Colonel Sanders Thrives in China

      May 19, 2009 12:35

      The archetypal American fast-food chain KFC has closed 272 stores in the United States over the past four years, from 5,525 in 2004 to 5,253 last year. But in China, the number of KFC stores mushroomed 80 percent from 1,657 in 2004 to 2,980 last year. KFC's sales in China are more than double the money the chain makes at home. Last year, KFC's directly-operated stores in the U.S. generated US$1.2 billion in sales, while China sales totaled a record $2.5 billion.

      These days, many major American businesses are relying on increased consumption in China to generate more sales there than at home.

      Top U.S. bank Citigroup posted a $27.68 billion loss last year due to poor earnings by its U.S. business entity. But the situation is completely different looking solely at Citigroup's China operations, which achieved a $191 million net profit, up a massive 95 percent from 2007. At least in China, Citigroup is a rapidly growing bank.

      And carmaker GM faces bankruptcy unless it receives additional rescue funding from the U.S. government. Yet in April, it sold 151,084 cars in China, up 25 percent from the same period a year ago. During that same month, GM's U.S. sales dropped 34 percent to 173,007 units. If robust sales continue in China, it could become GM's largest market instead of the U.S.

      Newsweek magazine grouped such businesses under the moniker "Kentucky Fried China." The New York Times on Friday said China's domestic consumption accounts for just 35 percent of its GDP and that U.S. Treasury Secretary Timothy Geithner's next task is to boost that amount.

      The Financial Times of London says China's savings rate was 50 percent of its GDP in 2007, while even households making less than $200 a year put 18 percent of their incomes into savings accounts. The FT said this money could translate directly into spending if the Chinese government reduces medical costs for its people. The Chinese government recently promised state medical insurance benefits for 90 percent of its citizens by 2011, boosting expectations of increased consumer spending.

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