Long march to the affluent society

TVs and fridges are old hat. Now China's middle classes want PCs, cars and houses.

IN PEKING'S Super Wave Hi-Fi Garden, video compact disc (VCD) players have usurped laserdisc machines as the preferred purchase. "Very popular," nodded Li Huigang, manager of the ground floor. "We're selling 100 to 200 VCDs per month at between 3,000 yuan and 8,000 yuan (pounds 240-pounds 640)."

Super Wave, one of the biggest electronics stores in Peking, opened last February. It is owned, rather improbably, by the city's Western District Education Bureau. "Originally there was a primary school on this site," Mr Li said. "But there were very few students, so the local education bureau changed it into a shop to make money." Built around a large courtyard where school children used to play, its showrooms offer state of the art hi-fi and video, professional karaoke units, car stereos, and computers, many of them imported, some scarcely available yet in Europe.

Another popular line, according to a lively sales assistant, Li Hong, is the audio-visual tuner-amplifier. "They produce the atmosphere of a movie theatre," she promised. "Five channels of sound."

Over the next few weeks, China will experience its annual consumer spending binge as the country gears up for the Chinese New Year festival, which this year falls in mid-February. The shopping frenzy next year will be far removed from the 1960s, when an ambitious housewife in a Chinese city would dream of the jiu san da jian (old three big things) - a Shanghai "Seagull" wristwatch, a Tianjin "Flying pigeon" bicycle, and a Peking "Butterfly" sewing machine.

By the middle of the 1980s, when Deng Xiaoping's economic reform programme was in full swing, upwardly mobile urban families had their sights set on the xin san da jian (new three big things) - a colour television set, a refrigerator, and a washing-machine. Social standing could hinge on whether your apartment boasted such consumer desirables.

A recent survey of 600 households in Peking by the Diamond Information Industry market research company found that the "new three big things" are now commonplace: colour television ownership was 98.5 per cent, refrigerators 96.7 per cent, and washing-machines 93.2 per cent. China's most ambitious urban consumers are now saving for the so-called chaoji san da jian (super three big things) - a computer, a car and a private house, the last two still way beyond most families' budgets. China's 900 million rural dwellers are far behind on the road to consumer bliss; not for them the luxury of VCDs or even running hot water. But the emerging Chinese middle classes now constitute almost a large separate nation, with spending power of potentially global economic importance.

Official city dwellers number 300 million. Around 12 million city residents fall below the official poverty line, but a million households have an annual income of more than 1m yuan (pounds 80,000). In between, at least 100 million people - equivalent to two populations the size of Britain's - have spare cash.

Living with one foot in old Communist China and the other in a booming market economy, most Chinese urban families have rather different expenditure profiles from their Western counterparts. More than half those surveyed lived in housing provided by their work units at peppercorn rents. This, combined with heavily subsidised electricity and heating, means rent and household bills accounted for only 8 per cent of a family's monthly income, the survey found. Disposable income is thus much higher than might be expected.

Sixteen years of "socialism with Chinese characteristics" have transformed the availability of consumer goods for city dwellers. But fast-track economic growth has created some curious anomalies. It has proved much easier for the government to put a television in every home, for example, than to provide adequate urban housing or modern sewage systems. In the cities, average total per capita living space is just 70 square feet. One quarter of the Peking homes sampled had no toilet, and one in six no proper kitchen.

With the market for large domestic appliances all but saturated, Peking's households are snapping up smaller appliances. The survey found 63 per cent of homes had telephones, despite the hefty 5,100-yuan connection fee for a direct line. Other purchases included furniture suites (50 per cent), hi-fi units (18 per cent), air-conditioners (17 per cent), microwave ovens (11 per cent), computers (7 per cent) and pianos (4 per cent).

"These days everyone wants to buy European- style furniture," said 27- year-old Xiao Zhang. Piano sales have jumped over the past year because many parents are convinced that learning the instrument will make their precious only child cleverer. One customer at Peking's Piano City store, shopping for his son, explained: "Playing a piano is good for developing the child's memory."

On the telecommuncations front, demand for mobile equipment is unquenchable. The number of mobile telephones in China, the much-flaunted status symbols, has jumped from 20,000 in 1990 to 1.57 million last year. The number of people with pagers has soared over the same period from 430,000 to 24 million. Not that this necessarily involves much personal expenditure. "Many people with mobile phones have not bought them with their own money. The company buys them," said Ke Huixin, the statistician at Diamond. "Some people use it to show how rich they are."

Rising sales of the third-generation items, the "super three big things", herald the next stage of the urban consumer spending spree in China. The Ministry of Electronic Industry has forecast a 40 per cent growth next year in the home computer market. New technology has also brought unforeseen challenges to China's law enforcement agencies, however. Last week the government launched a new anti-pornography crackdown, with a specific emphasis on illicit CD-Roms and floppy discs, as well as VCDs and laserdiscs.

Private cars and homes remain a reality for only the super-rich. In a market where a Chinese-manufactured 1.8-litre basic saloon car sells for eight times the average family annual income, Diamond found just 1.7 per cent of Peking homes with a private family vehicle. But that, of course, takes no account of millions of officials who have personal use of a work unit or government department car.

Buying a house or apartment is left as the ultimate fantasy for urban Chinese. Xiao Bai, a 27-year-old business-woman, explained how she and her husband had been to look at an apartment on the outskirts of Peking. The newly built, small two-room flat was on sale - for a modest 1.2m yuan (pounds 100,000). "We're going to wait for the prices to fall," she firmly declared.