How to tap into 'gray' market in China

Despite the recent slowdown in China's economy, many foreign companies continue to see the world's second-largest economy as one of the most attractive markets now and in the future. Consumption of foreign brands by the Chinese contributes considerably to the profits of many foreign companies, especially luxury brand producers. But do foreign companies and their marketing teams really understand the changing nature of China's customer base?

Much discussion has taken place about the younger generations, especially those born after the commencement of China's family planning policy in the late 1970s. Marketing to China's younger and more modern customer base continues to receive a lot of attention.

Both the reform and opening-up policy and the family planning policy have clearly spawned a generation of different and "heavy brand" customers. But what appears to have been overlooked by many foreign companies operating across the Chinese mainland, the great majority of which target the 18 to 35 age group, is the aging impact of these policies.

According to China's central government, the family planning policy is responsible for the reduction of more than 250 million births between 1979 and 2000. While the overall population continues to grow, the growth rate has fallen and is estimated to fall below 0.5 percent a year by 2017.

Furthermore, the United Nations predicts the population will stop growing entirely by 2032 and will then start to shrink. If current trends continue, by 2028 India will become the world's most populous country.

Foreign companies, especially those which continue to target only younger urban professionals, appear to be ignorant not just of China's aging population but the acceleration of this as a result of the family planning policy.