The People’s Republic of China—Should You Be There? Part One
China has been one of the most confounding markets for shared ownership resort developers since the People’s Republic of China (PRC) began opening its doors to Western businesses 25 years ago. The barriers to entry have always been high—but not impossible—for an operator who wants to provide adequate safeguards for both its own business and its clients. But is it worth it? Is there now a large enough spending class to justify the exercise?
A Question of Timing
Before deciding if China is right for your brand, there are a myriad of factors to consider. Among them is the all-important question of the consumer—would they even consider a shared ownership product? What type would appeal most to this demographic and culture?
Further, the unpredictability of the Chinese legislative and regulatory process has a large influence on both consumer behavior and the ability to do business on the ground level. Legislative decisions regarding property ownership for foreigners and citizens are often passed without much warning. Foreign companies establishing a business in China have found the bureaucracy surrounding the process bewildering, time-consuming, and costly. There is little transparency within the system and not much opportunity for appeal. It is hard to plan a business in the midst of such uncertainty.
But it is possible for those who can see the panorama of opportunities presented by an early entry. The following will attempt to bring to light some basic questions that may be helpful in sparking conversations about your involvement in the world’s second largest economy.
Brief Back Story
There has been a shared ownership presence in China for the last two decades. The format has varied from five- to fifty-year right-to-use models, with sales made mostly offsite. Timeshare is rarely more than leased hotel product or serviced apartment type property arrangement. Average purchase prices have been generally less than $10,000. Sales and marketing is often rudimentary, conducted without benefit of any regulatory governance. Indeed, timesharing is not even a recognized commercial enterprise in China—not surprisingly, the product’s reputation in China is often negative.
Over the life cycle of Chinese timesharing, there have been about 40 different companies operating internally. At the time of publication, less than 20 are still operational, and less than five are in active sales—the market has a very low penetration rate.
There are more households in China (almost 402 million) than there are people in the United States (314 million). There are nearly 200 million households in urban areas where the average per capita household (in USD as in the rest of this article) is officially reported at approximately $13,000 annually (compared to $43,000 per capita income in the United States). The official figures don’t take into account unreported income, which by some estimates represents as much as 12% of GDP.
A rigorous 2013 non-government survey of household wealth in China reported the following in terms of disposable income, a very useful indicator. Assuming approximately 200 million urban households, here are a few key statistics:
Add to this the fact that GDP growth over the last five years was 151% (compared with the United States at 7.6%) and that it has among the highest home ownership rates in the world. Both factors of continued growth and the sheer scale of numbers is potential evidence for a viable Chinese timeshare presence.