August 1, 2010｜China
Executive Director, Mizuho Securities Asia Limited
A woman in jeans was playing acoustic guitar on her own. It was mid July in an underpass in a sightseeing area of Wuhan City, an inland hub city in China. In the street of bars housed in traditional architecture in a former concession along the banks of the Yangtze in Wuhan City, young people were enjoying music and alcohol until late into the night. In the street of bars of the quarter that never sleeps were also parked cars of European and Japanese manufacture. The wealthy and the urban middle class were certainly growing in the inland hub city.
Taking a look into musical instruments, China has already become the world’s top in the manufacture and sale of pianos. The production of the world’s leading 48 piano manufacturers in 2008 was 424,000 instruments, and from the impact of the financial crisis, etc., had decreased by 43,000 instruments from the previous year. The number of pianos produced by China was 313,000, a decrease of 79,000 compared to the previous year. Of these 62,000 were exported (China Musical Instrument Association). Additionally the number of people learning the piano had reached approximately 30 million (Chinese Musicians Association).
The penetration rate, however, is still low. At the end of 2008, the piano penetration rate for urban households (urban residents) was at a nationwide average of 3.0%. This didn’t match privately-owned cars (8.8%), video cameras (7.1%), and health appliances (4.0%). Broken down by individual province and municipality, from a total of 31, the coastal areas occupied the highest rankings, with Shanghai Municipality top at 5.8%, Beijing Municipality in second place with 3.6%, and then Shandong Province, Guangdong Province, Fujian Province, Liaoning Province, Zhejiang Province, and Jiangsu Province.
There are also statistics on penetration rate by income level. The penetration rate for the highest income group out of the six for urban households nationwide is 4.3%, yet even this is no match for the average for Shanghai Municipality. For the highest income group out of the six for urban households in Beijing Municipality it is 6.6%, and for the highest income group out of the seven for urban households in Guangdong Province it is 7.4%. While the piano was not included in a survey of rural residents, the untapped potential market, looking at only urban areas, appears to be large.
The learning of the piano began to spread out from the coastal cities, such as Beijing and Shanghai, in the 1980s. World-class performers have already been produced from this generation. One is Li Yundi, from Chongqing in the interior. He began the piano at age four, and at the 2000 Chopin International Piano Competition was the first Chinese to win it. Another is Lang Lang, from Shenyang, Liaoning Province in northeastern China. His father was a performer on the erhu in an air-force song and dance troupe. He learnt piano from age three, and at age five won the local Shenyang Piano Competition. His talent developed from early in his life, including getting first prize for outstanding artistic performance and a technical prize at the Ettlingen International Competition for Young Pianists in Germany at age 12. He performed a concerto at the opening ceremony of the Beijing Olympics. The two were both born in 1982. Their role as “billboards” for the world’s number one piano market is also anticipated. China has begun to turn out world-class pianists besides these two.
Suning Appliance, a major Chinese electrical appliance retailer, in June this year opened a branch in Shanghai: “Music Box”, a musical instrument store affiliated with Laox, the Japanese home electronics store it acquired. White goods, televisions, PCs, cell-phones and the like have become the focus of replacement purchase demand in China as well. This means that, in the coastal urban areas, products that are not likely to sell are increasing. The nationwide urban-household penetration rate for cell-phones is 172.0%; for color televisions, 132.9%; for air conditioners, 100.3%; for washing machines, 94.7%; and for refrigerators, 93.6%. For Shanghai Municipality PCs have exceeded 100%. For electrical appliance retailers, besides increasing branches in the interior, the unearthing of the coastal market has become necessary. One year has passed since the acquisition. I wonder whether Suning Appliance considered the opening of musical instrument stores, researching the maturity and saturated state of the Japanese market through Laox.
Going about 100 meters in from the main road in the former concession in Wuhan City, there are rows of eateries with no air-conditioning. A bowl of noodles containing beef was 4 yuan and thin, steamed buns were 0.50 yuan each. The population of China is equivalent to the population of the United States, the European Union (EU) and the Association of Southeast Asian Nations (ASEAN) combined. In considering it as one economic area, then China is too huge by half.
[Translated by ERINA]
Note: For the three most populous prefectures—Tokyo Metropolis, Osaka Prefecture, and Kanagawa Prefecture—the population is approximately 30 million.