Market Information: The Musical Instruments & Services Market in China

International Exhibition for Musical Instruments and Services Shanghai New International Expo Centre (SNIEC), Shanghai, China 9 – 12 October 2008

Should you need more information, please contact: Messe Frankfurt (HK) Ltd Music China Team 3506 China Resources Building 26 Harbour Road, Wanchai, Hong Kong Tel: (852) 2238 9901 Fax: (852) 2598 8771 Contact: Ms Phyllis Tsang Email: [email protected] Website: www.musikmesse.com

Contents: I. II. III. IV. V. I.

General Information on China China's Economic Outlook in 2008 The Musical Instruments Market in China Shanghai – International Hub in China What can Music China offer you? General Information on China

China is the world’s third largest and most populous nation in the world. With 1.3 billion populations and economy grew by 10.7%, 11.4% growth rate of GDP in 2007, China remains one of the fastest growing economies in the world and a market not to be missed.

Latest Development in China 1

Real GDP grew by 11.4% in 2007. Fixed assets investment grew by 25.8% in 2007. Consumer price index went up by 4.8% in 2007. 2 Exports grew 25.7% and imports by 20.8%. Export growth slowed further while import growth continued to rise in December, reflecting the persistent appreciation of the Renminbi against the US dollar in 2007. With the US in danger of falling into recession and global growth slowing, mainland China’s export growth is expected to decelerate to about 20% in 2008. With the policy objective of maintaining a stable growth, the central government has taken stabilization measures aiming to moderate investment growth since 2004. In 2005 and 2006, the economy grew by 10.2% and 10.7% respectively. In the second quarter of 2007, real GDP growth accelerated to 11.9% after growing at 11.1% in the first quarter, but slowed to 11.5% in the third quarter and further down to 11.2% in the fourth 1 quarter, resulting in an average of 11.4% growth for 2007. Mainland China's real GDP grew 11.4% in 2007, up from the 11.1% in 2006. During the year, real GDP growth dropped gradually from 11.9% (year-on-year) in 2Q to 11.2% (year-on-year) in 4Q, reflecting that the government's monetary tightening was taking effect (Exhibit 1). Despite the recent slowdown, mainland China's economic growth remained strong when compared with those of the past 2 few years (Exhibit 1) . Key Market Indicators

1

Major Economic Indicators

2006 Value

2007 Growth

Value

Growth

Gross Domestic Product (in RMB bn)

21,087.1

11.1%*

24,661.9

11.4%*

Fixed Assets Investment (in RMB bn)

9,347.2

24.5%

11,741.4

25.8%

Consumer goods retail sales (in RMB bn)

7,641.0

13.7%

8,921.0

16.8%

Exports (in US$ bn)

969.1

27.2%

1,218.0

25.7%

Imports (in US$ bn)

791.6

20.0%

955.8

20.8%

1,066.3

30.2%

1,528.2

43.3%

Foreign currency reserves (in US$ bn) Notes: * Real growth

1 2

HKTDC, updated 10 March 2008 China Economic Monitor (Feb 2008) by Hang Seng Bank Limited

2

Current Economic Development

3

Fixed assets investment is one of the major driving forces of the economy. After growing by 27.6% in 2004, fixed assets investment continued to grow by 27.2% in 2005 and 24.5% in 2006. Although the government scaled down the issuance of construction bonds in recent years, fiscal expansion remains a contributing factor 3 to China's economic growth. In 2007, fixed assets investment grew by 25.8%. Retail sales of consumer goods grew by 13.3% in 2004 and 12.9% in 2005. Growth in retail consumption was fundamentally supported by government policies to stimulate consumption which include provision of consumption credits and lengthened holidays. Continued growth in disposable income also contributed to the steady increase in retail sales. After growing by 13.7% in 2006, retail sales increased by 16.8% in 2007. The government is aiming to further stimulate consumption and raise its contribution to economic growth. Deflationary pressure began to be reversed since 2003 and the rapid rise in food prices resulted in a 3.9% increase in the consumer price index (CPI) in 2004. In 2005 and 2006, the consumer price index went up by 1.8% and 1.5% respectively. In 2007, the consumer price index went up by 4.8% with food prices increased by 12.3%. Beginning 21 July 2005, China reformed the Renminbi (RMB) exchange rate regime by moving into a managed floating exchange rate system with reference to a basket of currencies, and the exchange rate of RMB was re-valued to 8.11 per US dollar on 21 July 2005. Effective 21 May 2007, the floating band of RMB against the US dollar is enlarged from 0.3% to 0.5% around the central parity published by the People's Bank of China on each working day. China's foreign exchange reserves reached US$1,589.8 billion by the end of January 2008, the largest in the world. Foreign Trade and Investment In 2006, China's external trade reached US$1,761 billion, ranked the third in the global economy. In 2007, exports grew by 25.7% while imports increased by 20.8%, resulting in a trade surplus of US$262.2 billion. Export-processing trade continued to be the major form of external trade. In 2006, exports and imports related to processing trade grew at 22.6% and 17.4% respectively. Export-processing trade accounted for 52.7% of China's total exports in 2006 and dropped slightly to 51% in 2007. In 2007, exports and imports related to processing trade grew at 21% and 14.6% respectively. In 2006, exports of foreign-invested enterprises (FIEs) increased by 26.9% while imports grew by 22%. In 2007, FIEs' exports increased by 23.4%, accounting for 57.1% of China's total exports, and imports increased by 18.4%, representing 58.5% of China's total imports. Trade and Investment Policies As a move to liberalize trade, China has continued to reduce administrative barriers to trade by increasingly switching to the use of tariffs and exchange rates adjustments. Since its WTO accession, China has basically fulfilled its tariff reduction commitment. The average tariff rate remains at 9.8% beginning 2008, progressively down from 15.3% in 2001. II.

China's Economic Outlook in 2008

4

Slower export growth helped cooling down 4 the economy One reason for the slower pace of growth since the second half of 2007 was the gradual deceleration in export growth. In December, China’s export growth slowed further while import growth continued to rise, reflecting the persistent appreciation of the Chinese Renminbi against the US dollars in 2007 (Exhibit 2).

3 4

HKTDC, updated 10 March 2008 China Economic Monitor (Feb 2008) by Hang Seng Bank Limited

3

For 2007 as a whole, exports grew 25.7% and imports by 20.8%. With the US in danger of falling into recession and global growth slowing, China’s export growth is expected to slow to about 20% in 2008. But retail sales remained strong In contrast, retail sales in December rose strongly by 13.8% year-on-year in real terms, up from the 12.1% in November. For 2007, retail sales grew 12.5% in real terms, similar to the 12.6% recorded in 2006. A major reason for the impressive performance was the sustainable income gains in recent years. Overall, real GDP is forecast to grow by about 10% in 2008, slightly lower than the 11.5% growth projected for 2007 (Exhibit 7). CPI inflation is expected to ease to about 3-4% in 2008 from the 4.5% projected for 2007, 5 which is still slightly higher than the government's 3% target. Exhibit 7: Mainland’s economic growth forecast 2006

2007

2008

Real GDP growth, %

11.1

11.4

10

Retail sales, real growth, %

12.6

12.5

12

Fixed Assets Investment, growth, %

24.0

25.8

20

1.5

4.8

3.0

969.3

1,218.0

1,466.0

27.2

25.7

21.0

791.8

955.8

1,130.0

20.0

20.8

20.0

Consumer Price Index Export of goods, US$ bn - growth, % Import of goods, US$ bn - growth, %

China will maintain macro controls in 2008, to ensure a continual growth of the economy, as well as to prevent the economy from burning out, according to the Political Bureau of the Communist Party of China (CPC) 6 Central Committee. In 2007, the gross domestic product (GDP) reached 11.4%. China is likely to become the world’s second largest consumer market by 2015, according to the Boston Consulting Group (BCG). Chinese consumers are experiencing unprecedented wealth growth which is 3 to 5 times faster than developed countries in the past 50 years. Most Chinese consumers plan to spend more in the near future to 7 fulfill their family dreams.

III.

The Musical Instruments Market in China

According to the General Administration of Customs and the National Bureau of Statistics, China import and export figures of Musical Instruments reached USD165 million (up 24.18%) and USD1,222 million (up20.18%) in 2007 respectively. The import and export figures of MI in 2006 reached USD132 million and USD1,018 million respectively. In 2005, the import and export figures of MI reached USD127 million and USD924 million respectively. According to the China Musical Instrument Association, MI industry continued to keep a stable development under the Government policies and positive control. The MI export went up slightly while imports increased sharply. It was supported by the government of various levels and society of all circles. Music education activities flourished the culture market and activate the effective influence among society at the same time. th The 17 CPC National Congress report proposed the strategy of “fostering the cultural development and prosperity with great motivation”. In addition, lift the MI export and greatly expand MI domestic consumption to 8 build a stable, healthy and regular MI trade market.

5 6 7 8

China Economic Monitor (Dec 2007) by Hang Seng Bank Limited www.tdctrade.com Xinhua Online, 22 October 2007 China Musical Instrument Association, 4 January 2008

4

Below table highlights the categories of MI in import and export: 9

Import (all value are expressed in USD million) Description

2006 Unit

Change in % (year-on-year)

2007

Volume

Value

Volume

Value

Volume

Value

Upright Piano

Set / piece

14,773

10.001

19,825

14.039

34.20

40.39

Grand Piano

Set / piece

2,836

13.064

5,199

18.241

83.32

39.63

Stringed instruments

Set / piece

5,152

0.644

20,235

1.064

292.76

65.28

Brass-wind instruments

Set / piece

2,805

0.638

5,011

1.272

78.65

99.49

Wood-wind instruments

Set / piece

44,344

3.240

487,376

4.324

999.08

33.43

Set / piece

285,519

3.925

195,805

3.730

(31.42)

(4.98)

Set / piece

178,261

10.549

255,674

18.028

43.43

70.90

17.62

19.74

Percussion (including drums, xylophones, cymbals, castanets, maracas) Electronic and electrical instruments Parts and accessories

Kg

9,979,766

86.426

17,738,532

103.487

Sheet music

Kg

1,308

0.089

1,653

0.053

26.38 (40.09)

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Export (all value expressed in USD million) Description

2006 Unit

Volume

2007 (Jan – Nov)

Value

Volume

Value

Change in % (year-on-year) Volume

Value

Upright Piano

Set / piece

63,677

61.676

64,362

65.564

1.08

6.30

Grand Piano

Set / piece

16,799

43.292

14,106

39.533

(16.03)

(8.68)

Stringed instruments

Set / piece

9,794,763

176.809

11,488,126

213.795

17.29

20.92

Brass-wind instruments

Set / piece

679,403

42.094

900,564

58.204

32.55

38.27

Wood-wind instruments

Set / piece

4,831,524

24.960

19,079,217

59.123

Set / piece

11,554,044

106.170

16,292,387

135.706

41.01

27.82

Set / piece

8,141,765

361.047

10,264,362

429.281

26.07

18.90

Parts and accessories

Kg

29,430,310

147.403

30,079,436

164.372

2.21

11.51

Sheet music

Kg

233,523

0.323

585,313

0.76

Percussion (including drums, xylophones, cymbals, castanets, maracas) Electronic and electrical instruments

9

HKTDC (data from China Customs)

294.89 136.87

156.72 140.80

5

IV.

Shanghai – International Hub in China

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Shanghai has a total area of 6,300 sq. km, consisting of 18 districts and one county. Total population stood at 18.2 million by the end of 2006. Shanghai is one of the 4 autonomous municipalities and historically a 10 commercial and financial center of China. Located at the heart of the Yangtze River Delta, Shanghai is China's largest and the world's 3rd largest container port, which handled 21.7 million TEUs in 2006, up 19.9%. The Yangshan International Deep Water Port under construction is expected to give modern twist to the port city. Hongqiao and Pudong International airports link Shanghai with 141 cities in 29 foreign countries and regions. In its 11th Five-Year Programme, Shanghai aims to become an international hub for finance, trading and shipping. In particular, Pudong District is to become a pilot area for integrated reforms. In order to host The 2010 World Expo, Shanghai will invest RMB 28.6 billion in total, 18 billion in construction and 10.6 billion in operation, creating huge business opportunities. Shanghai consumer prices increased by 5.1% in October, as compared to the same period last year. Higher food prices attributed to the rise, as it accounted for a third of the whole Consumer Price Index (CPI). In September, China's CPI rose by 6.5% year-on-year, thereby being the highest record in more than a decade. The National Bureau of Statistics predicted last week, that inflation would ease climbing prices in November and December. Major Economic Indicators 2006


Jan-Jun 2007


Value


Growth (%, y-o-y)


Value


Growth (%, y-o-y)


Gross Domestic Product (RMB bn)

1,036.6


12.0*


556.2


13.0*


Fixed-assets Investment (RMB bn)

392.5


10.8


192.8


9.6


Retail Sales (RMB bn)

336.0


13.0


188.7


14.2


Economic Indicators

1.2


Inflation (Consumer Price Index, %)

1.8


Exports (US$ bn)

108.5


25.3


64.3


20.9


Imports (US$ bn)

112.8


18.8


63.6


21.3


Notes: *In real terms Sources: Shanghai Statistical Yearbook 2007, China's customs statistics 6.2007

Industries In 2006, half of Shanghai's GDP was attributed to services industries. The top 3 largest industries were: retail and wholesale, financial services and real estates. Shanghai will focus on the development of financial services, logistics and cultural industries. Consumer Market Shanghai is the largest consumer market among all mainland cities, supported by the rising income level. Shanghai's retail sector is developing rapidly. Retail sales of consumer goods grew by 13% to RMB 336.0 billion in 2006, accounting for 4.4% of China's total. Shanghai has strong distribution power in China, especially in the Eastern region and Yangtze River Delta. And foreign brands often choose Shanghai as point of entry into the China market. All these prove Shanghai to be a truly lucrative market ! It is the right time to showcase your product in the right place. Music China is the must-attend event that should not be missed !

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HKTDC (data from China Customs) 6

V.

What can Music China offers you

Music China offers the following ways to grow your international sales: 1.

Music China is world’s third largest exhibition of musical instruments coming after Musikmesse and NAMM.

2.

Music China has been recognised for excellence by the Shanghai Foreign Economic Relation & Trade Commission, in association with the Shanghai Convention & Exhibition Industries Association 11 (SCIEA). To qualify for the award, the exhibition must: a) b) c) d) e) f)

be focused on the brand and professionally-organised be made up of no less than 35% recognised market-leaders have repeat exhibitor participation of at least 60% poll minimum 85% exhibitor satisfaction in independent research poll minimum 85% visitor satisfaction in independent research have at least 95% of exhibits within the product categories.

3.

It’s the Best of its kind in Asia. 65,250 sqm Exhibition area.

4.

Powerful buyer network not only from China but all over the world providing better business matching services. Last event in 2007 attracted more than 37,000 visitors from 91 countries / regions. a)

There were 57% visitors came from Shanghai while 21% potential trade buyers were came from East China. There were 14% buyers came from other provinces and cities. Overseas buyers are 8% which came from Asia and European countries.

b)

Nearly 50% of the visitors are manufacturers, wholesaler, IE firm and retailer.

c)

Over 50% visitors wanted to collect product information and conduct purchases at the fair.

5.

Last event, we invited 70 Public media aim at news, music, entertainment and life style; including 19 television, 37 newspapers, 4 web sites and over 10 radios.

6.

Comprehensive showcase of full range of western & traditional Chinese MI and accessories.

7.

Unique entertainment and education platform including live performances, product demos, drum festival, NAMM University courses and so much more.

8.

Multimedia promotion solution to ensure you stand out from your competitors. a)

An intensive direct mailing, electronic mailing and campaign for visitor promotion covering the whole China and the globe.

b)

80 Public media aim at news, music, entertainment and life style; over 20 TV channels, 40 newspapers, over 8 web sites and over 10 radios will be invited.

c)

Public advertising such as transport and subway.

d)

Productpilot.com - business matching competence online Finding business partners, exchanging information and discussing topics of shared interest: the Productpilot Business Community makes this possible.

Last updated in March 2008

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