China Consumption Trends for 2023: Rebalancing The Economy

China Consumption Trends for 2023: Rebalancing The Economy

It is vital for companies not to underestimate the strength of domestic brands”

While businesses are bracing themselves for a choppy start to 2023, there is also a sense of a light at the end of the tunnel. Inflation, the War in Ukraine and China’s reopening after three years of strict Covid-restrictions, are set to have the largest impact on global trade.

China is set to experience extensive levels of Covid-19 cases in the following weeks, with the peaks expected during Chinese New Year and after the return to work following the festive period. [Airfinity] Yet, investment analysts say China lifting restrictions will help rebalance economies sooner than anticipated.

Having opened our Shanghai Import Pavilion in Nov 2019, Sinowei teams throughout China, UK and EU have had first-hand experience of the challenges presented across international trade during a pandemic. We’ve observed the quick pace at which things can change in China and how opportunity can arise. The annual McKinsey China Consumer Report released in December, projected several consumer trends pinned for companies to watch in 2023.

  1. “The Middle-Class Continues to Rise”
    Not only is China experiencing the highest growth of middle-class households every year; China is also “expected to add another 71 million upper-middle and high-income households.”
  1. Premiumization Maintains Momentum”
    Consumers still “trade up” to premium over mass, “despite rising anxiety over the economy and their personal incomes”.
  1. “Smarter Choices, but not Trading Down”
    Consumers becoming increasingly creative in how they’re getting the brands they want for less – whether it’s through Community Group Buying Platforms, Taobao or livestreaming offers.
  1. “It’s all about product”
    With a world of information at our fingertips, savvy consumers can quickly “educate themselves about the technical specifications of their favourite products on social media” and the likes of Baidu.
  1. “Local Companies are Winning”
    While foreign brands could once persuade consumers to pay premium based on country of origin, “Chinese companies today offer excellent products that are competitive or sometimes even superior to their foreign peers. … Today domestic companies are reacting faster to trends, are closer to the consumer and making bolder investments.”

 

Our Thoughts

“The resurgence of the world’s most important source of international travellers has already created a positive impact for neighbouring economies.”

China’s growing spending power presents greater opportunity in 2023, due to the easing of China’s zero-Covid restrictions. Not only do we expect to see uptake in bar and restaurant visits – but the resurgence of the world’s most important source of international travellers has already created a positive impact for neighbouring economies.

Consumer Behaviours 

The key consumer demographic, set to influence consumption trends over the next decades, are those in their 20’s and 30’s. This category generally has better education, aren’t too concerned with savings and will spend more on entertainment. Most importantly, they are more concerned with quality and value over low price.

Understanding the omnichannel experience for Chinese shoppers can seem overwhelming to Western companies, who are used to more straightforward touch points. Having spent several years establishing our B2C distribution through these online channels, what we found most interesting were the community group buying platforms.

This refers to several small house-hold orders combined into one larger community order. It’s in often favoured in Tier 3,4,5 areas where there’s lower-income as these platforms offer better group price offers. Also in these areas: community values are stronger and neighbours more familiar with one another. [Dauxe Consulting]

Covid-lockdowns forced the shift in online commerce in first and second tier cities, as logistics and delivery workforce were impacted. Community group buying models are increasingly showing high-conversion and retention capabilities. We see this as an excellent channel for Western companies to reach consumers beyond the traditional market points for imports.

Domestic Adaptability and Innovation

While foreign companies were once held in esteem of having higher-quality goods, mainly in food, drink, clothing and cosmetic products – this was largely because of their newness and unfamiliarity to China. Fast forward two decades and Chinese manufacturers have quickly adapted to consumer demands while offering further innovation than imported counterparts.

It is vital for companies not to underestimate the strength of domestic brands. They should demonstrate understanding of China’s consumer culture and cater their offering accordingly.

Why is Chinese New Year celebrated in Jan/Feb? Lunar vs Solas Calendars?

Why is Chinese New Year celebrated in Jan/Feb? Lunar vs Solas Calendars?

A cool thing about the Chinese, is they’re great travellers and seekers of adventure. As a result, we’ve seen waves of Chinese emigration throughout history and their influence can be seen all over the world. An example of this is the fact that twenty countries and regions recognise Chinese New Year as a designated day. In the run up to Chinese New Year 2022, we want to help build a better understanding of this festival and answer your questions!

Why does Chinese New Year fall in Jan/Feb?

As one of the top questions we were asked – it would be a good one to start with.
First, we must recognise that time is man-made. No, we’re not playing God – but the hourly, daily, monthly and annual segmentation beyond “night and day” was created over the history of mankind.

According to a recent estimate, there are about forty calendars used in the world today – so it’s no wonder we see several time conflicts. The main roots of human time-keeping are derived from Lunar and Solas Calendars. What’s the difference? In short – the celestial body used to measure the passage of time: moon or sun.

Solas calendars are based on the position of the sun in relation to the stars behind it. One year equals the time required for the earth to rotate around the sun. Seasons and time are measured between the vernal equinoxes. We see 365 days in the Solas year with the exception of leap year which helps synchronise the additional 0.25 days it takes for full earth-sun rotation.

Lunar calendars are based on cycles of the moon phases. A month is measured from one new-moon to the other. We see 354 days in the Lunar year, give or take. Lunar Calendars are still in wide use, particularly in Asia to keep track of religious festivities.

This is why Chinese New Year is nearly a month after Western countries. Since ancient times, China has followed the lunar calendar to plan the cultivation and harvesting of crops, which has also evolved into the 24 solar terms.

Some of the oldest calendars known in history were Lunar. Past societies emphasised the genuine connection between human behaviour and the moon.

Ultimately, we are controlled by both cycles in different ways. Let’s hope this New Moon of 2022 brings a joyful and prosperous year for us all! Gong Xi Fa Cai! 

Is China winning?

Is China winning?

THIS YEAR started horribly for China. When a respiratory virus spread in Wuhan, Communist Party officials’ instinct was to hush it up. Some predicted that this might be China’s “Chernobyl”—a reference to how the Kremlin’s lies over a nuclear accident hastened the collapse of the Soviet Union. They were wrong. After its initial bungling, China’s ruling party swiftly imposed a quarantine of breathtaking scope and severity. The lockdown seems to have worked. The number of newly reported cases of covid-19 has slowed to a trickle. Factories in China are reopening. Researchers there are rushing candidate vaccines into trials (see Briefing). Meanwhile, the official death toll has been far exceeded by Britain, France, Spain, Italy and America.

China hails this as a triumph. A vast propaganda campaign explains that China brought its epidemic under control thanks to strong one-party rule. The country is now showing its benevolence, it says, by supplying the world with medical kit, including nearly 4bn masks between March 1st and April 4th. Its sacrifices bought time for the rest of the world to prepare. If some Western democracies squandered it, that shows how their system of government is inferior to China’s own.

Some, including nervous foreign-policy watchers in the West, have concluded that China will be the winner from the covid catastrophe. They warn that the pandemic will be remembered not only as a human disaster, but also as a geopolitical turning-point away from America.

That view has taken root partly by default. President Donald Trump seems to have no interest in leading the global response to the virus. Previous American presidents led campaigns against HIV/AIDS and Ebola. Mr Trump has vowed to defund the World Health Organisation (WHO) for its alleged pro-China bias. With the man in the White House claiming “absolute power” but saying “I don’t take responsibility at all”, China has a chance to enhance its sway.

Even so, it may not succeed. For one thing, there is no way to know whether China’s record in dealing with covid-19 is as impressive as it claims—let alone as good as the records of competent democracies such as South Korea or Taiwan. Outsiders cannot check if China’s secretive officials have been candid about the number of coronavirus cases and deaths. An authoritarian regime can tell factories to start up, but it cannot force consumers to buy their products. For as long as the pandemic rages, it is too soon to know whether people will end up crediting China for suppressing the disease or blaming it for suppressing the doctors in Wuhan who first raised the alarm.

Another obstacle is that China’s propaganda is often crass and unpleasant. China’s mouthpieces do not merely praise their own leaders; some also gloat over America’s dysfunction or promote wild conspiracy theories about the virus being an American bioweapon. For some days Africans in Guangzhou were being evicted en masse from their homes, barred from hotels and then harassed for sleeping in the streets, apparently because local officials feared they might be infected. Their plight has generated angry headlines and diplomatic rebukes all over Africa.

And rich countries are suspicious of China’s motives. Margrethe Vestager, the EU’s competition chief, urges governments to buy stakes in strategic firms to stop China from taking advantage of market turmoil to snap them up cheaply. More broadly, the pandemic has fed arguments that countries should not rely on China for crucial goods and services, from ventilators to 5G networks. The World Trade Organisation expects global merchandise trade to shrink by 13-32% in the short run. If this turns into a long-term retreat from globalisation—which was already a worry before covid-19—it will harm China as much as anywhere.

More fundamental than whether other countries are willing to see China supplant America is whether it intends to. Certainly, China is not about to attempt to reproduce America’s strengths: a vast web of alliances and legions of private actors with global soft power, from Google and Netflix to Harvard and the Gates Foundation. It shows no sign of wanting to take on the sort of leadership that means it will be sucked into crises all across the planet, as America has been since the second world war.

A test of China’s ambitions will be how it acts in the race for a vaccine. Should it get there first, success could be used as a national triumph and a platform for global co-operation. Another test is debt relief for poor countries. On April 15th the G20, including China, agreed to let indebted nations suspend debt payments to its members for eight months. In the past China has haggled over debt behind closed doors and bilaterally, dragon to mouse, to extract political concessions. If the G20’s decision means the government in Beijing is now willing to co-ordinate with other creditors and be more generous, that would be a sign it is ready to spend money to acquire a new role.

Perhaps, though, China is less interested in running the world than in ensuring that other powers cannot or dare not attempt to thwart it. It aims to chip away at the dollar’s status as a reserve currency. And it is working hard to place its diplomats in influential jobs in multilateral bodies, so that they will be in a position to shape the global rules, over human rights, say, or internet governance. One reason Mr Trump’s broadside against the WHO is bad for America is that it makes China appear more worthy of such positions.

China’s rulers combine vast ambitions with a caution born from the huge task they have in governing a country of 1.4bn people. They do not need to create a new rules-based international order from scratch. They might prefer to keep pushing on the wobbly pillars of the order built by America after the second world war, so that a rising China is not constrained.

That is not a comforting prospect. The best way to deal with the pandemic and its economic consequences is globally. So, too, problems like organised crime and climate change. The 1920s showed what happens when great powers turn selfish and rush to take advantage of the troubles of others. The covid-19 outbreak has so far sparked as much jostling for advantage as far-sighted magnanimity. Mr Trump bears a lot of blame for that. For China to reinforce such bleak visions of superpower behaviour would be not a triumph but a tragedy.

(This article is from Economists https://www.economist.com/leaders/2020/04/16/is-china-winning)

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