Strength of the Chuppies

Robert Hsu, May 10, 2008

A few weeks ago -- the same week as the 100-day mark to the Beijing Olympics, in fact -- China celebrated its weeklong International Labor Day holiday. Commonly known as "Golden Week" in the Chinese tourism industry, this national holiday was created to encourage spending, particularly for travel and tourism. Most Chinese businesses will be shut down for the week, and many Chuppies will take to the roads for vacation destinations or to visit family.

As you know, Chuppies -- young, affluent Chinese professionals -- like the overseas ethnic Chinese are one of the driving forces behind China's economic growth. This subset of China's middle class has grown in prosperity as the China Miracle has unfolded. Most are well-educated, confident, proficient in English and openly embrace the American style consumerism.

So not only are Chuppies spending their hard-earned cash on vacations during China's national holidays, they are interested high-tech gadgets, eating out at restaurants, buying their own home and other luxury items. For the past seven years, China's consumer spending has grown at 10% per year, and Chuppies have accounted for much of this spending.

If you recall, back in January I predicted that 2008 would be the Year of the Chuppies. One of the catalysts for this, that I noted then, was the development of credit card businesses in China. Well, MasterCard blew analysts expectations out of the water this week with its first-quarter earnings being driven by overseas growth -- approximately 50% of MasterCard's revenues come from overseas.

With a little help from the weakening dollar, dollar volume on purchases worldwide jumped 15%. 935 million cards were issued around that world so far in 2008 -- that's a 12.1% increase over the amount of cards issued in the first quarter of 2007. Dollar volume on purchases in Asia for the quarter grew 27.8%.

Looking forward, MasterCard expects regions outside of the U.S. -- Latin America, South Asia, the Middle East and Africa -- to drive significant growth. I expect China's middle class -- particularly the Chuppies -- to aid in this growth, as they move from a more paper-based method of purchasing to credit cards.

Chuppies are just starting to use consumer finance, so I think we're only just beginning to see the awesome strength of China's purchasing power. The strength of Chuppies' consumer spending is a theme that I expect to continue for at least the next 10 years, and we'll continue to take advantage of it with some of our companies that are profiting from their affluence.

For more information about how the Chuppies are driving China's economic growth, become a member of China Strategy today.

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