Disposable income for the next middle class
Last night we had dinner with a cousin who works as a product designer for Baidu. He’s got a CS background from Qinghua. Part of the conversation veered to cost of living and salaries. A college hire nowadays can hope for an annual salary of 8500 China Yuan Renminbi (CNY) a month, 1050 USD. An apartment in a suburb though might set him back 2000 CNY a month. Not all 20 something live own their own. Many whose family also lives in Beijing prefer to stay with their parents until they meet someone. Leasing downtown isn’t an option.
A few nights ago we had dinner with one of S’s friends from grade school. She’s now an accountant in her mid-twenties. After college she worked for a few years at Deloitte Touche Tohmatsu. She recently quit to go work at a technology startup, Taihoo. There the hours are sane. Seems like grinding down junior accountants (or developers, lawyers and consultants) transcends cultural barrier. After a few years of work she makes more than 12000 CNY a month, aka 1500 USD. The progression is similar to what you’d make in North-America.
Those salaries are below the taxation level here. Moreover, there’s no sales tax and tipping is unheard of here. At worse, a very fancy restaurant might add a 10% service charge automatically. A neighborhood restaurant wouldn’t. Finally, most youths don’t own cars. It’s not practical in this city. A ride on a regular bus is a few CNY depending on distance. Buses run every few minutes. Taxis are also very popular. We’ve been using them a lot. From the 3rd ring to downtown in morning traffic will set you back ~30 CNY. The minimum charge is 10 CNY.
So what do they do with their spare income? Spend it.
Consumerism is more rampant here than in any city I’ve visited, including New York. Yesterday we went to one of the shopping district. Think downtown Montreal or Bellevue Square but a few times bigger. Compared to North-America, small labels seem to do very well here. They easily undercut the more expensive labels and, if you’re careful, quality is as good as what you’d get in North-America (after all, a lot of what I buy in Seattle or Montreal is Made in Asia). S bought a blouse for ~100 CNY and a hairpin for 18 CNY. There’s also a market for designer labels. One of the shopping centers specializes in luxury goods: Armani, Cartier, etc. Prices for these seem the same as elsewhere.
Eating out is also popular. Given the population density, there are restaurants a plenty. I haven’t seen anyone serve western cuisine. According to the guide book there are a few Italians a few French restaurants in the international section. You do see chain restaurants: KFC, McDonald, Pizza Hut, Outback Steak House, etc. Each of them has tailored their offering a bit to the local market. The prices though are outrageous by local standards. A tall Starbucks latte is 23 CNY (which at 2.88 USD is about the same as in the US). In comparison, I’ve now been to many good Chinese restaurants ranging from fast food to sit down dinner all much cheaper.
My lunch in a food court yesterday was 8 CNY. A good sit-down dinner for two with four or five dishes (including my favorite Sichuanese dish of chili chicken) is ~100 CNY. The most we think a dinner has cost us was 400 CNY for three. Since no-ones trusts the water system and given the heat, bottled liquids make a killing. A bottle of water is 2 CNY. The other popular drink is cold green tea. Since listing ingredients isn’t required, we can only assume they really use tea though and we’re not sure of the calorie count. The result is really nice though. It typically resells for only slightly more than plain water. There are also many ice-cream vendors whose popsicles are 3 to 5 CNY. Some even advertise that they use Real Milk!
In short, with an exchange rate of 8 to 1, Beijing is really cheap for American tourists once you’ve arrived. I’d also suggest it’s a great time for Canadians to visit given the CAD’s strength.
We often hear about piracy. Frankly, I haven’t seen any pirated goods for sale. The reasons I think are simple. First, if you can’t beat them, undercut them. The guide book we have was published in 2004. It suggests that pirated CDs were available for 15 CNY while DVDs went for 30 CNY. These should be easily available. On Friday we visited a local music store (very similar to HMV). They sell the real stuff. CDs were priced at 14~16 CNY while DVDs were 28~30 CNY, including albums I’ve bought in North-America for the same numerical amount albeit in USD. In effect, the real stuff is now priced competitively to the fake stuff. Secondly, downloading content is very popular here. For example, we’ve met people who spend their free time watching the X-Files (season 1 was judged better than seasons 2 to 4).
Technology is also everywhere. Everyone (and I do mean everyone) has a cell phone. When we got here, S was handed one by her uncle. They acquired it for 40 CNY, 5 USD. The cousin last night had a very cute Nokia phone. He and his girlfriend use these to take and show friends pictures of their place and of their cats. The cousin, it’s worth noting, spends a lot of his spare time playing World of Warcraft. As expected also, S has been asked her email address and Instant Messaging contact by relatives. MP3 players are common. The iPod isn’t as popular here; probably because it resells for slightly more than the US price. Laptops also seem expensive. There was an ad the other day for one at 6999 CNY, ~900 USD. I guess some of the electronics simply can’t be made any cheaper.