Is Starbucks 'Over-Charging' in China?

The recent controversy between a Chinese state owned television network and Starbucks has put the state’s relations with the Chinese people into the spotlight.

A tall latte costs £2.74 in a Starbucks in Beijing, £2.46 in London, £2.02 in Chicago and £1.14 in Mumbai, as reported by China Central Television, CCTV.

Their post went viral almost instantly on China’s version of Twitter, Sina weibo. However, in a surprise to the state, the post actually led to many users taking Starbucks’ side. After the CCTV report, Starbucks China posted an image of an alpaca, whose Chinese nickname is “cao ni ma”(which translates to Grass Mud Horse). This is pronounced similarly to a Chinese insult and seemed to be a statement to the Chinese state. Although Starbucks China deleted the tweet and apologized for the picture later, it still had a huge impact throughout the nation.

The CCTV news channel aired a twenty-minute “…investigation from CCTV correspondents stationed around the globe”, which accused Starbucks of charging higher prices in China, than in other major markets. “Starbucks has been able to enjoy high prices in China, mainly because of the blind faith of local consumer in Starbucks and western brands.” Wang Zhengdong, director of the Coffee Association of Shanghai, told CCTV on the show. However, there was a backlash from online media users, academics and entrepreneurs.

President of Starbucks China and Asia Pacific, John Culver, explained that the higher prices in China reflected costs of training employees, locating ingredients from safe sources and maintaining larger store spaces, as Chinese customers tend to liner longer than their American counterparts.

Many Chinese critics of the CCTV report said it had a “lack of basic economic sense” and was “a setback from the market economy”. Others also point out that the CCTV does little to address domestic concerns, such as the consistent rise in housing and living costs. This inability to respond to the urgent issues facing the Chinese people leaves many to feel the state is out of touch and the CCTV is now “…losing public trust”.

The rising price of fuel, unsafe food and a healthcare system that cripples most families when one member has a stroke or serious illness, the CCTV’s decision to wage a war with Starbucks seems trivial to most Chinese viewers. One social media user sarcastically wrote, “Seeing none of this (in relation to domestic problems), you are telling me that the coffee I drink less than five times a year is the most expensive coffee in the world. How interesting.”

Their decision to pummel a Western firm presents the state’s prioritisation of political maneuvering over tackling the average person’s daily troubles, which many are growing to resent. It also seems to contradict the statement of Premier Li Keqiang, who said that the government is “steadfastly pursuing reform and opening-up with priority given to the stimulation of the market.” This heavy handedness towards external firms acts contrarily to the proposed perusal of reform. Despite this, the majority of Chinese people, nowadays, would say that the free market plays the most important role in China’s economy.

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