Investing In China's Wedding Fever

I have written previously that my son is about to be born in the year of the Golden Pig, which is a very auspicious year for babies being born in China. Similarly, 2006 was a great year for weddings, so many Chinese couples have been tying the knot before the Chinese New Year in mid-February. In Shanghai alone, 162,663 couples registered for marriage in 2006, a 62.18% increase over 2005. It has been a good year, a very good year, for companies that focus on the wedding business.

One of my colleagues, Natalie Zhu, about whom Fons from China Herald has written, joined the fray and married her fiancé last weekend at a lovely ceremony in a 5-star hotel in Shanghai. I think back to my own 35-person wedding ceremony held in my father’s backyard and catered by my wife’s favorite Mexican restaurant Hermanos. Such a low-key and low-cost event certainly would not have passed muster in China, where in 2006 the average couple spent $3500 USD on a wedding, in Shanghai $6500 USD. This is still not as costly as American weddings where the average price tag is $28,000 USD, in New York $33,000 USD, but it is a lot when we consider that the average GDP in China just passed $1000 USD a year.

Natalie broke down for me the amount of money she spent on the wedding and the money spent by her friends and family on gifts and in renovating homes. I guess she is beginning to jockey for a bigger bonus for next year already as she has told me that her bank account is empty.

But weddings provide good insights into Chinese families and the industry itself is something that investors should look at.

For many couples, this is the shot for parents and grandparents gain face from relatives and friends, showing them how well their families have done in the last several decades since China’s economic reforms. It is also a way for them to live vicariously, because they never had the chance to have large celebrations when they were young when China was mired in economic poverty. They will spend large amounts of their savings on weddings and in getting a new apartment ready for the newlyweds.

Cars and Hotels

Natalie told me that her family became very demanding during the wedding preparations. They wanted to have Volvos (VOLV) or Mercedes (DCX) and BMWs to transport family and guests to and from the wedding. They had to stay in a 5 star Chinese hotel or an international one like a Westin (HOT), Marriott (MAR), Hilton (HLT),or Hyatt (HYATT). For many Chinese, the car is the major status symbol that people want to buy after a home, which explains the success of Buick (GM) and Ford (F) in the marketplace.

Travel

Many young couples are now able to afford nice honeymoons. Popular domestic destinations include beach vacations on Hainan Island or tours of the jungles of Yunnan, according to focus group my firm held. As passports and visas are easier to get, trips to Hong Kong and Thailand are becoming more popular and packages are sold through online travel sites like Ctrip (CTRP) and Elong (LONG). Look for the online travel companies to benefit from the boom in package tours to other hot spots in Asia.

Home Furnishings

A place to live is the first urgent demand for young couples. Many Chinese refuse to get married if they have to live in a rented apartment. Many couples put off marriage until they can buy an apartment. Natalie told me that many of her friends refuse to even date anyone unless they have bought an apartment. I think of my own rented place and remember again how lucky I am to have my understanding wife.

In Natalie’s case, she moved into a new apartment the day after she was married. Her family spent a lot of money buying furniture and other decorations and appliances for her from companies like P&G (PG), Unilever (UN) ADR Dupont (DD) Philips (PHG) and Sony (SNE).

Conclusion

Like in the US, the wedding business is big business in China. But the amounts as a ration of savings being spent here is bigger than in the States. Saving face from grandparents and parents plays a big role in the process and will continue to do so in the coming years.

Comments

[john gaats]

Other than CAF, can we buy A shares from QFII here in N.Y.?

[Jameswg]

Do you seek any companies like the knot.com coming to China?

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