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What Are The Chinese Willing To Pay For?

Popularity 11Viewed 3320 times 2015-3-24 08:13 |Personal category:Quote Me|System category:Economy| willingness, pay, for, intangible, wealth

Do we value intangible wealth?

It has been my observation that the majority Asians are quite willing to pay for material goods that represent wealth. Many (not all) however are reluctant to pay for quality services or intangible wealth, with the exception of paying for brand names and the prestige associated with them. I have seen this first hand among Indians, especially the newly rich in India.

Do you agree? What do you see around you?

Background:

Coming from a historical (many generations) background of poverty and hunger among the vast majority of the population, it is perhaps understandable that many Asians value tangible assets as representing wealth. Gold, land, material goods, luxury goods are classic examples. People who acquire a lot of money are willing to pay, and pay a premium for these kinds of assets that they can see, feel and touch. People aspiring to be wealthy seek to acquire these kinds of assets. 

In the terminology of economics, these could be classified as goods. There is another element of wealth in economic theory - the intangibles. These are things you cannot usually see, touch or hold. They include services and intellectual properties (a fancy name for good, clever and useful ideas).  Services can be anything from someone taking your order and serving you a cup of coffee to someone giving you useful information, knowledge or advice - such as a doctor or a lawyer. We all NEED to pay for it. Often, we don't realise that the smile that comes with the service is also paid for. That is why the corporations in the USA are very strict with their employees on this issue. Many have been fired for not smiling. 

By the way, how much would you pay for a smile? Historically, some very wealthy millionaires have paid heavily for the smile from a waitress!!

One had better learn to pay for good knowledge, advice or information (a fancy term for a lot of gossip) too! It is big business these days and in the future.

These  intangibles are also considered wealth in their own right. In fact, sometimes in the 80s, if I recollect correctly, there was a famous milestone marked in the USA - that nation's GDP, for the first time had 'services' sector valued more than the 'goods' sector. It indicated a trend for the future. Today, the majority of the wealth, the world over, is in fact intangibles - the services and intellectual properties. 

There is another kind of intangible that people usually pay for, often disguised under the title of intellectual property - a feeling of prestige and belonging to the elite. This is not strictly a product or service in itself.  This is usually linked to a tangible product or a service that people can either touch or feel or experience. Brand names goods and luxury items are good examples of this. The actual goods or service would be just as useful without the brand name. Often we pay more for the brand name than for the value of the material goods or service itself.

I believe the vast majority of the wealth in the world today, especially in the more advanced economies, is intangible wealth in the services and intellectual property category. One needs to appreciate it more, and be willing to pay for these even in the process of accumulating more wealth for ourselves. It makes sense that we will value things we are willing to pay for.

The hype and brand name category is quite high up there too, in the scale of things, but I would not necessarily pay for a lot of it myself.

What do you think? How are the Chinese's feelings towards these different kinds of wealth of the future? What are they willing to pay for?

(Opinions of the writer in this blog don't represent those of China Daily.)


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Reply Report Dr.Bill.Shen 2015-3-24 11:18
Think this is up to each individual's utility function. as you said, many upstarts are too eager to showboat their newly acquaired wealth. The poorer the upbringing, the more exteme they go. All is about the respect they are craving. Similar things happen to those mobsters as well.

From a business point of view, any good brand carries a lot of intangible values itself. people pays for that. In M&A in China, you also notice the item goodwill that represents that as well. However, most chinese people are less likely to pay for professional services. Best example is what psychiatrists have been facing. Many people think it is crazy to pay for someone to listen to their stories. I have a few highschool classmates who are shrinks, and they make far less than those surgeons.  

Things are changing as well. Anyone with a foreigner face could be paid handsomely for coming to China to teach english.
Reply Report SEARU 2015-3-24 11:31
In Chinese dictionary, culture (文化) means the sum of two kind of things: the mental sense about the physical world and  material products that human beings have created.-------it should be equal to the word 'civilization‘ in English dictionary.
Reply Report ColinSpeakman 2015-3-24 13:10
I asked that question to one Chinese guy and he replied: 10 rmb  per fake 100 rmb note. There's a true story about that!
Reply Report KIyer 2015-3-24 13:13
Thanks for all your comments, Dr. Bill Shen, Searu and Colin. Bill, thanks for the details. It resonates a fair bit with my experience of India.
Colin you always seem to have a funny zinger comment for every occasion.
Reply Report ColinSpeakman 2015-3-24 13:19
Dr.Bill.Shen: Think this is up to each individual's utility function. as you said, many upstarts are too eager to showboat their newly acquaired wealth. The poorer  ...
On the same lines as the Shrink, would Chinese be willing to pay for  a personal trainer or a life coach?
Reply Report ColinSpeakman 2015-3-24 13:20
KIyer: Thanks for all your comments, Dr. Bill Shen, Searu and Colin. Bill, thanks for the details. It resonates a fair bit with my experience of India.
Colin ...
I think there is probably a long list of things that Chinese do not yet see the value of in the intangibles area. I think it could change.
Reply Report ColinSpeakman 2015-3-24 13:30
KIyer: Thanks for all your comments, Dr. Bill Shen, Searu and Colin. Bill, thanks for the details. It resonates a fair bit with my experience of India.
Colin ...
I wonder if the ambience of a high class restaurant comes into that? I believe Chinese value good food but will they pay high prices for what they see as the same quality food  they can get in more basic places?

Two examples. High end restaurants where business comes from govt officials on expenses. Now that stopped, the restaurants have to move down market. If the experience was that good, why won't Chinese spend their own money on it?

The second. Chinese tourists in Paris.. They spend in Galleries Lafayette and Primtemps stores, yet eat noodles rather than dine in fine Paris restaurants,  it is criminal to be in Paris and not eat the fabulous cuisine in great ambience!
Reply Report ColinSpeakman 2015-3-24 13:31
Dr.Bill.Shen: Think this is up to each individual's utility function. as you said, many upstarts are too eager to showboat their newly acquaired wealth. The poorer  ...
If a handsome foreigner face, they can be paid even more handsomely!   
Reply Report Dr.Bill.Shen 2015-3-24 13:34
ColinSpeakman: On the same lines as the Shrink, would Chinese be willing to pay for  a personal trainer or a life coach?
Yes, they can pay a personal trainer in gym or in a yuga session.
Reply Report KIyer 2015-3-24 13:37
ColinSpeakman: I wonder if the ambience of a high class restaurant comes into that? I believe Chinese value good food but will they pay high prices for what they see ...
I once studied 'value' engineering, a very interesting area that addresses issues like this. It was apparently pioneered by the US Navy in the process of trying to control costs, and evolved into a fascinating more universal discipline, useful for almost all things we 'value' in a monetary sense. There is a case study similar to the high class restaurant situation you mention.

If someone would hire and pay me as a consultant, I could do a thorough analysis of the scenario, Colin. Of course, it will involve costs and trips to Paris and its famous restaurants, their ambience, eat their food and study the problem from all angles and then I can present a 'valuable' report on the monetary value of the ambience!
Reply Report Dr.Bill.Shen 2015-3-24 13:38
ColinSpeakman: If a handsome foreigner face, they can be paid even more handsomely!   
yes. many Chinese ladies have a strong propensity of doing that.
Reply Report KIyer 2015-3-24 13:42
ColinSpeakman: If a handsome foreigner face, they can be paid even more handsomely!   
You lucky dude! I've got to count myself out teaching English in China then....
Reply Report ColinSpeakman 2015-3-24 14:18
KIyer: You lucky dude! I've got to count myself out teaching English in China then....
Reply Report ColinSpeakman 2015-3-24 14:19
Dr.Bill.Shen: yes. many Chinese ladies have a strong propensity of doing that.
Ok
Reply Report ColinSpeakman 2015-3-24 14:20
Dr.Bill.Shen: Yes, they can pay a personal trainer in gym or in a yuga session.
Good investment!
Reply Report ColinSpeakman 2015-3-24 14:21
KIyer: I once studied 'value' engineering, a very interesting area that addresses issues like this. It was apparently pioneered by the US Navy in the process ...
Indeed!
Reply Report teamkrejados 2015-3-25 09:28
It seems the Chinese will pay for 'face': whatever makes them look good. DISCLAIMER: while 'face' is an aspect of traditional China and not likely to go away, buying 'face' is a relatively new trend: expensive cars, foods, wines and social experiences.
Such 'face' buying is not a new phenomenon. We see it in all the nouveau riche all over the world.
I believe that, once China gets used to its capitalist state, people will calm down and find 'face' in more traditional areas, such as academics or accomplishments, rather than materials.
Reply Report voice_cd 2015-3-25 09:41
Thanks for sharing your opinion here. We have highlighted your blog.
Reply Report ColinSpeakman 2015-3-26 11:12
KIyer: Thanks for all your comments, Dr. Bill Shen, Searu and Colin. Bill, thanks for the details. It resonates a fair bit with my experience of India.
Colin ...
I try . Without being too Jeremy Clarkson!  
Reply Report ColinSpeakman 2015-3-26 11:13
KIyer: I once studied 'value' engineering, a very interesting area that addresses issues like this. It was apparently pioneered by the US Navy in the process ...
It sounds like a plan!

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