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Understanding consumer ethics in China’s demographic shift and social reforms

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Abstract

Purpose The purpose of this paper is to explore some specific, current social phenomena in China that may influence consumers’ ethical beliefs and practices, focusing on how some top-down, social and political changes could shape consumer behavior that needs to be understood in the Chinese context. Design/methodology/approach Extensive literature was critically reviewed to explore recent macro-societal reforms in China and their impact on consumers’ (un)ethical practices. Findings The authors lay out how China, a government-led society, underwent a series of political reforms resulting in demographic shifts that differentiate it from its western, industrialized counterparts. The authors connect these societal changes with Chinese characteristics to consumers’ ethical evaluations, forming a new angle to understand consumer ethics in China. The authors also draw on two empirical examples to illustrate the argument. Originality/value While consumer ethics are often explained by either cultural factors or individual variations, the authors discuss how one’s ethical practice is shaped by one’s social position, which is a product of national-level public policy. The discussions have ramifications for the study of consumers’ social class and ethical practices because they take into account the elusive social positions and ambiguous social class consciousness of the Chinese population that have resulted from social mobility. The discussions may give practitioners a better understanding of the ethical rationale behind consumers’ changing lifestyles especially in the Chinese context.
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Understanding Consumer Ethics in China’s Demographic Shift and Social Reforms
Wei-Fen Chen, Xue Wang, Haiyan Gao, Ying-yi Hong
This is a post-review version that reflects suggested corrections but before any final publisher
copy editing has taken place.
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Abstract
PurposeThe aim of this study is to explore some specific, current social phenomena in China
that may influence consumers’ ethical beliefs and practices, focusing on how some top-down,
social and political changes could shape consumer behavior that needs to be understood in the
Chinese context.
Design/Methodology/ApproachExtensive literature was critically reviewed to explore recent
macro-societal reforms in China and their impact on consumers’ (un)ethical practices.
Findings—We lay out how China, a government-led society, underwent a series of political
reforms resulting in demographic shifts that differentiate it from its Western, industrialized
counterparts. We connect these societal changes with Chinese characteristics to consumers
ethical evaluations, forming a new angle to understand consumer ethics in China. We also draw
on two empirical examples to illustrate our argument.
Originality/ValueWhile consumer ethics are often explained by either cultural factors or
individual variations, we discuss how one’s ethical practice is shaped by one’s social position,
which is a product of national level public policy. Our discussions have ramifications for the
study of consumers’ social class and ethical practices because they take into account the elusive
social positions and ambiguous social class consciousness of the Chinese population that have
resulted from social mobility. Our discussions may give practitioners a better understanding of
the ethical rationale behind consumers’ changing lifestyles especially in the Chinese context.
Paper TypeGeneral review
Keywords: China, Consumer ethics, Social stratification, Public policy
1. Introduction
Consumer ethics is an established theme in the study of consumer behavior in Western or
industrialized countries (see the review of Vitell, 2003). In general, consumer ethics can be
viewed as a response to business ethics, meaning that consumers may choose to purchase from
firms and nations performing ethical practices, and to avoid purchasing from those doing the
opposite (Belk et al., 2005). Consumer ethics may also be defined by consumers’ own ethical
behaviors and decisions in marketplace. The Muncy-Vitell scale of consumer ethics (see Vitell,
2015), for example, categorizes consumers’ (un)ethical practices into five dimensions: “actively
benefiting from illegal activities,” “passively benefiting from someone else’s mistake,” “actively
benefiting from questionable (but perceived to be legal) acts,” “no harm/no foul,” and “doing
good/recycling.” However, some new phenomenon in the emerging markets cannot be easily
evaluated by such moral standards and their meanings may be better captured in the local
context.
In the context of China, consumer ethics has been under-researched, and when researched, it
often revolves around the “dark side” of unethical practices (e.g., bribery and other forms of
corruption in China; Liu et al., 2017; Seidlmeier, 1999). Such a skewed perspective may reflect
the lack of a local approach that grounds the discussion in the Chinese context, which has
specific economic realities and social configurations that may be different from those in Western,
industrialized countries. Since ethical judgments could be a product of local socioeconomic
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realities and cultural propensity, in this paper, we critically examine certain societal changes in
China to demonstrate how they may shape consumers’ particular ethical evaluations and
practices.
China is the world’s second largest economy (Barboza, 2010), as well as the largest consumer
market worldwide (Ro, 2015). In the context of China’s rapid economic development and social
changes, consumers’ (un)ethical practices may be a mixture of the cultural values they hold
(values that are rooted in ancient Chinese philosophies, e.g., Confucianism, Taoism, and those
that are commonly attributed to East Asian cultures, e.g., collectivism) and a reaction to current
demographic changes and the enforcement of public policy. Given this context, the goal of this
paper is twofold. First, we explore some current issues in China that are not often juxtaposed
with the study of consumer ethics but that may in fact influence consumers’ ethical practices.
Second, we link these China-specific discussions with comparable socioeconomic realities in
other emerging markets to explain why the new economic order has shaped consumers’ ethical
evaluations, which cannot be fully explained by existing accounts. We also illustrate the
argument with two common “unethical” practices in China -- counterfeit consumption and
guanxi-related ethics. This paper should be of interest to scholars and practitioners who seek to
explore how individuals’ values are affected by the recent macro-societal dynamics in China.
This paper supplements mainstream consumer ethics framework not simply because of its focus
on China, a context that has been less explored, but in its connection to novel perspectives that
are not often used to account for consumers’ ethical practices. We focus on the political-
economic impact on consumer ethics, arguing that consumers’ ethical judgments are not solely a
cultural product, but rather an outcome of rapid position shifts in societal dynamics as well as in
the global economy. As many social changes in China are discontinuous and abrupt, we believe
such an approach may better explain those potential dynamics, and even ambivalence, in
consumers’ ethical judgments.
This paper is structured as follows. First, we lay out some “Chinese characteristics” in China’s
modernization process to discuss why they are significant to account for consumers’ ethical
practices. The discussions are divided into two parts. The first part mainly focuses on two
demographic changes caused by social mobility: The emergence of a new middle class and rural-
to-urban migration. In the second part, we further present how social policies affect individuals’
daily lives as consumers. Subsequently, we present how the consumer ethics in other emerging
markets may inform our discussions by drawing on two cases pertaining to consumer ethics in
China and in other emerging markets: counterfeit consumption and guanxi-related ethics.
Finally, we conclude the article with a diagram summarizing potential factors that may influence
consumer ethics in China and how it interacts with the global market norms. We also suggest
directions for future research.
1. Recent demographic changes in China
Compared with industrialized societies, where social structure is more influenced by market
factors, initial endowment, and network structure (Li, 1999), individuals’ life opportunities in
China are determined to a greater extent by the institutional arrangements of residential and
employment opportunities (Zhou et al., 1997), persistent political power (Bian and Logan, 1996),
and the role of government (Walder, 1995). In the post-1978 regime, economic forces have
strengthened. Meanwhile, social policy and political power still influence the stratification
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process (Bian, 2002). As the social configuration in China has been changed by economic
development and state policy, consumers’ relative positions in a given society undergo dramatic
mobility. Therefore, we may need a more dynamic view to understand social stratification by
taking social mobility into consideration. As Shavitt, Jiang, and Cho (2016) point out, in the
trend of widening income gap, people often gain or lose their socioeconomic status, which leads
to questions regarding the applicability of insights based on static consumer segmentation (e.g.,
working class, middle class) as they do not reflect social position change across time.
We argue that, in China, there are at least two demographic shifts resulting from social mobility
that may yield innovative insights for scholars and practitioners, namely, the emerging new
middle class and rural-to-urban migration. In the following paragraphs, we first introduce the
definition and pertinent research findings of social mobility. Then, we focus on the case of China
and lay out how the new middle class representing upward mobility and the rural-to-urban
migration representing horizontal mobility may serve as dynamic contexts for discussing
consumers’ ethical practices.
Social mobility refers to one’s movement of relative position in a given society. It usually
includes intra-generational and intergenerational social mobility. The former refers to one’s
social position movement compared to one’s own past; the latter refers to one’s movement
compared to one’s parents and is usually the focus of social mobility research (Sørensen, 1975).
Intergenerational mobility is often measured by changes in income, occupation, and education
between generations (e.g., Guo and Min, 2008; Grusky and Hauser, 1984).
Social mobility is a macro-societal shift that influences individuals’ consumption. People within
the same social class are expected to share common values, cultures, and lifestyles (Stephens et
al., 2014). These particular values or cultures associated with social class are reflected in their
consumption patterns. For example, the middle class, compared to their working class
counterparts, tend to value uniqueness and to distinguish themselves from others in product
selection (Stephens et al., 2007). However, individuals experiencing social mobility between
classes may not naturally conform to the original class or adapt to the destination class. Instead,
they may face challenges, experience inconsistent identities, and feel that they do not belong to
any social classes (Friedman, 2014). For instance, compared to college students who have at
least one parent with a four-year college degree, first-generation college students academically
underperform because their interdependent propensity does not match the universities’
expectation that students exercise independence (Stephens et al., 2012). Hence, the experience of
moving up or down in the social hierarchy can cause uncertainty in one’s status-based identity
and further reduce well-being (Destin et al., 2017).
Even in the absence of actual social mobility, consumer behavior can be influenced simply by
beliefs and expectations about social mobility. Expectations of great opportunities to move up on
the social ladder can either increase or decrease consumption, depending on the purpose of
consumption. When consumers focus on the high likelihood of narrowing the income gap, they
consume less and save more. According to Yoon and Kim (2016), materialistic people who
perceive high likelihood of economic mobility reduce their impulsive purchases in order to
achieve long-term financial success. By contrast, if consumers focus on fierce competition from
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the same and close social tiers, perceived high social equality increases conspicuous
consumption, especially within the lower class (Ordabayeva and Chandon, 2010).
In China, social mobility is closely related to two important social changes: The emerging new
middle class and rural-to-urban migration, which are discussed below.
1.1 The new middle class segment
Since its 1978 economic reform and opening-up policy, China has experienced remarkable
economic development, which has resulted in a burgeoning group of people who are classified as
having a medium-level income. According to a 2013 report by the consulting firm McKinsey &
Company, by 2022 about 76 percent of urban households in China will be classified as middle
class, with annual household incomes ranging from US$9,000 to US$34,000 (Barton et al.,
2013). No consistent criteria exist, however, to define middle class in China (see Li, 2008). Some
researchers use the integrated index of education, income, and occupation (e.g., Li and Zhang,
2008), while others emphasize income and purchasing power (e.g., Barton et al., 2013). The
divergent definitions have resulted in different estimates of the size of the middle class. For
example, Zhou’s (2005, 2008) study based on 3,038 telephone interviews in five major cities in
China indicates that 11.9% of the sampled city population belong to the middle class, as defined
by their employment, education, and income. Meanwhile, according to the Global Wealth Report
published in 2015 by Credit Suisse, 10.7% of the adults in China, or 109 million people, are
middle class. A World Bank report (as cited in Kharas, 2010) indicates that the middle class in
China is expected to increase to 70% of the total population in 2030 from just 12% in 2009.
Regardless these variations in numbers, scholars consistently agree that a “new” middle class is
emerging and that it implies lucrative business opportunities (Barton et al., 2013). Li (2011)
summarized several consumption patterns of China’s new middle class. First, compared with the
lower class, they spend a lower percentage of their household incomes on basic needs (e.g., food,
education, and healthcare) and a higher percentage on products to improve their quality of life
(e.g., clothing, travel, and furniture). Specifically, the middle class spends only 60% of their
household income on necessities (e.g., food and housing), while the lower class spends more
than 80%. Therefore, the new middle class has more disposable income and hence greater
purchasing power for expensive products (e.g., cars) and long-term investments (e.g., supporting
their children to study abroad). In addition, with abundant surplus incomes, the new middle class
can invest in financial products and real estate. They also care more than the lower class about
brands, product quality, and shopping experiences. Those born after the mid-1980s are a major
group within the new middle class, and their consumption is expected to account for 35% of total
urban consumption in 2022 (Barton et al., 2013).
China’s new middle class is unique in that it subscribes to ideologies that are different from that
of their Western or Asian counterparts. The distinction can be observed in at least the following
three ways. First, a middle class is often regarded as a vital prerequisite to the development of
democracy, a view that is supported by the social reforms that took place in Taiwan and South
Korea (Li, 2010). However, according to a survey conducted in three major Chinese cities (Chen,
2013; Chen and Lu, 2011), the majority of the new middle class in China does not favor
democracy; this is especially true among those employed in state-owned enterprises and those
satisfied with their material conditions. Zhou (2010), an authoritative sociologist, characterizes
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the Chinese middle class as “the vanguard in consumption and the rear-guard in politics.” As
such, new middle class consumers may not be interested in certain ethical practices that are
driven by liberal political stances. Therefore, although their consumption tastes are increasingly
Westernized, the attitudes of these consumers toward Western consumer culture may still be
ambivalent because they do not share the ideologies of liberty and a free economy.
Second, the new middle class may still subscribe to some traditional Chinese values. For
example, according to recent research about how faceinfluences consumption (Xia, 2017), the
impact of face on luxury consumption is even stronger for young Chinese than for older
generations. The finding suggests that traditional culture endures while the middle class expands.
Doctoroff and Hong (2015) describe young Chinese consumers as “new minds in an old world,
meaning that even though they take Western consumer goods and material enjoyment for
granted, some deep Confucian cultural roots cannot be easily swept away. Their rationale for
shopping could therefore be different from that of their Western counterparts.
Third, the self-identified middle class in China and the objectively defined middle class may not
be one and the same. In a study conducted by Li and Zhang (2008), “middle class” is defined by
income (1 to 2.5 times the average), occupation (managerial positions or those requiring
technical skills), and education (college degree or above). This approach is an example of an
objective way to define “middle class.” In Li and Zhang’s (2008) study, the “core (核心 he xin)
middle class” match all three criteria for the definition of “middle class; the “semi-core (半核心
ban he xin) middle class” match two criteria; while the “marginal (边缘 bian yuan) middle class”
match only one criterion. However, these classifications do not correspond with the respondents’
self-identified social positions. The same study revealed that only 61.7% of the core middle
class, 53.5% of the semi-core middle class, and 46.8% of the marginal middle class identified
themselves as middle class. Furthermore, 38.6% of those from other social classes identified
themselves as middle class. Put differently, Chinese consumers have relatively ambiguous social
class consciousness; that is, how they see themselves may be inconsistent with how they are
defined according to commonly used, objective variables (i.e., income, education, and
occupation).
Importantly, researchers found that self-identification of being middle class (subjective middle
class perception) serves as a better predictor of perceived social justice than objective middle
class measurement (Li and Zhang, 2008). Therefore, while practitioners are accustomed to
relying on social class to segment the market (Coleman, 1983), in China, they may need to look
into consumers’ self-claimed identities, in addition to commonly used, objective variables, to
better predict consumer behavior. Even though some consumers are qualified to be middle class
based on their income, education, and occupation, they may not respond to advertisements in the
expected ways because of their self-identification.
1.2 Rural-to-urban migration
Urbanization is another wrenching change China has experienced since its economic reform and
opening-up policy began in 1978. According to a 2015 report from China’s National Bureau of
Statistics, 56% of China’s population live in urban areas and the number is still growing,
compared with 49.7% in 2010 and only 20.9% in 1982. The impact of urbanization on
individuals is far-reaching. For example, the residential mobility that results from urbanization is
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believed to be the cause of changes in individuals’ social relationships as well as their values and
well-being (Oishi, 2010; Oishi and Talhelm, 2012). High movers reported less close social
relationships and lower levels of well-being than lower movers (Oishi and Schimmack, 2010),
but they are motivated to expand their social networks in order to avoid loneliness (Oishi et al.,
2013). They also show higher preference for egalitarianism and individualism (Lun et al., 2012;
Oishi and Kisling, 2009). Rural-born migrant households residing in urban areas report lower
levels of happiness than rural households, possibly because of their new reference group, the
urban-born residents (Knight and Gunatilaka, 2010).
These psychological features resulting from residential mobility inevitably affect how consumers
shop. First, because residential mobility produces anxiety, people who move frequently seek a
sense of familiarity and thus prefer shopping in familiar chain stores (Oishi et al., 2012). That
being the case, while the need for uniqueness or novelty is regarded as an important drive for
consumer behaviors in the West (Tian et al., 2001), its effect may be diluted in China due to the
relationship between residential mobility and familiarity-seeking consumption (Oishi et al.,
2012). Thus, in China, we argue that there is a potential market for consumer goods symbolizing
interpersonal bonds, safety, and familiarity. For instance, established and familiar brands may
have a greater likelihood of success in expanding their chain stores in locations with high
migrant density rather than low migrant density. Also, established brands can better mitigate the
risk of losing customers than less established brands can when they raise prices to implement
ethical practices (e.g., Fair Trade).
Second, as urbanization has resulted in emerging metropolises in China, social comparison
within concentrated populations becomes salient in the context of exacerbated economic
inequality. Many studies have consistently demonstrated that individuals’ relative position in
society impacts their mental and physical health in vital ways. For example, some studies
indicate that relative income compared to others predicts life satisfaction but objective income
does not (Boyce et al., 2010; Luttmer, 2005). In addition, subjective socioeconomic status is a
stronger predictor than objective socioeconomic status of psychological functioning and physical
health (Adler et al., 2000; Cheon and Hong, 2017; Wang et al., 2016). An empirical study also
suggests that affluent black South Africans purchase conspicuous products to catch up with the
privileged white consumers they interacted with when growing up, suggesting that relative
deprivation generates conspicuous consumption (Chipp et al., 2011). Similarly, the drastic rise in
conspicuous consumption in post-Cultural Revolution China, especially in urban areas, is well
documented (e.g., Podoshen et al., 2011). Factors such as traditional Chinese values (e.g., face;
Li and Su, 2007) and political ideology (e.g., Deng’s policy of focusing on economic
development; Sun et al., 2014) have often been used to explain the trends of emerging
materialism and conspicuous consumption in China. We argue, however, that conspicuous
consumption is also influenced by rapid urbanization, which leads to salient social comparison
among individuals and may also lead to consumers’ unethical practices simply out of a desire to
“keep up with the Joneses.”
Third, after migrating to big cities, many rural-to-urban migrants still try to keep their hukou in
their rural hometowns. Previous studies usually criticize the constraints of the hukou system on
migrant housing (Wu and Treiman, 2004; Logan et al., 2009), but some studies contend that
many migrants are actually reluctant to give up their rural hukou even if they have a chance to do
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so because of great potential benefits tied to their rural hukou, such as receiving compensation
for requisitioned land (e.g., Chen and Fan, 2016). Moreover, the way they deal with their rural
homes reflects their aspirations for an urban lifestyle, such as adopting an “urban style” in their
home décor (Zhang and Lin, 2014). Even though they are in their rural homes only for short
periods of the year, they tend to build large houses furnished with high-end home appliances
(Chen, 2003). While this may seem unnecessary and wasteful, they may be driven by a need to
keep up in social comparison with others (Zhang and Lin, 2014); or a desire to signal their status
when comparing themselves with people with urban hukou (Mazzocco, Rucker, Galinsky, and
Anderson, 2012; Rucker and Galinsky, 2008).
Conversely, the hukou system and its related regulations are also changing the lifestyles of big
city urbanites. For instance, some citizens living in big cities, such as Shanghai, intentionally
manipulate their hukou information in order to have more people tied to the same hukou, so that
more monetary compensation from the government can be expected when their houses need to
be demolished for the purpose of urban development. Another example related to hukou is fake
divorce. Specifically, Shanghai residents are required to make a 30% down payment when
purchasing their first home but must put down 70% for their second home, so many couples get a
“fake” divorce so that one partner becomes the sole owner of their existing real estate, which
allows the spouse to buy a new property as a first-time buyer. These couples then re-marry after
the transaction (Wang, 2016). Such seemingly unethical practices have developed among urban
residents as a way to get around the housing policy.
The demographic changes discussed above were mostly caused by national level public policy.
In the following section, we discuss other public policies that have significantly impacted
individuals’ everyday lives, including their ethical practices.
2. Public policy and consumption
China has a long history and tradition of despotism and rule by authoritarian regimes (Walder,
1995; Wittfogel, 1956). Consumers’ everyday lives are shaped by the government and by state
power. Walder (1995) and Qiang Li (2008) argue that China is a “government-led society” in
which the central government and local political agencies are the cause of many societal shifts at
all levels, from politics to economy and culture. We review below how political forces have
guided the recent social and cultural changes in China, and how they pertain to consumer ethics.
2.1 The birth control policy
China is one of a very few counties that has imposed a birth control policy on its citizens
(Scharping, 2013). Enforcement of the one-child policy began in 1980 as a means to slow down
China’s population growth and to facilitate economic development (Wang et al., 2013). From the
outset, the one-child policy was strictly enforced among urban residents, especially public sector
workers, through penalties such as substantial fines and loss of employment (Hesketh et al.,
2015). China also carried out large-scale sterilization and abortion campaigns. In 1983 alone,
14.4 million abortions, 20.7 million sterilizations, and 17.8 million intrauterine device insertions
were performed, compared with approximately 21 million live births (Whyte et al., 2015). A
large proportion of these medical procedures were involuntary.
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The one-child policy has had a huge impact on China’s demographics. For instance, it has
reduced the total fertility rate (TFR, the average number of children delivered by each woman)
from 2.9 to 1.6, resulting in a recent labor shortage, as well as the most uneven gender ratio at
birth, which peaked at 140 males to 100 females. This gender imbalance means men have great
difficulty in finding a partner, resulting in a large number of unmarried men (Zhou et al., 2011).
Such an imbalanced gender ratio may account for the emerging phenomenon of “mail-order
brides,in which Chinese men pay agents to find them brides from less developed countries such
as Vietnam, Laos, and Cambodia (Chow, 2017). For instance, a Chinese bachelor needs to pay as
much as US $18,500 to a Vietnamese marriage broker to “import” a wife (Minter, 2014).
Although some mail-order brides volunteer to come to China, hoping to obtain Chinese
citizenship and a better material life, many of them are tricked, coerced, or even sold to come to
China, which is a gross violation of basic human rights (Thal, 2014). Therefore, the gender
imbalance has been blamed for human trafficking, as well as other social problems such as high
divorce rates and domestic violence (Chow, 2017).
On the positive side, the one-child policy has resulted in a healthier population (Li and Zhang,
2017), accelerated gender equality in education and the work place (Zhou et al., 2011), and
accounted for a sharp increase in China’s household savings (Choukhmane et al., 2013). That
said, thirty-five years of the one-child policy also reshaped China’s consumption-scape: the elder
generation saved every penny to provide the best for their children, while the youngsters focus
on a self-indulgent and self-fulfilling lifestyle (Yu, 2014). Research shows that the policy
cultivated new behavioral patterns with less trust, less competition, more pessimism, more risk-
aversion, and less conscientiousness (Cameron et al., 2013). Moreover, even if the one-child
policy implies more educational resources for each child, students are often burdened with their
parents’ excessive expectations and suffer from tremendous academic pressure, resulting in
physical and psychological stress (Jing and Chen, 1995).
In order to alleviate problems caused by the one-child policy, the Chinese government
implemented the two-child policy at the end of 2015, allowing all Chinese couples to have two
children (Hesketh et al., 2015). The new policy is expected to increase population size, and thus
mitigate problems in fertility, the work force, and economic development, which have been
caused by aging population and the gender imbalance (Zeng and Hesketh, 2016). In 2016, the
number of newborns rose to17.86 million, an increase of 7.9 percent over 2015, according to
China’s National Health and Family Planning Commission. Such an increase once again affected
individuals’ purchasing behaviors, especially in the categories of real estate, baby products, and
education. The two-child policy may also result in consumers’ unethical practices. For instance,
women who are over child-bearing age may try to avoid a high-risk pregnancy by hiring
surrogate mothers on the black market (Sheng, Zhang, and Li, 2017). These examples
demonstrate how public policy enforcement in China, often taking place without prior
consultation and having a drastic impact on people’s everyday lives, can have a trickle-down
effect on consumption patterns and consumer ethics. That being the case, the state is able to drive
and swing economic activities swiftly in China through changes in public policy, a marked
contrast with the gradual changes resulting from market forces in the West.
2.2 Wielding political capital in the post-reform era
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State power in China also permeates consumer culture. In recent years, a value change from
thriftiness to hedonism has been observed, a shift that has taken place alongside the transition
from a planned economy to a market economy (Wang, 2010). In the planned economy, the
lifestyle of urban residents was locked at the level of basic living because of the government’s
minimum wage policy and rationing of basic living necessities1 (Wang, 2010). The values of
self-discipline and thriftiness prevailed at that time, and the pursuit of a bourgeois, hedonic
lifestyle was condemned. During the market reforms in the 1990s, however, economic
development and GDP growth became the government’s main, if not the sole, objective. At the
policy level, the government sought to stimulate consumption and domestic demand, especially
after the 2008 financial crisis (Newman, Rickert, and Schaap, 2011). As a result, Chinese
cultural values and lifestyles were critically challenged, and that is reflected in the emerging
Chinese consumer culture of hedonic consumption and materialism (Lin and Wang, 2010).
Although improved economic conditions and the popular culture in the media may also have
contributed to the formation of this new consumer culture (Pollay et al., 1990), state power and
policy change are unquestionably among the most influential factors.
Bourdieu’s (1986) discussion of various forms of capital is often employed by scholars to
analyze how individuals compete for social status through consumption. That is, our
consumption often reflects our possession of economic capital (financial resources such as
money and assets), social capital (social networks such as relationships, organizations, and
affiliations), and cultural capital (a set of socially rare and distinctive tastes, skills, knowledge,
and practices) (Holt, 1998). However, consumption in China involves a fourth form of capital,
political capital, which is often defined by membership in the Communist Party or by cadre
status (Lin and Zhang, 2014). Needless to say, before the market reforms, political identity was
especially important. During the transition from socialism to a market-oriented economy, these
politically privileged individuals secured their advantageous positions through different
mechanisms, such as strong information networks and connections with the government (Bian
and Logan, 1996; Walder, 1996). Political power was salient especially in terms of consumption
involving public resources and facilities, including access to housing, education, and health care
(Castells, 1978).
Take housing as an example. The urban housing provision system in pre-reform China was an
evidence of how state power produces housing inequality (Huang, 2003). Party members and
individuals in powerful positions were able to manipulate housing allocation rules to favor their
families (Djilas, 1957). In the post-reform era, the link between one’s occupation and one’s
residential advantages has been weakened, while at the same time a new social stratum has
arisen: Homeowners. The privatization of urban housing in 1998 allowed homeowners to
capitalize upon their power and resources that were not evenly distributed in the pre-reform era
and therefore expedited social inequality (Wu, 2002). These “new rich” homeowners may want
to signal their superior economic status through hedonic and conspicuous consumption,
abandoning the simple and frugal lifestyle promoted by the party in the pre-reform era.
1 This policy is enforced through the distribution of Basic Living Voucher (基本生活资料的凭证定额供Ji Ben
Sheng Huo Zi Liao De Ping Zheng Ding E Gong Ying), which is needed to have a quota to purchase necessities at
affordable prices determined by the government. The restricted product types include grains, eggs, sugar, cooking
oil, etc.
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3. Rethinking consumer ethics in China and other emerging markets: Two examples
We have discussed above the macro-societal forces in China, including the expansion of new
middle class, rapid urbanization, and strong enforcement of public policies (birth control,
homeownership), all of which have resulted in swift socio-economic changes. These
characteristics have created contradictions between traditional values and new cultures, rural and
urban lifestyles, and the “haves” and “have-nots.” We also lay out how state power and political
capital remain significant in the post-reform, market-oriented economy, and how market
demands usually acutely reflect consumers’ lifestyle changes brought by shifting public policies.
For example, an individual’s choice of his/her dwelling may not be a personal discretionary
decision but rather one that has been pre-determined by the hukou system, the compulsory
registration of residences. Therefore, rural-to-urban migrants may constantly experience a sense
of being excluded and thus feel a need to create an upper-class façade so as to fit in. While living
beyond one’s means can be considered unethical, for Chinese migrants, this tendency is a way to
cope with their perceived inferior status which was determined by the institutionalized power.
In this section, the discussions of consumer ethics in China are informed by other emerging
markets in the world. We argue that, consumer ethics is influenced not only by individuals’
social position shifts in the local society, but also by the whole country’s status change in the
global economy. In this view, Chinese consumers may share similar psychological features with
their counterparts in other emerging markets, because their countries are undergoing economic
development to different extents. In the following paragraph, we draw on literature that is
pertinent to emerging markets to discuss how these trends and features documented may
facilitate the understanding of consumer ethics in China. Specifically, we use two empirical
examples to illustrate how consumer ethics in China, just like in other emerging markets, is
shaped by the country’s dynamic status on its way to become a key player in the global market.
3.1 Consumer ethics in the emerging market context
Previously the consumer ethics in the emerging markets were often discussed from the
perspective of how emerging market consumers and their Western counterparts may subscribe to
different ethical beliefs because of cultural differences. However, scholars are still debating the
extent to which consumers’ ethical beliefs and practices vary substantially across cultures. On
the one hand, for example, Rawwas et al. (2005) argue that, compared with American
consumers, Turkish consumers are more likely to avoid uncertainties (one of Hofstede’s cultural
dimensions). Therefore, when they make a mistake in the grocery store (such as breaking an
item), they may need more guidance and assistance with regard to what to do next, otherwise
they may stop their shopping to avoid uncertainties and may perceive the store environment to be
unfriendly (Rawwas et al., 2005). Swaidan (2012) also employs Hofstede’s model of cultural
dimensions to argue that consumers who subscribe to different cultural orientations tend to have
different ethical beliefs. He found that consumers who score high in collectivism, high in
uncertainty avoidance, low in masculinity, and low in power distance reject illegal, and active or
passive questionable activities more than consumers who score low in collectivism, low in
uncertainty avoidance, high in masculinity, and high in power distance. On the other hand,
though, the research of Belk et al. (2005) shows a general lack of evidence that consumers across
cultures care differently about specific ethical issues. With subjects from eight countries on
different continents, their study concluded that culture does not influence consumers’
12
justifications and ethical stands as much as they expected. For these consumers, unethical
business practices are simply “the way of the world,” and their cultural backgrounds were not a
precise indicator for predicting their future ethical purchases.
Scholars’ divergent perspectives aside, this kind of analytic framework of cultural typology may
risk replicating a static worldview. Among the studies that attempt to examine the rationales
behind consumers’ (un)ethical practices in the emerging markets, relatively few are grounded in
the local socioeconomic realities. To fill this knowledge gap, we examine two common
“unethical” issues that are observed in China, and discuss their implications under China’s status
as an emerging market, where historical, cultural, and economic shifts are taking place. The two
examples are counterfeit consumption and guanxi-related ethics.
3.2 Counterfeit consumption
The intentional purchase of counterfeit goods has often been considered an unethical consumer
behavior (Shepard, 2017). Kwong et al. (2009) contend that Chinese consumers purchase more
counterfeits than their Western counterparts because these two groups of consumers have
different views on social costs, social benefits, and big business. It is also common to associate
the status consumption of Chinese consumers (i.e., using counterfeits to signal social status) with
the Confucian collectivist cultural tradition, in which conspicuous and valuable possessions (e.g.,
jewelry) are needed to concretely demonstrate and communicate financial achievement, a central
concern in the social hierarchy (Wong and Ahuvia, 1998). However, recent studies conducted in
other emerging markets can inform these conventional discourses, such as in the case of Turkey,
where counterfeit usage is associated more with Turkey’s transitional status as an emerging
market in the global economy, than with local traditional culture.
Kravets and Sandikci (2014) argue that some Turkish consumers purchase counterfeits because
they believe that they have been excluded from the global consumer society, and that the product
and price they have in the “less developed” Turkish market are different from those in the
industrialized, leading markets. In their study, some informants purchased counterfeits because
“the counterfeits are available before originals and are of similar quality because originals are
submanufactured in Turkey” (p.135). Similarly, for Chinese consumers, buying counterfeits
could mean more than using conspicuous consumption to signal social status. Drawing on the
example of Turkish consumers, the purchase of counterfeits may reflect an ambivalent identity
when emerging market consumers are “half way” to being international shoppers in the
contemporary consumer society. Although they are informed of global trends via worldwide
information flow such as the popular media, consumers at the same time realize that their
country is treated as a laggard in the global distribution system. Hence, their “unethical
purchase of counterfeits could be based on an “ethical” pursuit to claim full, equal citizenship in
the global economic order.
This tendency is revealed not only in the cross-country comparison but also in studies focusing
on domestic markets. Tang et al. (2014) found that some Chinese students purchase counterfeits
with the motivation of undermining the unequal relationship between manufacturers and
consumers, as the former has asymmetrically stronger power over the latter. Some young
consumers believe that this is a way to fight unethical monopolies, such as buying pirated
Microsoft software because the originals are overpriced and there are hardly any alternative
13
options (Tang et al., 2014). Rawlinson and Lupton (2007) also contend that Chinese students,
compared to their American counterparts, tend to believe the control of pirated software usage is
the instructor’s responsibility. In other words, Chinese students may not see themselves using
such software as a significant problem unless it is regulated by the authority. In a similar vein,
Chiou, Huang, and Lee (2005) indicate that consumers access pirated music because copyrighted
music products are considered overpriced and the serious consequences of such behaviors are
often neglected. Specifically, how consumers perceive the magnitude of consequence and social
consensus affects their attitude to music piracy. In such scenarios, consumers do not consider
their counterfeit purchase unethical because their behavior does not hurt any ethical entities and
may even help create a fairer market. Thus, consumers may keep using counterfeits until they are
strictly banned.
Such justification can also be observed in the “counterfeit” consumption in the field of digital
culture, such as the case of fansub. Fansub, short for fan subtitling, is a particular type of non-
commercial, non-institutionalized, informal, voluntary, organized translation done by a group of
fans who are interested in foreign popular culture (such as Japanese animations, American
television series, and Korean dramas) and are equipped with the language proficiency to
understand the foreign media content (Tian, 2011). These fans work as a group to reproduce the
foreign media content with Chinese subtitles that they have translated, and then they distribute in
near-real time these new versions online for free “to provide nationwide fans with the most
authentic experience of foreign culture that due to the strict governmental media regulation could
not have been easily accessed through legitimate channels” (Tian, 2011, p.2). These fans are
consumers as well as, to a certain extent, producers. They challenge censorship in China and
infringe on the copyright of the foreign content providers, so their behavior can easily be
categorized as an unethical act. It can be argued as another form of counterfeit consumption,
because people access contents that are not “authentic” and should not have been available to
them.
These acts seldom bring any monetary benefits to either the translators themselves or a specific
group, but when it comes to their cultural influence, scholarly discussion and popular media
discourse tend to echo the “anonymous heroes” moniker for fansubbers by acknowledging their
altruistic sharing that introduces local consumers to exotic cultural forms (Wei, 2016; Zhang,
2013). The same viewpoint is also adopted by the fansubbers themselves to legitimize their
questionable behavior, as they believe that they have empowered audiences for the public good
(Hsiao, 2014). The subtitling is an extension of their thirst for various cultural forms and fine
media content (French, 2006; Wei, 2016). Their endeavors facilitate the spread of foreign
cultures in China, and subsequently create business opportunities for foreign media companies
(e.g., gaming, animation) because the materials are already familiar to Chinese consumers (Wei,
2016).
The premise of fansub is that the emerging market consumers have developed a more
cosmopolitan taste even if they can only legally consume a small, filtered part of foreign cultural
forms that does not completely represent the rest of the world. Such unethical acts could be
altruistic in nature, aiming to introduce local consumers to exotic cultural forms. Just like how
people may shop for counterfeits for a good cause of equality across markets, fansub can also be
viewed as an act to get around censorship and access filtered information.
14
3.3 Guanxi-related ethics
Guanxi, literally meaning interpersonal connections and relationships, is deeply rooted in
traditional Chinese culture (Su et al., 2003; Dunning and Kim, 2007). Yet, its practice in day-to-
day life and in commerce can be confusing to outsiders. Westerners may find it difficult to
differentiate between guanxi and bribery or other forms of corruption, especially when gift-
giving is involved to nurture guanxi and certain social obligations are imposed upon both the
receiver and the giver (Steidlmeier, 1999; Su et al., 2001). At the root of guanxi is renqing,
which has been suggested as being the underlying mechanism that guides the behavioral norms
of guanxi. Renqing often refers to the exchange of favors, in accordance with certain social
norms and behavioral rules (e.g., giving expensive gifts, such as gold jewelry, at weddings) that
are especially important in rural society (Hwang, 1987).
In general, guanxi is utilitarian, reciprocal, transferable, personal, long-term, and intangible in
nature (Dunning and Kim, 2007), and it can be divided into two kinds. “Favor-seeking guanxi is
culturally rooted signifying social contracts and interpersonal exchange of resources in a
collectivistic society. Rent-seeking guanxi reflects on institutional norms signifying social
collusion based on power exchange in a hybrid Chinese socialist market economy” (Su et al.,
2003, p.310). Since rent-seeking guanxi implies giving and receiving favors in the bureaucratic
system, it is associated with corruption more than favor-seeking guanxi is.
The unavoidable practice of guanxi is often perceived as a characteristic of the Chinese market,
where business does not yet operate according to institutionalized rules and regulations (Warren
et al., 2004). With little assistance and few official or legitimate solutions, guidelines, and
resources, individuals may find it necessary to establish guanxi with bureaucratic power (Warren
et al., 2004). However, while the prevailing assumption is that guanxi can only be challenged by
external, non-Chinese forces such as Western, transnational firms, we argue that guanxi could be
undermined by recent dynamics within the Chinese society.
Guanxi may be viewed as a form of social capital, i.e., the association with social networks such
as relationships, organizations, and affiliations (Bourdieu, 1986). For example, some may have
strong social capital to get access to insider information from the “right people” in order to deal
with issues in a local community, such as gaining access to private schools. We may assume that
the elites have stronger and more useful social capital than the general population. However,
previous studies have suggested that individuals’ capital operates differently outside the context
where the capital was first developed. Owens (2015) indicates that in the housing crisis during
the Great Recession, some advantageous characteristics of the middle class became
disadvantages in the mortgage modification process when compared with their working class
counterparts (Owens, 2015). Working class homeowners may have a more useful social network
with similar others that enabled them to quickly share key information to avoid scams and
facilitate applications.
Owens’ (2015) study implies that a strong, fixed, and compact guanxi network may no longer
work well in the context of the socioeconomic shifts in China today. At the national level, China
has gradually become the regional leader, for instance, through the recently launched one-belt-
one-road initiative that seeks to facilitate cooperation among countries in Europe, Africa, and
15
Asia. At the organizational level, more China-originated companies have tapped into the global
market and become transnational corporations. At the individual level, more Chinese citizens
have acquired international experiences, either through short-term overseas tourism or long-term
education abroad. In other words, in contrast with Western firms that attempt to figure out
guanxi, Chinese entities may be even more motivated to gain a new sensibility of the ethical
climate that is recognized worldwide. That is to say, on the one hand, unstable socioeconomic
conditions may result in corruption, but on the other hand, the globalized development of China
may weaken traditional social ties, which to a large extent dictate everyday interaction and
business relationships. This duality is reflected in China where, on the one hand, the Chinese
government has recently launched high profile crackdowns on corrupt officials, while on the
other hand, petty bribery” (e.g., giving “red pocket money” to physicians in charge of surgery)
is still tolerated and prevalent in the lives of ordinary people (Liu et al., 2017).
To sum up, societal developments in the emerging markets have ramifications for the
interpretation of consumer ethics in China. Furthermore, it enriches our understanding of the
rationales behind consumers’ (un)ethical practices in China and other emerging markets. Our
insight into consumer ethics can be enriched if we take the local socioeconomic realities into
consideration. Scholars may want to focus on how emerging market consumers’ ethical practices
are co-constituted by the changing glocal consumer society as well as the extent to which the
consumers appropriate the implications of such a dynamic process.
4. Conclusion and future directions
This paper has reviewed and discussed how recent macro-societal reforms in China interact with
traditional Chinese culture to shape Chinese consumers’ behaviors and consumption ethics.
Consumer ethics in China is shaped by individuals’ responses to rapid socio-economic changes
and coercive public policies. It is also influenced by China’s status as an emerging market, so
that some features of Chinese consumer ethics are comparable to the trends in other emerging
markets. That being the case, we cannot fully understand consumers’ ethical choices without
considering their position in the social configuration and in the world economy, as well as the
interplay among socio-political changes and cultural values and traditions. Figure 1 visualizes
the relationship among multiple variables that were argued to affect consumer ethics in China.
Local characteristics were co-constituted by political power, economic reform, and traditional
culture. Meanwhile, these local characteristics inform, and also being informed, by the aspired
global standards and norms that are perceived to represent advanced economies. As such, a local
approach that grounds the discussion in the Chinese context holds ramifications for the
mainstream account of consumer ethics.
[Insert Figure 1 here]
Although rapid and abrupt social changes can sometimes become obstacles when promoting
ethical practices among consumers, the changes could also be turned into potential opportunities
for entrepreneurs whose aim is to create innovative solutions to address the demands of the
largest consumer market in the world. For example, to deal with the overflow population in
megacities, policy makers and practitioners struggle to create employment opportunities and
improved living conditions in the countryside in order to motivate youngsters to stay near their
birth places. One of the solutions to this issue is e-commerce. The Chinese online retailing giant
16
Taobao collaborates with around 1,000 local, small shops in rural areas that they call “Taobao
villages,” which serve as the commercial hubs and pick-up locations for rural consumers who
have placed an order online (Weller, 2017). This type of arrangement reduces door-to-door
delivery costs and brings business opportunities to the local shops, which earn profits from goods
storage as well as consumers’ additional, unplanned shopping when they come to pick up their
orders in the store (Chu, 2016). In addition, by utilizing big data, consumers’ demands can be
predicted even before they actually place an order. Products can be packed and shipped in
advance to the local shops to await the anticipated consumers (Chu, 2016). In this way, local
consumers enjoy convenience and variety in product selection as much as urbanites do. This
business strategy not only solves the “last mile” problem of delivery, but also empowers some
poor, rural communities, and eventually facilitates a more balanced development across various
regions in China (Weller, 2017). It may trigger social behavioral change downstream as well. For
instance, according to Winterich and Zhang (2014), consumers may reduce their ethical, pro-
social behaviors (e.g., charitable donations) if they perceive high power distance and social
inequality. This suggests that even if Chinese consumers have more disposable incomes, they
may not feel obligated to engage in altruistic, ethical practices if they believe in an unequal
society (Winterich and Zhang, 2014). Therefore, as Taobao villages bridge the rural-urban gap,
and thus empower rural consumers, they may also further reduce consumers’ unethical practices
because they alleviate relative deprivation and perceived inequality.
Extrapolating from this study, we suggest two directions for future research.
First, if we approach consumer ethics issues solely as a cultural phenomenon or a product of
personal belief without considering socioeconomic forces, it leaves relatively little room for
scholars to suggest solutions to correct unethical practices. In this paper, we discuss consumer
ethics through the lens of individuals’ choices to accommodate to socioeconomic shifts,
implying that consumers’ perceived or experienced inequality may relate to their agency in
making ethical choices. While we argue how multiple forces have separately influenced
consumer ethics, these forces can also be viewed as factors that may interact with one another to
shape consumer ethics. For example, given that China is among the countries with the highest
Gini coefficient (Xie and Zhou, 2014), the drastic contrast between the poor and the rich may
result in different reactions to demographic shifts and public policy across these two groups, and
the poor may be more susceptible to social mobility changes (Yoon and Kim, 2017). We
encourage future studies to continue looking at how people’s socioeconomic status and their
corresponding psychological states may moderate how they interpret, react, and cope with
changes in public policy. Future studies may also consider empirically examining how
consumers’ perceptions of social position, either in the domestic scope or in the global market,
affect their (un)ethical practices. This kind of empirical evidence can inform public policy and
business strategies that aim to build a more socially responsible and sustainable marketplace.
Second, we urge more scholars to explore consumer ethics in China from its transitional status as
an emerging market or as a modern society where consumers have cultivated a globalized taste,
instead of from its traditional, old cultural form. This “transitional status” perspective allows
scholars to scrutinize the complexities of the Chinese market, such as the division between well-
developed cities and developing rural areas. In terms of consumer ethics, urban populations
could be overrepresented in scholarly discussions since they are capable consumers with strong
purchasing power. In contrast, rural consumers and migrant workers are often ignored. A
17
political-economy approach may yield a more complete conceptualization of consumer ethics
across various market segments. Furthermore, examining the Chinese market based on its
transitional status also requires adding other comparison groups in multiple levels of
development. Future research comparing China with other developing countries and capitalist
societies will bring interesting insights to how a country’s participation in the global market
influences its consumers’ particular ethical interpretations and coping strategies.
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... Second, we add to the literature on interpersonal relationships influencing gift decisions by introducing relational norms that classify giver-recipient relationships by reciprocal motives. Motives and norms shape gifting behaviors (Sherry, 1983;Babin et al., 2007;Chen et al., 2019); however, the research on giver-recipient relationships by motivation or norm substance is lacking. We manipulate communal and exchange relationships using Aggarwal and Zhang's (2006) method to specify the contexts where givers prioritize altruistic and egocentrics motives and verify the link between givers' two types of dominant motives and their gift choices. ...
... cognitive) attributes. This study provides additional evidence that behavioral norms shape gifting behaviors (Sherry, 1983;Babin et al., 2007;Chen et al., 2019). ...
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