide. All rights reserved.

Chinese consumers are finally seeing their country taken seriously on the global stage. Aspire to be political, business, and cultural trendsetters. And they know the world is watching. Copyright ©2007 Fallon Worldwide. All rights reserved. 16

We’re witnessing the rise in national desire to be a country led by innovation, not just manufacturing. Leading the charge in areas such as stem cell research and the exploration of space. By 2050, they seek to be the global leader in science. Copyright ©2007 Fallon Worldwide. All rights reserved. 17

“Marketers who ignore the pent-up demand of 1.3 billion emerging consumers spending more than $700 billion do so at their own peril.” Noreen O’Leary AdWeek China Series Copyright ©2007 Fallon Worldwide. All rights reserved.

Brands are being redefined through a unique cultural lens. In many ways still new to a consumption culture, people are seeking out brands that align with their aspirations. U.S. China Cheap, quick Status, “face” Copyright ©2007 Fallon Worldwide. All rights reserved. 27

An unprecedented level of freedom is spurring real world business training and education. Border restrictions continue to loosen, benefiting all of us. 6.8 million Chinese traveled to Hong Kong in 2006. 80 million Visas were granted to residents previously unable to visit Hong Kong. Influx into China as well: 2nd biggest tourist spot by 2010, world’s premier destination (will pass France) by 2020. Copyright ©2007 Fallon Worldwide. All rights reserved. 29

At the heart of this is the emergence of a culture that is fueled by its aspirations for success. The auto industry is a particularly telling example. Fastest growing auto market in the world. Number of cars sold grew 22% in 2007 (8.8 million sold). Copyright ©2007 Fallon Worldwide. All rights reserved. Source: AdWeek China Series 2007 People’s Daily Feb 2007 30

We’re witnessing the rise of a middle class starved for branded consumption. Current urban population with significant discretionary spending power is estimated to be around 125 million people. Projected to grow to 650 million by 2015. Copyright ©2007 Fallon Worldwide. All rights reserved. 34 Source: AdWeek China series

It’s indicative of a broad cultural shift: a historically thrifty populace now eager to spend their cash. Copyright ©2007 Fallon Worldwide. All rights reserved. 38 Source: AdMap China Supplement Feb 2007

Driven by curiosity (and ability) to explore the world beyond China, they’ve rapidly adopted technology and new media. More than 135 million Chinese are online. 43% use message boards. 76% are on video sharing. 24% are active bloggers. 400 million mobile phone users (compared to US: 250 million). Copyright ©2007 Fallon Worldwide. All rights reserved. 40 Source: CIC Data

Nearly 80% of Chinese Web sites have some form of bulletin board system. Daily page views across boards: 1.6 billion (10 million new posts published every day). 45% of Chinese people who use bulletin boards spend 3-8 Copyright ©2007 Fallon Worldwide. All rights reserved. hours per day. 47% of users have bought products directly through a bulletin board. Source: iResearch Consulting Group 2007 42

In such a short period of time, they’ve more or less caught up with the developed world in the media they choose to engage with. Social Networking Professional Networks Online Video Copyright ©2007 Fallon Worldwide. All rights reserved. Source: China Internet Network Information Center Jan 2008 43

Young people in particular have leapfrogged technology adoption at incredible rates. In a survey of 15-21 year olds… China (Shanghai) U.S. Used IM Yesterday 91% 59% Engaged with Virtual Worlds 64% 22% Watched TV yesterday 19% 68% Read magazines 81% 20% Copyright ©2007 Fallon Worldwide. All rights reserved. 44 Source: Harris Interactive China YouthPulse 2007

“To be successful in China, businesses need to stop lusting after the billions, and take time to understand the one.” Sandy Thompson, Head of Planning (Asia)—Saatchi & Saatchi Author: “One in A Billion—Xploring the New China” Copyright ©2007 Fallon Worldwide. All rights reserved.

Check the blog and keep the conversation going: http://fallontrendpoint.blogspot.com QQ Coins eBay Dragon Rising Google China Co-Created Customization Eco-Friendly Avatar Brands Pollution Environmentalism P&G Made in China Black Gold Telecom Chery Asia Globalization Authenticity Brandz Chinese culture Instant Message China SMS Starbucks 3D Messaging More Chinese Going Local Middle Class Little Emperor General Motors Virtual Worlds Materialism Automotive Early Adopter Broadband Copyright ©2007 Fallon Worldwide. All rights reserved. Guanxi Tier Cities New World Order Communism Superpower Income Divide Playdo Virtual Life Brand Evangelists Connections Consumerism Plan for Action Community Plannerliness Futurist Brainfood Thought Leadership Agency Culture 58

Fallon Brainfood: Dragon (China) Rising

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