China's Consumerism “The government is still the most powerful force in China, and they have just adopted their 12th five-year plan, emphasizing food safety and domestic consumption,” David Gao, Walmart’s government-relations director for China, told me in the company’s Shenzhen headquarters. “If we want to push sustainability efforts and grow here, we have to have government support. So we want to align our strategy with government interests. And quite frankly, because the overall business climate for sustainability is favorable, I can’t think of any reason for not doing this.”
Today we take advantage of a long, perhaps overly long article in the December edition of Atlantic Magazine, that is focused on China and Walmart’s relationship with it. Specifically, how Walmart’s green environmental policies are helping clean up China and bringing about energy and clean water efficiencies. The article also gets all steamed up about organic foods. My interest in the article is far more practical. Walmart now operates 352 stores across China, with many along the lines of Sam’s Clubs. Walmart’s expansion in China is still continuing and likely will for decades to come.
Below, a sample from AM’s article.
How Walmart Is Changing China The world’s biggest corporation and the world’s most populous nation have launched a bold experiment in consumer behavior and environmental stewardship: to set green standards for 20,000 suppliers making several hundred thousand items sold to billions of shoppers worldwide. Will that effort take hold, or will it unravel in a recriminatory tangle of misguided expectations and broken promises? By Orville Schell BESIDE THE FIFTH Ring Road, one of the superhighways encircling Beijing like concentric shock waves radiating outward from the epicenter of an earthquake, sits an enormous big-box installation, one of thousands now proliferating throughout China. The parking lots flanking it are gridlocked with late-model cars and ruddy-faced peasants-turned-workers pushing long, snake-like trains of shopping carts toward the entrance.
Stepping into the building’s vast, windowless interior, I have the sense of entering an oversize Fabergé egg. But instead of refined scenes of aristocratic czarist life, I encounter thousands of middle-class Chinese engaging in the newest, and already the most inalienable, right in this erstwhile “People’s Republic”: shopping. This is the Shijingshan Shanmuhui, a Sam’s Club, one of the 352 stores that Walmart now operates in 130 Chinese cities.
----Although Walmart’s $7.5 billion in Chinese sales receipts account for only 2 percent of the company’s annual revenues, its sales in China have risen substantially over the past decade. Sales in the United States, by contrast, have been shrinking. And as China’s retail market—the world’s fastest-growing—expands by 18 percent a year, Walmart’s executives smell the intoxicating scent of more growth to come. Equally important, if not more so, some 20,000 Chinese suppliers, or “partners,” reportedly provide Walmart with about 70 percent of the nearly $420 billion worth of goods that it sells globally each year.
----With some 30,000 Chinese factories making things for Walmart, the company’s future was tied to China in the most elemental way. So Scott and his team knew that Walmart could never truly “green” its supply chain without taking on its Chinese partners. But, if China was going to be the laboratory of the future, it was difficult to imagine how even Walmart could wrangle such a far-flung and disparate range of suppliers into a responsive group. More
From our RMB perspective, it’s all about the increasing level of Chinese demand, specifically for products that involve some use of rare earth elements. From an article like this, it’s not hard to see why China wants to restrict REE exports in favour of meeting its own growing consumption, and of meeting the needs of the rest of the decade and the next. The current five year plan is focused on environmental remediation and promoting the growth of consumerism. This year China’s policy had been one of tightening bank credit in the system. In the past month there are signs that China has started to ease again. My guess is that China will turn itself into the more consumerist economy it wants by 2015. My fear is that we have not yet adequately factored in the coming level of Chinese demand for REEs.
(20min delay)