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China Media Spend Up

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NEW YORK Reflecting the improving outlook for China's economy, GroupM is revising upward its forecasts for 2009 and 2010 media spending in the country.

Last week, the WPP Group media company said it estimates ad spending, led by the Internet, will increase 5.8 percent in 2009 to $37.3 billion and by 9.8 percent to $41 billion in 2010, when China hosts the World Expo in Shanghai and the Asian Games in Guangzhou. In June, GroupM had predicted an increase of 3.2 percent in 2009 and 8.9 percent next year. Last year, as Beijing hosted the Olympic Summer Games, China enjoyed a 23 percent jump in media spending.

GroupM forecasts that China will overtake Japan as the world's second-largest ad market in 2011, with measured media spending in the country expected to reach $47 billion compared to Japan's projected $40 billion. The U.S., the industry's No. 1 market, is forecast to be a $150 billion market in 2011.

GroupM's revision coincided with signs that suggest China's economic recovery is well under way as the government released data a week ago showing rises in industrial output and money supply. After China's pessimistic outlook at the start of this year amid the world economic crisis, there are new indications consumer confidence is returning: In August, passenger car sales in China jumped 90 percent over the year-earlier period, while sales in the furniture and construction materials industry rose 42 percent and 37 percent, respectively.

Economists, including those from the World Bank and Goldman Sachs, recently lifted previous forecasts for Chinese real GDP growth by about 1.5 percentage points, with a consensus forecast of about 8 percent this year, before the country returns to double-digit growth in 2010.

Lucy Zhang, futures director, GroupM Knowledge, China, cited that improvement in the broader economy and marketers' growing confidence in the recovery for GroupM's revisions.

"Advertisers from the food and beverage, industrial, business, retail, electronic appliance and cosmetic categories have increased their TV and print media investment in the first half of 2009, compared to the same period last year," she said. "Advertisers from clothing, cosmetic and toiletries, education and retail categories have increased their online ad spending in the first half of 2009."

In addition, she cited the high growth potential for digital media in a country that currently has an estimated 338 million Internet users, easily topping the U.S. as the world's largest Internet market. GroupM estimates the number of online homes in China is growing by nearly 88 million every 12 months, adding the equivalent of a country the size of Germany.

"The rising online population, deeper engagement of the Chinese netizen on the Internet and more choice in online ad formats have all helped online become the fastest-growing advertising medium in China," said Zhang.