China's producer turns spender

By Sophie Taylor

SHANGHAI (Reuters) - The Chinese worker driving the export-led boom in the world's fourth-largest economy is fast becoming the Chinese spender.

Foreign and local firms -- from HSBC Holdings (0005.HK: Quote, Profile, Research, Stock Buzz) (HSBA.L: Quote, Profile, Research, Stock Buzz) to Wal-Mart Stores Inc (WMT.N: Quote, Profile, Research, Stock Buzz) and China Yurun Food Group (1068.HK: Quote, Profile, Research, Stock Buzz) -- are thinking local as they tap rising spending power from a 1.3 billion-strong potential consumer market.

Overseas banks, now able to gain access to China's retail market as Beijing opens up the sector under WTO obligations, are queuing up to incorporate locally. Sino-foreign fund management joint ventures, meanwhile, are mushrooming.

"As Chinese people become richer and richer, the demand for professional wealth management services is also becoming higher," said Chen Yikang, deputy CEO of AXA SPDB Investment Managers, a fund venture between Shanghai Pudong Development Bank Co (600000.SS: Quote, Profile, Research, Stock Buzz) and French insurer AXA (AXAF.PA: Quote, Profile, Research, Stock Buzz).

Nearly five years of roaring economic growth of 10 percent or more a year has put China on track to overtake Germany as the world's third-biggest economy.

That has fed China's booming domestic stock market -- up more than 90 percent this year after gains of 130 percent last year -- which, in turn, has minted a growing class of millionaires and helped China's middle class balloon.

Urban disposable incomes in China have risen 87 percent since 2000, to 11,759 yuan (US$1,559) per person last year. Insurance premiums over the same period have risen more than threefold, to 564.1 billion yuan.

At the luxury end of the consumer market, China -- now the world's third-largest consumer of luxury goods after Japan and the United States -- is expected to grow 10 percent annually between 2008 and 2015, when sales will exceed US$11.5 billion, a recent KPMG survey estimated.

Executives speaking at the Reuters China Century Summit, from September 4-6, will outline the potential opportunities and pitfalls in expanding their services to win the business of China's burgeoning consumer class.

Beijing is also eager for China to rely less on exports and investment for growth to defuse trade tensions with the United States and Europe.

The Reuters Summit will feature about 20 exclusive interviews with executives from companies including HSBC's local fund management joint venture and private Swedish home furnishings retailer IKEA as well as officials from the European Union Chamber of Commerce in China.

Executives will discuss their strategies for carving out profits across a range of sectors in China, and the legal and regulatory changes that are transforming China's economy.

Other topics will also highlight the risks associated with operating in an emerging economy where evolving legal and financial structures race to keep pace with GDP.

"We see huge market potential, but there are also many things for us to do, as the market is not mature enough," said Cartier Lam, executive vice president of Bank of East Asia (China) Ltd.

One example of this is rampant speculation in the stock market, which the government is trying to tame, he added.

(Additional reporting by George Chen)