The expansion of Chinese wealth and the middle class has led to an incredible demand for luxury goods- clothing brands, accessories, automobiles, and more recently artwork. There have also been the more unusual status symbols such as the fad of the $1.5 million Tibetan Mastiff as a household pet. However, there are few industries that have managed to create a status symbol in China that is exportable internationally. One of these significant, and perhaps surprising, products is the piano. As an exception to the stereotypically low-value added international exports, China is now the largest producer and consumer of pianos. Many international brands are producing their pianos in China as well as one of China’s own homegrown brands becoming the largest exporter in the world. A large, expensive item often prominently on display in wealthy homes in the West, the piano is both an instrument and piece of art, and now being eyed by an expanding Chinese middle class as an increasingly desirable, and attainable, home item.
Increased disposable income is a widespread phenomenon in China as urban households with an annual earned income between US$9,000 to US$34,000 rose from just 4% in 2000 to about 66% in 2012 and are projected to hit 75% by 2020, according to McKinsey consulting group. Sales trends over the past few years indicate that Chinese consumers are increasingly spending money on household decoration and personal enjoyment, contributing to the increased interest in pianos. Additionally, pianos are considered an attractive item because, unlike a Rolex or Louis Vuitton bag, they also require a large living space- a pricey commodity now in major Chinese cities- adding an additional element of prestige to the purchase.
The desire to showcase this purchase as a status symbol can be seen in the purchasing statistics. In Europe, only about 40% of Steinway grand pianos are bought for amateur player use. The majority are used in concert halls or music schools due to their size and the impracticality of fitting one into the average living room. However, in China this number is over 65% with a larger segment of the purchasing population wanting it as part of their home decoration.
In addition to being a decorative addition to an upper class home, the piano has long been considered a possible route to success by Chinese parents. Many parents feel that this is a potential step up in an extremely competitive university environment in big cities like Beijing. Talented young musicians can receive coveted extra points on the Chinese university entrance exam or have the alternative route of a music conservatory instead of having to compete for a spot at Tsinghua or Peking University.
Now, as more and more Chinese couples are allowed to have a second child, an expensive instrument in the home is an even better investment. In fact, in the first week after the announcement of the relaxed One Child Policy a few months ago, along with a rise in stock prices for companies making diapers and baby formula, piano manufacturing companies’ stock rose ten percent (with these changing prices clearly in response to the new law, evidenced by the drop in stocks for condom maker Humanwell Healthcare Group). These types of products, affected by the expected increase in birthrate have been named “second-child concept stock” and have seen a temporary boom in the market.
The Chinese piano industry is experiencing a rise in production and consumption as this sector declines in many countries around the world. Since 2008, the traditional piano markets of the US, Europe, and Japan have been negatively impacted by the financial crisis and falling birth rates. In Europe, the number of piano manufacturers declined over the past century from more than 300 to only nine. Meanwhile, China has more than 100 piano makers, now producing nearly 80% of the global total. Its market is also largely supporting international brands. Steinway has seen decreasing sales in Europe and US for years, but has been growing in China every year since 2005.
Low production costs in China have drawn many famous international piano brands to China, at least for production of their lower-end models. However, Chinese brands are also building more of a name for themselves, attempting to give “Made in China” less of a stigma to global consumers. Pearl River Piano and Hailun Company, the two largest piano manufacturers in China, are both listed on the Shenzhen stock exchange. The former is now the largest piano manufacturer in the world and holds 20% of the domestic market. It is the fastest growing piano manufacturer in the US and Canada with over 300 dealers in addition to exporting to over 80 countries.
Pearl River Piano may also provide a business model for other high-value added manufacturing companies to consider when exporting abroad. It was the first Chinese company to use its own brand name, rather than simply producing cheap models under a Western brand name. In order to adjust to the market, the company used international sales representatives to raise awareness about the brand, pushing their pianos into over 1,000 American outlets where consumers can try it out for themselves.
As Chinese salaries remain on the rise, and the concern for children’s education certainly doesn’t seem to be relaxing, the increasing interest in an expensive musical instrument makes sense. Traditional piano markets, now unable or unwilling to absorb the prices of traditional brands, are giving Chinese manufacturers a chance that they have not had in many other expensive items, such as automobiles. This may represent a unique and fortunate opportunity for a Chinese industry in a step up the manufacturing chain in international exports as well as stiffer competition for future conservatory applicants.