RENEE MONTAGNE, host:
In China, the economic problem is of a different type. This week China's central bank asked local financial institutions to stop lending in an effort to slow China's surging growth. And China's consumers are already spending enough to change the world. That's according to Karl Gerth, a professor at Oxford University. He writes about it in a new book called "As China Goes, So Goes the World: How Chinese Consumers are Transforming Everything." Steve Inskeep reached him in Oxford, England and he started the conversation by asking Gerth what Chinese people want.
Professor KARL GERTH (Oxford University): Back during the Maoist era in the 1970s, people just wanted four functional status symbols - bicycles, watches, sewing machines, radios. I think these were called the four things that go 'round.
STEVE INSKEEP, host:
Well, what kinds of products are hot now, if you compared them with those four items from a few decades ago?
Prof. GERTH: So rather than just buying things like a house, a car - those are probably the two biggest things that people are after now. They're also after experiences like studying and higher ed, especially overseas, perhaps in America or the U.K. They're interested in leisure travel. So we're just beginning, I think, to see a huge number of Chinese tourists travelling all over the world, as well as cultural events such as the Beijing Olympics.
INSKEEP: You know, we brought along a commercial for KFC that is playing on Chinese television. I'd like to play a little bit of that. Let's listen to just a bit of this commercial.
(Soundbite of commercial)
Unidentified Woman: (Foreign language spoken)
INSKEEP: You have this dramatic kind of feel-good corporate music and a woman is on the screen and she's saying - I'm translating very roughly here - that she didn't realize that when she first ate some KFC chicken, that it was going to change her life. And she goes on to say that she got a job at KFC and now she's got a better life and now she can help other people.
I love seeing this ad because it reminds me of corporate ads in the United States, where they don't just say we're selling you a product; they say we're making the world a better place.
Prof. GERTH: Now, imagine if you were a teenager living in an impoverished village in China somewhere and you see that advertisement a hundred times; actually, you don't have to imagine it. I was travelling in rural China and decided I would ask whether this innkeeper, not far from the Tibetan border, had ever heard of (foreign language spoken) Kentucky Fried Chicken (foreign language spoken) McDonald's, that sort of thing.
He pointed to his television - he said, of course. He said, not only have I, do I know of all these brands, but I successfully convinced my daughter to leave home and move a six-hour bus ride away just by promising her she'd finally get to go to a (foreign language spoken) Kentucky Fried Chicken.
(Soundbite of laughter)
Prof. GERTH: If that isn't the power of brands in our consciousness, I don't know what is.
INSKEEP: Are there American brands that Chinese consumers will pay a premium for right now?
Prof. GERTH: I read an article recently about Kohler, the Wisconsin-based toilet manufacturer, and the sort of a status that a Kohler has there commands a premium.
INSKEEP: You know, fine toilets, don't get me wrong. But why would Kohler toilets be the thing that would really excite people?
Prof. GERTH: If you build up a brand properly and that brand is associated with luxury, then you can command a premium for those brands. I think Kohler also managed to cover its posterior by setting up its own chain of installation people so that they wouldn't have a very expensive toilet installed and then not work properly, which would damage the value of the brand.
INSKEEP: Oh, so each Kohler toilet becomes an advertisement for more Kohler toilets?
Prof. GERTH: That's correct. Consumerism begets more consumerism, right? The more fancy things you have, the more fancy things you want. I have a friend, a Chinese friend, who says that when her friend buys two LV handbags, Louis Vuitton handbags, she says she needs three bigger, better Louis Vuitton handbags.
INSKEEP: You mean to compete?
Prof. GERTH: To compete. That after all is the heart of the consumer-driven economy in society, right? You need people to buy more and more stuff. So on the one hand, that's a wonderful thing, that they have more money. It could drive global economic growth, especially since the U.S. and Western Europe have less money these days to spend on these sorts of things.
INSKEEP: Another question, I suppose, that occurs to Americans is how large the opportunity is here, because as you know very well, Americans are buying hundreds of billions of dollars in goods from China, and you wonder if American exports, which are so much lower to China, can increase a little bit, which won't really make that big a difference, or if they really could increase a lot over time.
Prof. GERTH: I think they could increase a lot, but by the same token, they're going to face quite a bit of competition, not only from the companies of other countries but within China itself. China doesn't want to remain at the bottom end of the value-added chain. They don't just want to do all the hard work, right? They want to create internationally competitive brands of their own and they're going to do that both through traditional capitalist means, but also with the help of their state.
INSKEEP: I would have trouble naming a lot of Chinese brands, even though I'm sure I've bought a lot of Chinese products, as almost every American must as they go through the day. Are there Chinese brands we're going to hear about in the coming years?
Prof. GERTH: How about Volvo? Have you heard of them?
(Soundbite of laughter)
Prof. GERTH: Or MG Rover. In other words, if they don't successfully create brands from the ground up, they could easily buy brands and then you'd be effectively buying Chinese brands then.
INSKEEP: Karl Gerth is the author of "As China Goes, So Goes the World," a book about Chinese consumers. Thanks very much.
Prof. GERTH: Thank you very much for having me on.
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