The most profound feeling when I returned to Chengdu this time was the change in prices. The last time I lived in Chengdu was before the outbreak of the epidemic in 2020, so the price level in Chengdu in my memory stayed at the same level as five years ago. Now when I return to Chengdu again, I find that prices have more than doubled. Although I currently have some income in Sydney, from an exchange rate perspective, prices in Chengdu are still relatively low for me. However, when I came back this time, I felt that living in Chengdu was more difficult than in Sydney.

Let me give you a practical example to help you understand more intuitively: when dining in a relatively good restaurant in Chengdu, the per capita consumption is about 100 RMB, which is about 20 Australian dollars when converted into Australian dollars. But in Sydney, 20 Australian dollars usually only buys an ordinary fast food box lunch. However, it is worth noting that according to data released by the Chengdu Municipal Bureau of Statistics, the average annual salary of all employed persons in Chengdu’s urban units in 2022 is 96,413 yuan. According to data released by the Australian Bureau of Statistics, as of November 2023, the average weekly salary of full-time adults in Australia is 1,888.80 Australian dollars, and the annual salary is approximately 98,218 Australian dollars. Without taking into account the exchange rate, the average income figures of residents in the two cities are almost the same, so for residents in the respective cities, their spending figures should feel the same. However, spending 100 Australian dollars per person in Sydney usually means being able to go to very high-end French restaurants or even Michelin restaurants. This is significantly different from the restaurant level in Chengdu where the per capita consumption is 100 yuan.

Another obvious discovery when I returned to Chengdu this time was that many Domino’s pizza restaurants have opened in Chengdu. Me and two friends spent about 250 yuan to dine together. However, in Sydney, Domino's is only a very affordable fast food brand, with a larger pizza costing about 20 Australian dollars. Although it is undeniable that the decoration and dining environment of Domino's in China are far better than that of Domino's in Sydney, but according to the logic of the above income comparison, the three people spent 250 yuan on a fast food with a better environment in Chengdu, which is equivalent to Sydney residents spending 250 Australian dollars on a fast food, which is obviously not cost-effective.

The third fact is that there are some globally priced products, such as iPhone, Nike and other brand clothing. The prices of such goods in the global market are often priced directly in local currencies, without taking into account local income conditions. For example, I bought a pair of Nike short-sleeves in Chengdu for 300 yuan. According to the income logic above, this is equivalent to Sydney residents spending 300 Australian dollars on the same product. However, I can actually buy the same style of short sleeves in Sydney for about A$50. This means that when incomes are equal, purchasing such globally priced brand products in Chengdu actually pays a huge brand premium.

Summarize the above three findings:

  1. The average annual salary of residents in Chengdu and Sydney is similar, so for people who have only lived in a single city for a long time, their income levels are similar.
  1. Some fast food brands that are very common abroad are often packaged and upgraded in China and turned into higher-end restaurants, resulting in significantly higher consumption than similar foreign brands.
  1. When the income levels of globally priced goods are similar, domestic consumers invisibly pay more brand premiums.