Think your car is costly? Check out prices in China

Middle-class consumers there pay more for everything compared with their American counterparts.

By Bruce Kennedy Sep 5, 2013 6:59AM

A man looks at a Cadillac as the US manufactured car is promoted at a shopping mall in Beijing (© MARK RALSTON/AFP/Getty Images)
OK, so the average price for a new car in the U.S. hit a record high in August. Good news for the overall economy perhaps (or at least the automakers), but maybe not so good for the average American consumer. However, if it's any consolation, consider your middle-class counterparts in China, who are paying through the nose when it comes to many of the goods and services that help make to life manageable.


According to The Wall Street Journal, price comparisons of hundred of items in China -- where the average per capita income is about $7,500 -- and in the U.S. show some startling discrepancies. The Journal says clothing and other apparel cost Chinese consumers on average 70% more than Americans pay. And the price gap occurs across a wide spectrum of goods, from big-ticket items to everyday purchases.


A fancy coffee drink at Starbucks (SBUX) in China costs a dollar more than in a U.S. store. And a General Motors (GM) Cadillac Escalade Hybrid Base 6.0, which lists for just over $73,000 in the U.S., runs around $229,000 in China.


Several reasons account for this disparity. The Journal points to issues such as government taxes and import tariffs, but there's also an element of keeping up with the Joneses. For years, the paper said, China's fast-growing middle class has been willing to put up with paying more to acquire imported goods and trendy products.


"Companies happily charged what the market would bear," it notes, "even finding high prices could help provide a quality halo effect, winning customers psychologically. In many cases, when foreign manufacturers charged more, Chinese producers followed suit."


But Chinese consumers also face financial pressures of their own and have apparently had enough. Thanks to the Internet, they can comparison shop and make purchases online. Many affluent Chinese are also waiting to travel abroad to take advantage of better prices, especially on luxury goods.


Chinese authorities have taken the hint and are cracking down on price manipulation at home, with investigations into the retail jewelry, infant formula, pharmaceutical and auto sectors.


Another big issue, according to observers, is China's massive bureaucracy. "It can take months upon months -- passing tests and getting licenses -- to open a retail store in China," Rocky Lee, head of the Asia corporate practice at law firm Cadwalader Wickersham & Taft in Beijing, told the WSJ. "Permits and bureaucracy cost; all of that is passed on to the consumer."


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5Comments
Sep 5, 2013 2:18PM
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Cars in Singapore are equally expensive 
Sep 5, 2013 11:12AM
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I`ll stick with my American made honey wagons.
Sep 5, 2013 6:16PM
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Passing tests and getting licenses in China?  The dumb writer never heard of a bribe.  Works all the  time in China.   Umport duties.  Remember those nasty things that our politicians did away with here in the U.S.   China and the rest were going to do away with those things.  Guess what? They lied.
Sep 5, 2013 11:57AM
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Most people in Asia are living in class societies.  In addition to keeping up with the Jones, they like to show off their status for their ego.  And most people there do not learn or use to the idea you can sell low but you earn more because you sold more yet.   Also, that is the price before barter.  I hate barter.
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