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That ‘other big shopping festival’ on China’s calendar, 618, wrapped up over the weekend providing many lessons for brands in China. It also acts as a barometer to gauge Chinese consumers’ appetite for spending following the recent spate of lockdowns in Chinese cities.

JD.com’s sales result will be pleasing to many with Gross Merchandise Value (GMV) growing 10.3% on last year. Pinduoduo said sales of home appliances, cosmetics, and personal care and household cleaning items had more than doubled, but didn’t reveal their overall 618 results. Like previous years, Alibaba hasn’t published its 618 results, but Syntun analysis of the big three ecommerce platforms saw sales grow marginally from last year’s festival.

Alibaba would have also missed their two super-star livestreamers, Austin Li and Viya, who contributed ¥18.9 billion ($2.8 billion) on one day of livestreaming during the last big festival, 11-11. This 618 festival, Viya was absent following her tax evasion charges late last year, and Austin Li’s contribution was cut short following a ‘politically insensitive’ livestream with an iconic Viennetta ice cream resembling a tank.

Despite the absence of China’s livestreaming A-Listers, the livestreaming format continues as strong as ever, given another charge by the recent lockdowns. Alibaba and Pinduoduo will have seen some 618 market share eroded by the video platforms: Kuaishou partnered with JD, and Douyin’s 618 presales grew 183% on last year. WeChat also bet big on livestreaming commerce for the festival, following 15-fold growth last year.

The trend of brands hosting their own livestreaming channels saw interesting innovations – from brands not traditionally associated with livestreaming. With less people flying at present, China Southern and Hainan Airlines used livestreaming to sell “fly happy” deals, airline ticket “blind boxes” and other aviation-themed products, in addition to flight attendants selling cosmetics. On their Douyin livestream, China Southern sold 23,000 bottles of an eye cream. New Oriental, struck by Beijing’s education crackdowns, attracted livestream audiences, not just with products, but to learn some English as well.

Whilst the continued evolution of livestreaming commerce is one the big stories of this shopping festival, there are other valuable lessons that apply to brands selling in China.

Mass disruptions to supply chains resulting from the recent lockdowns created a lot of consumer uncertainty around receiving goods. This saw JD double-down on its supply chain advantage, promoting this year’s 618 under the ‘Responsible Supply Chain’ banner. The theme contributed to JD’s success, reinforcing that, even in China where most things are made, certainty around receiving goods on time is paramount. Products on the “Hour Platform” that could be delivered swiftly from local stores grew 77% from last year.

Chinese consumers’ love for the new held true, with novel technologies, designs and functions among some of the best selling products. Consumers were also discerning over the quality of service, with products covered by guarantees of replacement and repair over long periods proving popular. Omni-channel continued to accelerate with Wal-Mart, China Resources and Yonghui increasing 6.6 times from last year. Green consumption is on the rise and farmers’ produce gained in popularity.

Although many of the lessons from 618 were pertinent for brands participating in the festival, much of it applies to everyday business in China. Contact China Skinny to learn how we can help you better understand both the important fundamentals and the emerging trends in China to help you succeed during these unique times.

Click/tap here to see this week’s most important China market and marketing news.

This week’s news and trends in China:

Online: Digital China

JD.com Reports over ¥379.3 Billion ($56.7 billion) Transaction Volume for 2022 618 Grand Promotion: JD’s 618 festival sales were up 10.3% on last year. Whilst positive, it was well down on last year’s 27.7%.

Tencent’s WeChat Debuts in 618 Shopping Festival with Big Bet on Live-Streaming Ecommerce Despite Slowing Economy: Tencent’s WeChat has launched its own 618 online shopping festival via its in-app video function Channels for the first time. Sales made through live-streaming on WeChat grew 15-fold in 2021, with over 50% coming from private domains – such as a brand’s existing fans on WeChat. Buyers in Channels live streams spend an average of ¥200 (US$29.9) in each session, with 60% of users making repeat purchases.

More Virus-Hit Chinese Firms Join Livestreaming Ahead of Mid-Year 618 Shopping Festival, Expecting Rapid Consumer Market Recovery: Chinese businesses spanning industries have transformed and diversified business to incorporate livestreaming. Airlines such as China Southern and Hainan sell cosmetics through livestreams, with lower prices than duty-free stores.

Schooling and Education

From Teacher to Livestreamer: Ecommerce Move is Game Changer for China’s New Oriental Education: New Oriental is going from classroom to e-commerce. Online shopping has never been more educational. Whether they are selling fruit, rice, or even shrimp, New Oriental’s livestream hosts are grabbing every opportunity to teach their viewers a new word or concept, often using a whiteboard to introduce new vocabulary. New Oriental Education’s livestreaming sales exceeded ¥20 million ($3 million) a day, with best selling products being books and videos, fresh agricultural products and food & beverage.

Consumers,  Chinese Consumers

China Adopts Targeted Measures to Bolster Foreign Trade Growth: In an effort to help foreign trade firms navigate difficulties, the State Council, China’s cabinet, issued a guideline last month to improve services and provide more financial and fiscal support for the enterprises. 27 government departments, including the Commerce Ministry and the Central Bank, have rolled out relevant policies, which mainly focus on smoothing foreign trade logistics, strengthening financial support for foreign trade firms and stabilising the industrial and supply chains of foreign trade.

What Do Chinese Consumers Want? Walmart Can’t Figure It Out: The hypermarket model is losing ground to local competitors who refresh their offerings and layout more often. They also have faster, 30-minute local delivery, which is popular as car ownership is still relatively low. It also isn’t straightforward for Walmart to open new stores. For example, the company needs permits for each store in order to sell condoms, the top form of birth control in China, because they are considered medical devices. Permits can take years to clear. Walmart held 10.9% of China’s overall retail sales market last year. That was up from 9.3% five years ago, yet Walmart dropped to fourth place from third. Despite the challenges, operating stores in China helps Walmart stay abreast of trends in retail and ecommerce.

For Young Africans, China is More Influential than the US: Survey: A survey conducted by the Ichikowitz Family Foundation found that 76% of 4,507 young Africans across 15 countries named China as a foreign power with a positive influence on their lives, compared with 72% for the US. In 2020, the same survey found 83% positive about the US versus 79% for China. About 42% of the world’s youth are expected to be African by 2030.

Young Chinese Have Shunned Marriage. Now, They Want Singles’ Rights: According to government estimates, the number of people living alone in China reached 92 million in 2021. Single people can’t adopt a child, access assisted reproductive technologies, or — in many cases — claim maternity benefits. In some cities, they even face extra restrictions when buying a home.

Premium Food & Beverage

European Diplomats in Beijing Invited to Deliver Products Ahead of JD’s 618 Grand Promotion: Ahead of the 618 Grand Promotion, JD.com invited diplomats from European countries including Denmark, France, Hungary, Italy, the Netherlands, Portugal, and Slovenia, to deliver European products to Chinese consumers. During JD’s 618 pre-sales period, the transaction volume of Danish food products grew by 98% YOY. The French National Pavilion recorded an increase in transaction volume of nearly 220%; and the transaction volume of imported European cheese products grew by almost 250%. Germany, France, Italy, the Netherlands and Denmark were the largest European countries of origin by sales volume on JD over the past year. Dairy products, candy biscuits, wine, and black tea were the most popular food products imported from Europe.

Kids Parenting

How China’s ‘Mom Groups’ Share the Work of Parenting: In the absence of public childcare services, some urban moms are trying to rebuild and recreate a sense of community among families.

Overall Beauty

Prestige Beauty: The Next Growth Engine for Beauty Players in China: Premium beauty sales are expected to grow at 13% annually, with premium market share further increasing to 53% by 2025. Post-90s account for 57% of high-luxury beauty consumption and a similar rate of online beauty purchases.

Designers and Fashion

Anta’s Big Marketing Spend and Sexy Ads are Paying Off: Chinese sports giant Anta recently found itself slammed online for “edge marketing” – using attractive female models with suggestive or tight-fitting clothing to inspire impulsive buying among men. The technique is increasingly common in China, especially in the auto industry, but many do not approve of this “vulgar” tactic. The tactic appeared to be paying off with Anta’s revenue growing 38.9% in 2021, versus 19.1% for the industry overall, although some of rise was at the expense of the hit Nike and Adidas took from the Xinjian cotton issues. Anta’s advertising spend grew from 10% of revenue to 12.4% between 2020 to 2021, spending ¥6.1 billion ($917 million) on advertising last year, including cooperation with Eileen Gu. R&D spend dropped from 2.5% to 2.3% over that time.

Forever 21 Takes Third Crack at China with New Bricks and Mortar Store: American fast fashion retailer Forever 21 is making its third tilt at the China market, with plans to open a physical store in a shopping centre in Taizhou, Jiangsu province, later this month. The youth-focused, fast fashion retailer quietly re-entered the Chinese market last August, at first selling exclusively online via platforms such as Vipshop and Pinduoduo and later on Tmall.

China’s Plus-Size Market: Big Business Opportunity?: Since 2020, sales of plus-size fashion have risen rapidly in China — but consumers are calling for better quality and choice in high-end plus-size apparel. A live broadcast by large-size fashion brand Plusmall on Xiaohongshu (RED) resulted in ¥16.8 million ($2.5 million) of sales in a day. The brand notched up ¥100 million ($15 million) in sales within 10 months of launching. Some estimates suggest that 35% of the adult population of China are in the plus-size category. The category grew 42% in 2020.

Pollution and Environment

China Rolls Out Another Plan to Adapt to Climate Change: China’s Ministry of Ecology and Environment, and various other departments, yesterday published a new plan to tackle climate change amid another season of heavy rainfall that has already left at least 32 people dead in southern China. Three tornadoes, record rainfall, and blistering heat waves have further raised climate alarm in China.

Last week saw millions of Chinese kids take the gruelling Gaokao. The average 31 hours a week spent doing homework and extracurricular classes from the age of three, have largely been to prepare for the notorious 9-hour exam which determines the university they get into. Many consider the Gaokao scores to shape the trajectory of their lives.

To add to the pressure, the past two-and-a-half years of school leading up to the exam has been blighted by the shadow of Covid and sporadic isolations. Although Shanghai postponed its tests for a month, kids elsewhere were given no reprieve, with more than 800 kids taking the test from quarantine sites. As those who have lived in China will know, the whole nation takes it seriously, with banners, signs and people holding placards telling people to be silent around examination halls. Not a toot is to be heard.

Despite the challenges, this year sees a record of 11.93 million students taking their Gaokao – 1.15 million more than last year. This is positive news for foreign universities hoping to be considered for tertiary studies providing a larger pool of potential students. The extra million kids has also created even greater competition to get into China’s prestigious schools, which has historically been a driver for studying abroad.

The recent extreme lockdowns have seen more questioning China’s Covid approach and subsequently spiked migration enquiries, are also likely to see more considering foreign universities. The ongoing uncertainty around China’s Zero-Covid approach, and more kids and parents with cabin fever, will see more Chinese viewing overseas study positively than 6-months ago.

Many Chinese are still very cautious about the safety of travelling abroad and are unlikely to all bee-line it across the borders any time soon. Yet Chinese students will be trailblazing travel abroad before tourists. It is much easier to justify China’s minimum 14 days re-entry quarantine following a year of study than following a 5-10 day holiday.

Education institutions outside of China are likely to do well from more students studying abroad. It will also have a halo effect across many industries. Tourism will benefit from visiting friends and relatives, who are likely to be the first wave of long haul tourists from China. Consumer products also stand to benefit both through direct purchases from the students, but also positive exposure of the products and their country of origin on those students’ social networks. There’s a good chance that we’ll also see a bump in the daigou trade, which has historically raised awareness and sales of many foreign brands in China.

One of the largest beneficiaries of an increase in Chinese students abroad is the UK. So it is timely that China Skinny’s Andrew Atkinson will be speaking at CBBC’s flagship Consumer event of the year, China-Consumer 2022 at The British Library, London, as well as online. Andrew will be sharing thoughtful and valuable insights during his presentation on 28 June. Find more information and sign up here.

Click/tap here to see this week’s most important China market and marketing news.

This week’s news and trends in China:

Consumers,  Chinese Consumers

Consumers in China Shift Focus from Instant Gratification to Longer-term Value: Chinese consumers have entered a new phase marked by increasing sophistication and prudence, a bent towards sustainability, and the pursuit of work-life balance according to an Accenture study. Although family continues to play a central role, there has been a rise of the “me” economy. Convenience is a growing priority.

Australia’s Defence Minister Meets Chinese Counterpart, Marking the End of a Two-Year Diplomatic Freeze: Taking place on the sideline of the Shangri-La security summit, Defence Minister Richard Marles’ meeting with General Wei Fenghe marked the first high-level contact with Australia’s biggest trading partner since January 2020. The meeting is seen as a critical first step that could pave the way for more high-level talks between the two countries. In related news, China’s Foreign Minister, Wang Yi, held a virtual meeting with his New Zealand counterpart, Nanaia Mahuta, on Monday.

5th CIIE to be Held Offline, On-Schedule: Exhibitors have signed up to over 75% of exhibition space. The expo bureau will roll out special supportive measures for eligible exhibitors, such as fee relief for booth building, and will extend the sign-up period to July 31.

Urbanization Rate Exceeds 70% in Eight Chinese Provincial Regions: Beijing, Shanghai and Tianjin have urbanisation rates above 80% with Guangdong, Jiangsu, Zhejiang, Liaoning and Chongqing above 70%. Ten provinces logged urbanisation rates below 60%. Last year, China’s urban population reached 914.3 million with an urbanization rate of 64.7%. To learn more about China’s urban areas, try China Skinny’s free City Tier tool.

Schooling and Education

Photos: ‘Gaokao’ in the Shadow of COVID: Last week’s national college entrance examinations saw a record of 11.93 million students taking it – 1.15 million more than last year. It is the third year under the shadow of the pandemic. Meanwhile, an estimated 10.76 million will graduate from universities this year, an increase of 1.67 million compared to 2021.

Record Numbers take China’s Gaokao with AI a Popular Career Choice: Artificial intelligence topped the list of 10 most-searched majors, followed by mechanical engineering, electrical engineering & automation, and big data technology, according to the data. Biomedical engineering, and health services & management made the list as awareness of health management increases.

Online: Digital China

As Life in China Returns to Normal, Food Delivery Platforms Face a Slowdown: While the second wave of zero-COVID lockdowns in China have proved beneficial for food delivery platforms, a number of factors—including limited customer loyalty, price wars, and a poor customer experience—could hurt their efforts to become permanently ingrained in users’ lives. That’s led platforms like MissFresh and Dingdong making investments in private label brands, expand their fresh produce offerings by teaming up with local suppliers, and move into prepared meals to capture additional revenues. In Aug 2021, 40% of consumers bought fresh food and beverage, and 16% bought groceries at least once a week. 11% bought sports products, 10% books and 10% toys, weekly.

Premium Food & Beverage

JD’s Appetite for Ready Meals Biz Grows: JD said in the next three years, it will support 20 ready-to-cook, ready-to-heat and ready-to-eat meal brands, whose sales revenue is expected to surpass ¥100 million ($15 million), and five pre-made cuisine brands that are likely to see their turnover exceed ¥500 million ($75 million). JD’s support will be extended in areas like data flow, retail channels, marketing and cold chain logistics. There are about 5,000 varieties of ready-to-cook products at JD Super, with the transaction volume jumping 156% year-on-year in 2021.

Beyond Meat Hones in On Chinese Consumers With New Pork Sauces Launch: Beyond Meat has entered a new category, launching two Beyond Pork sauces to gain traction in the meal prep sector. Classic Bolognese and Savoury Black Pepper are confirmed and are now available through the company’s online Tmall store. Each sauce is slated to be suitable for multiple applications while delivering a protein hit. Both contain animal ingredients including added oyster sauce and chicken powder.

Starbucks to Have 6,000 Stores in China by the End of FY22: Starbucks is on track to surpass 6,000 stores in China this year, up from around 5,400 at present. It will continue construction of its China Coffee Innovation Park in Kunshan, Jiangsu Province. Starbucks was recently slapped with a ¥10,000 ($1,500) fine and barrage of barrage of negative airtime on social media after an inspector in Hanghzou found four boxes of expired coffee powder on its shelves selling for ¥69 ($10) each last December.

Chinese sport Sport

Nike to End Run Club App in China; Will Offer ‘Localised Solution’: Nike is discontinuing its popular Nike Run Club (NRC) App in China from July. It has not given a reason, but plans to provide Chinese runners with an “enhanced and localised solution in the future.” The app has more than 8 million users in China.

Banking, Investments

Shanghai Property Deals More Than Doubled After Lockdown: From May 30 to June 5, the transaction area of newly built residential buildings in Shanghai grew 142% from a week earlier, following policies making it easier to buy property and the end of the widespread lockdown measures.

Premium and Luxury

As Luxury Resale Catches on in China, Investment Buying is on the Rise: China’s customers are paying more and more attention to the long-term investment value of luxury goods when they make purchases, signalling a new brand hierarchy in the region. On social media platforms, including Xiaohongshu (Little Red Book), customers are searching for products with terms such as “value preservation”, with bloggers ranking the long-term value of various brands and styles based on buying experience. They guide shoppers to the best brands and product styles to buy as investment pieces.

Head of Tmall Luxury Division on Chinese Luxury Consumers’ Shopping Habits: The general characteristics of Chinese luxury consumers are mobile-only, online-first. And they’re extremely digital-savvy. They make sure they’re always connected to the current events and always looking for the latest trends. The largest profile of spenders is Gen-Y who are 70% female. They come onto Tmall one out of four days on average, spending nearly ¥30,000 ($4,500) a year. They are interested in the latest products, trends and events. They place importance on services offered by brands. Gen-Z is the next most important, with features such as 3-D product displays and AR / VR try-ons particularly resonant with this profile.

Can you name one event in your lifetime that has shaken the world more than Covid? The world has forever-changed since early-2020. Whereas many of Covid’s consequences have been negative, there have been some silver linings which will hopefully stay with us long after the face masks and vaccine passes have gone.

One of the consolations of the pandemic, is that most people have been forced to stop their routines and reflect about what is important to them. For many Chinese consumers, that has seen a marked uptick in being kind to others and the planet. This is noted in the increase in sustainability awareness and charitable behaviour.

There are dozens of studies illustrating Chinese consumers’ desire to live more sustainable lives and, feeding into that, support sustainable brands. 72% of Chinese respondents buy from companies that are conscious and supportive of protecting the environment according to a survey last year by PWC.

Similarly positive, Chinese donated 18% more money through online platforms last year than in 2020. More than 500 million Chinese consumers made philanthropic transactions through Tmall and Taobao platforms, supporting 2,450 charitable projects organised by 214 philanthropic institutions.

Brands looking to support these trends would be wise to understand their unique dynamics in China.

A Stifel study in April echoed many studies in concluding that Chinese place higher importance on sustainability than their US and European counterparts. Yet that importance doesn’t yet translate to many consumers willingness to pay a premium for green credentials. Just 18% of Chinese consumers say they would pay over 10% more for green brands, compared to 26% of US consumers, 23% of Brits and 28% of Germans.

The brands that have been most effective in China in supporting sustainability are not those who have tried to justify a premium through their sustainability. The most successful brands have been focused on building brand preference and drawing consumers in with engaging and entertaining sustainability-related interactions.

KFC China provides a good example of how to educate consumers about sustainability, while making it effortless and fun to play their part. In a campaign last December, the fast food chain helped inform consumers about how to practice low-carbon behaviour when consuming KFC products. Part of this saw KFC introduce a green rewards program, which encouraged and incentivized behaviour such as mobile ordering and in-store pickup, and opting out of using disposable cutlery. The company also used the campaign to launch their first carbon-zero product, an oat drink. More than 28 million members participated during the 3-week campaign, which was good for sales as well as the environment, and it lowered their costs at the same time.

Similar to sustainability successes, a big driver of the growth in Chinese consumers’ philanthropy is that it is simple to make a donation through mobile payments – which virtually every consumer uses – on the platforms they are already on such as a Tmall and Taobao. This rising willingness to support charity, also reflects the increasing appetite to engage with brands who also support good causes.

The lessons on resonant sustainability and philanthropic initiatives also apply to many other areas of marketing in China. Brands should understand what elements are important to Chinese consumers and the relevant pain points to enable them to deliver initiatives that are simple, convenient, engaging and fun. Get in touch with China Skinny to learn how we can assist your brand on each of those fronts.

Click/tap here to see this week’s most important China market and marketing news.

This week’s news and trends in China:

Consumers,  Chinese Consumers

2021 Sees Online Charity Donations Soar to ¥10 Billion ($1.49 billion) in China: Chinese netizens donated nearly ¥10 billion through online charities and channels last year, up 18% from the previous year. More than 500 million Chinese consumers made philanthropic purchases through Tmall and Taobao e-commerce platforms, benefitting 2,450 charitable projects organised by 214 philanthropic institutions. In 2021, Chinese made 150 million donations worth of ¥5.4 billion ($810 million) through Tencent’s platforms.

Beijing, Shanghai Reopening Speed Up: China Lockdown Tracker: Beijing restaurants reopened on Monday and all schools by next week. Of China’s top 50 cities by economic size, none currently have widespread restrictions in place.

China President Xi Jinping’s Pitch to Anthony Albanese for Relationship Repair for Gough Whitlam Anniversary: China has escalated its push for a relationship reset with Australia ahead of the 50th anniversary of Gough Whitlam’s diplomatic embrace of China, as senior business figures argue the shift “cannot be overlooked”. Premier Li Keqiang has sent a letter to Anthony Albanese, Foreign Minister Wang Yi has called for cooperation with Australia in the Pacific and China’s largest state media network, Xinhua, argued the Golden Anniversary in December presented a “rare opportunity” to strengthen ties.

Rising costs and Covid Delays: Is China’s Manufacturing Hotspot Under Threat?: Brands that manufacture in China have been facing challenges with Covid lockdowns in the short term and rising costs in the longer term. But many companies who have explored moving manufacturing out of China in recent years found supporting infrastructure came up short in most instances.

Online: Digital China

JD Worldwide Sales Jump as 618 Grand Promotion Kicks Off: After the eight-day warm-up phase for pre-orders, JD Worldwide saw the transaction value of its duty-free business rise 20 times year-on-year and its cross-border surrogate shopping business up by more than seven times in the first 24 hours of the mid-year shopping festival. Sales of cross-border food, beverage and fresh products increased by 160%, in which imported alcoholic beverages grew nine-fold. Imported moisturising lotion saw a rise of eight times. On JD overall, cellphones, air conditioners, Zongzi (Chinese sticky rice dumplings for the June 3 Dragon Boat Festival), baby formula and toys were the hottest search keywords in those first 10 minutes.

Douyin Sees Ecommerce Sales More than Triple in the Past Year: Douyin’s gross merchandise value (GMV) surged 320% year-on-year in the year ending in April as the company sold more than 10 billion products. Douyin is estimated to have achieved more than ¥800 billion ($120 billion) GMV in 2021 – dwarfing Tiktok’s ¥6 billion ($900 million). The number of customers on the platform rose by 69%. By comparison, Alibaba’s consumer platforms generated ¥8.3 trillion ($1.25 trillion), although growth was flat.

Mobile money: is Europe Lagging? Is America Ahead? Is China the Leader?: Stats are dubious for different measures of mobile payments globally, but it is clear that China is the standout leader, with Chinese consumers spending $45 trillion a year on mobiles. Americans spent almost around 1/100th on P2P mobile payments: an estimated $479 billion in 2021.

Premium Food & Beverage

Chinese Scientists Produce World’s First Pigs Cloned Entirely by Robot: Researchers at China’s Nankai University claimed this week that they successfully cloned pigs through an entirely automated process for the first time in March. The technique could benefit Chinese agriculture and consumers and help reduce the country’s dependence on imported breeding stock.

Cha Latte Completed its Angel Round Financing Led by Cyanhill Capital: China’s instant coffee brand Cha Latte (花田萃) completed its Angel Round Financing worth hundreds of millions of dollars. Cha Latte created their three-in-one instant coffee that carries notes of various flowers and teas sources from Yunnan. One of its signature drinks includes Red Robe Cha Latte, a type of rock tea originally from Fujian province.

‘Kong: Skull Island’ and ‘The Great Wall’ Actress Fined $1 Million for Touting Candies as Weight-Loss Drug: Jing has been a brand ambassador for Infinite Free, a Guangzhou-based company that claimed its fruit and vegetable candy could prevent the body from absorbing sugars, oils and fats. The 33-year-old actress said that people could keep in shape by taking two “candies” after eating a meal. The ¥7.22 million ($1.1 million) fine was due to the advertising law stating ordinary food can’t be claimed to have therapeutic effects.

Staying Health

Drugs Approved by the Chinese NMPA in 2021: A total of 61 new drugs were approved by the National Medical Products Administration (NMPA), up from 46 in 2020. 37 were new chemical drugs and 24 were biological products. 49% of approvals were for foreign companies.

‘It is Like a Vitamin’: Wave of Mindfulness Meditation Reaches Chinese Shores as Working Adults Grapple with Stressful Lives and COVID-19: Growing anxieties about life in China have led more people to find avenues to cope, with mindfulness being a popular choice. A free-of-charge mindfulness meditation podcast has been played over 11.3 million times and has 163,000 subscribers on Ximalaya. An introduction course to mindfulness meditation has been viewed millions of times on Bilibili.

Overall Beauty

Five Asian Beauty Trends Decoded: 94% of Gen-Zers in China do research on product ingredients, efficacy and safety before purchasing to know if the product is suitable for their skin type & concerns. One of Chinese consumers’ pain points is the freshness of skincare products.

Overseas Chinese Tourists

Marriott Partners with Ant Group to Enhance Digital Operations in China: Marriott is working with the Ant Group to enhance its digital operations in the Chinese market by providing Alipay members with various benefits when they sign up for the Marriott Bonvoy Rewards Program. New members can currently enjoy a ¥1 (15c) breakfast in selected hotels.

Culture Art

Deglobalisation Hits the Art World: One of the drivers of increased localisation in the arts is, counterintuitively, China — a country that has built 128 major new arts centres over the past 30 years. In a country the size of China being a local arts hub, rather than an international one, is a major achievement, well worth a large investment. Especially if the arts hub looks great in photographs.

This week’s news and trends in China:

Consumers,  Chinese Consumers

These Are the 33 New Measures China Is Taking to Boost Growth: The State Council’s plan includes tax rebates for more industries, stimulus and supply chain help.

Beijing, Shanghai Start to Reopen as Covid Cases Drop: Nationwide, the number of new Covid cases with symptoms on the mainland fell to 20 on Sunday, down from 54 a day earlier.

‘Innovation is Shifting to East’ as China Amasses Patents: Official: China approved about 700,000 patents for inventions last year, a 30% increase compared to a year earlier, and a ratio of high-valued patents nearly double that of 2017. China was 12th in the World Intellectual Property Organization’s Global Innovation Index for 2021, up from 22nd in 2017.

Chinese Consumers are Stuck at Home but Still Spending a Ton, Alibaba Says: Alibaba reported a better than expected earnings and sales for Q1, and now boasts more than 1 billion active customers for the first time. The company noted the spike in Covid has seen a shift in how and what Chinese consumers are buying. Alibaba’s user traffic and engagement have remained resilient, sales in the fashion and electronics categories declined, but demand for essential supplies such as food and personal care products increased significantly, as well as health care, activewear and outdoor products.

China’s Singles Agree: Age Matters: Men on online dating services prefer young women in both relative and absolute terms according to analysis of dating profiles in Shanghai and interviews. Discrimination faced by China’s “leftover women,” typically defined as successful professionals in their late twenties or older, is widespread. But the study found that single men past a certain age face stigmas in the dating market, too.

Online: Digital China

What a Buzzword Reveals About Chinese Tech’s Urban Bias: In some cases, internet companies seem to lean into stereotypes about rural or less educated users outside of major cities by increasing the frequency of notifications and promoting lurid or salacious content. Internet companies’ ‘xiachen’ strategies often reflect a biased view of rural and small-town internet users. They’re framed as places to be exploited — their residents backward and easily contented. Yet China’s economic development varies not just between large cities and the countryside, but also within so-called xiachen markets themselves.

‘The End of the Universe’: China’s Forgotten Celebs Resort to Selling Stuff on Livestream: Forgotten pop stars, former Olympians, and washed-up tech entrepreneurs are all cashing in on China’s booming livestreaming scene.

Premium Food & Beverage

China Releases First Technology Roadmap for Intelligent Agricultural Machinery: China released the nation’s first technology roadmap for intelligent agricultural machinery. The roadmap is based on unmanned agricultural machinery, drones and robots and proposes nine frontier and key technologies.

China Advances Further into Genetically Modified Farming: In January, China revised a set of regulations for seed-makers to seek approval for GM crops. For years, the absence of such regulations has hindered the commercialisation process. The technology has shifted in the eyes of the government into becoming an important tool for increasing agricultural production and cutting costs, and ultimately developing China’s food self sufficiency.

Chinese Find that Scotch Whiskey is a Bonny Drop: The Chinese mainland spent 123% more on Scotch last year than pre-Covid 2019, reaching sales of £198 million ($250 million). In 2020 Chinese people spent more than $2.4 billion (£1.9 billion) on spirits with international status – those that retail for $100 or more a bottle – in the domestic duty-paid channel and the new duty-free enclave of Hainan province.

Designers and Fashion

Ultimate Frisbee Soars in China — as a Fashion Sport: Ultimate Frisbee was introduced to China by American expats in the late-’90s / early-2000s, but only in the past year has the sport’s popularity exploded — thanks to influencers selling a lifestyle, many of them on Xiaohongshu (RED).

China’s Tech Giants Test the Waters in Fashion Metaverse Despite Slim Chance of Profits: China’s Big Tech companies from ByteDance to Tencent Holdings are testing the waters in the fashion metaverse even though prospects of monetisation and profitability are slim in the foreseeable future. Xiaohongshu (RED) is selling virtual fashion items in the form of non-fungible tokens (NFTs), while gaming and social media giant Tencent Holdings has undertaken collaborations with a number of fashion brands for its Peacekeeper Elite game, the localised version of PUBG Mobile.

Staying Health

Chinese Feminine Hygiene Brand Fuyanjie Stirs Controversy with “Dark and Smelly” Ad: Chinese female hygiene brand Fuyanjie has come under fire on social media for ‘insulting’ and ‘unscientific’ claims.

Autos and Cars

BYD’s Luxury Brand Denza to Release Three More Models this Year: CEO: BYD’s luxury Denza brand plans to introduce three new electric vehicle models this year as part of its bid to seize market share. Denza also released the D9, a people-mover-type vehicle with a starting price of ¥335,000 ($49,413). In addition, BYD is launching two off-road EV and PHEV models this year under another high end brand, priced between ¥800K-¥1.5m ($119,500-224,000).

 

Over the years, China has made the headlines for its cottage industry of fakes, from infant formula to condoms to fake zoo animals. This has left many with an impression that China is a nation of copycat producers. But in reality, China has been busy beavering away for years coming up with innovative ideas that change the way people live, consume and market.

In 2019, China surpassed the US for number of patents registered with patents for inventions growing 30% last year. As a whole, China’s patents aren’t considered to be the same quality as some countries, but the ratio of high-quality patents has doubled over the past five years. In 2021, the country climbed into the top-dozen countries in the global innovation rankings. Like many manufacturing countries before it, China has learnt a lot about product development from its role as the ‘world’s factory.’ This, combined with a strong focus on STEM in education, heavy investments in R&D, and a culture of risk taking and failing fast, has led to an increasing number of innovations coming from the Middle Kingdom.

On many fronts, China has been leading innovations for online consumer applications for some years, with the Facebooks, Amazons and Apples of the world replicating ideas from China.

Many of China’s innovations aren’t quite as sexy as the consumer-focused WeChat, livestreaming innovations or facial recognition-enabled smart shopping, but they address challenges that China and the wider world faces. China’s shrinking population and increasingly expensive workforce has seen an increase of robots in retail, warehouses and even robot earthworms to explore engine pipes. In the agricultural sector, Chinese innovations are set to increase following its first technology roadmap for intelligent agricultural machinery. It is also showing early signs of focusing on more GM farming as it strives for greater self sufficiency in feeding a nation wanting more calories each year.

Some of the most interesting innovations coming out of China are areas which are not traditionally associated with the country. A good example is the auto industry. Even in its home market, Chinese car brands have largely been considered inferior and unable to charge a fraction of the premium that foreign badges command. Although domestic brands are growing faster, foreign brands still account for the largest share of the market.

Whilst China is being beaten for combustion engines, it is leading for EVs. The government was quick to identify this as a significant future opportunity, and doubled down on its support and subsidies. By 2018, there were already 487 EV makers in China. Competition breeds innovation and that is what we have seen, with EV’s as cheap as $4,500 to talk of flying cars within a couple of years.

Globally, increasing environmental awareness and soaring fuel prices have seen consumer interest in EVs reach a tipping point. Although America holds the high profile Tesla brand and legacy auto giants in the US, Europe, Japan and South Korea are also investing heavily in the EV wave, backing the EV horse early has paid off for China. China produces the more than half of the world’s EVs, and dominates in supporting industries such as batteries and cell components.

Although EV innovations in China may not appear relevant to a lot of consumer categories, they are symbolic of China innovating under the radar, which will leave few brands and categories untouched.

For brands, China’s growing innovation presents both opportunities and threats. Innovative Chinese companies present partnership opportunities for foreign brands, both within China and outside. China’s innovations are also creating opportunities for new and enhanced channels for marketing, sales and data collection. The innovations are creating new behaviours, habits and subcultures, which in themselves present possibilities. Like any dynamic market, the opportunities will be more likely for those brands who stay ahead of the game in innovations and trends.

Click/tap here to see this week’s most important China market and marketing news.

Andy Lau is one of Greater China’s most celebrated and distinguished actors, singer-songwriters and film producers. The 60-year old Hong Konger has acted in more than 160 films, while maintaining a successful singing career. Hundreds of awards have borne his name – more than any other male Cantopop star.

Lau has avoided much of the recent scandals plaguing many of China’s celebs. He married in 2008, became a dad in 2012 and is a devout buddhist and vegetarian. He established a charitable foundation in 1994 to help people in need and promote a wide range of education services and has been globally-recognised for his philanthropy. In 2008, he led a fundraiser concert in Hong Kong to raise money for victims of the Sichuan earthquake that year. Just this month, he garnered over 3.6 million likes and 1 million comments after posting a video of himself cleaning his home dressed in a plain T-shirt and sweatpants. In short, Andy Lau is the type of authentic and esteemed A-lister that many brands would want endorsing their brand in China.

Andy Lau was front in centre of Audi’s campaign which launched late last week, filming him sitting in the back seat of an Audi discussing the eighth of 24 solar terms, Xiaoman. In the Chinese lunar calendar, Xiaoman marks the time when summer gradually becomes the dominant season, and the grains are about to ripen. In traditional Chinese culture, some believe that it represents the best stage of life of the solar terms, meaning one can pursue their way to perfection and fullness. Following Andy’s Xiaoman address, the viewer is introduced to the Audi and driving it to pursue fullness.

The ad had all the makings of a well-executed campaign, closely aligned with Audi’s desired positioning – except for one thing – Andy’s monologue was a blatant rip off from popular vlogger Beida Mange’s post from 2021. Beida detailed the plagiarism in a seven minute video to his 3.7 million followers on Douyin. It noted how themes were copied from his post including “an original poem,” outlining specific word-for-word plagiarism peppered throughout the Audi ad.

China’s Internet was set alight with the evidence, with half of the top-10 hot topics on Weibo on Sunday related to the scandal. The hashtag #奥迪小满广告抄袭 (#AudiXiaomanAdPlagiarism) earned 520 million views and 44,000 comments on Weibo. Audi’s apology hashtag drew another 320 million views and #AudiAndyLau clocked 150 million, in addition to the fervent spread on WeChat and Douyin.

Audi have a solid crisis management plan and was quick to remove the video and apologise for the plagiarism. Lau appeared to be a little embarrassed. In reality, it was the agency who developed the campaign, M&C Saatchi, who is largely at fault. There is an expectation that creative agencies will create original works – or at least, not blatantly rip off someone else’s originals. Audi blamed the infringement on ‘lack of supervision and lax review.’

Whilst it has never been more important for brands to do due diligence before investing in celebrity and KOL endorsers – both checking their character and whether they align with Beijing’s directives – it is much more difficult to probe individual creatives in agencies. M&C Saatchi’s director who created the Audi ad, Peng Yangjun, was highly regarded. He rose to fame in 2014 after photographing China’s “face-kini” craze, and has since directed a number of large ads, including a BMW ad last year which is now also being scrutinised for plagiarism.

Although Audi has egg on its face, most Chinese consumers won’t punish the brand too much once the dust settles. Greater China is still likely to account for over 40% of its global sales. The exposure for the Audi in the video has been significant, with more than 5 million likes of the video on Andy Lau’s Douyin account alone. Beida Mange, who claims to have made the original content, has also seen a jump in profile.

With so much creative content now on Douyin (or Tiktok in other markets), the very nature of video content makes it harder to check for copycats. Plagiarism from video platforms will be something we need to increasingly watch for. One positive from the scandal is how Chinese consumers are decreasingly tolerant of IP theft.

For brands, there are precautions you can take to decrease the likelihood of similar incidents happening. At China Skinny, when we provide creative direction, we use our own broad knowledge of China and other markets, supported by our tools and methodologies, to test for themes that may appear too similar to other content. Our consumer research to test concepts pre-launch often also captures issues and saves costly embarrassments down the line.

Contact us to learn more about reducing the risk of plagiarism and our many other research, strategy, branding and data services.

Click/tap here to see this week’s most important China market and marketing news.

This week’s news and trends in China:

Consumers,  Chinese Consumers

Audi, Ad Agency M&C Saatchi Apologise for Copyright Infringement in Video Campaign with Hong Kong’s Andy Lau: Audi blamed the infringement on a ‘lack of supervision and lax review’ of the M&C Saatchi-led campaign. M&C Saatchi said ‘weak copyright awareness’ by the company’s Audi service team led to the controversy.

With a New Australian Government and Foreign Minister Comes Fresh Hope for Australia-China Relations: An Albanese government in Canberra means an improved trajectory in Australia-China relations is a real possibility. Sure, there will be no “re-set” like we saw in the heady days of 2015. The world has changed; Australia and China certainly have. Albanese says relationship with China to remain ‘a difficult one’. New Foreign Minister Patsy Wong insisted in May last year that the differences between Australia’s interests and China’s interests, do not mean that there’s nothing we can do. Wong has singled out Singapore, not just London and Washington, for insight into Australia’s challenges. Premier Li said China stands ready to work together with Australia to review the past and look to the future and in the principle of mutual respect and win-win benefits.

Reasons to be Optimistic About China’s Recovery: Andy Rothman remains optimistic on China’s economy because the main problems are poor short-term policy choices rather than deeper, structural issues that are harder to correct.

China’s Stay-at-Home Economy is Here: It is boom times for makers of fitness equipment, pre-prepared meals, smart home devices and working from home with new office furniture and video-conferencing equipment. In 2021, the number of fitness content creators on Douyin increased by 39% year-on-year, and the number of sports and fitness videos increased by 134%. In 2015, around 160 million people were engaging in fitness activities, or 11.6% of the population; by 2021 this had increased to 300 million, or 21.5% of the population.

Photographer Luo Yang Captures Rare Glimpse of China’s ‘Brave and Free’ Youth: Neon hair, heavy black lipstick, friends gathered around a table in leopard print and lace. Luo Yang’s portraits of young people offer a rare glimpse into modern culture in China. “They are reclaiming their own narrative … there’s a dose of sexuality and liberation thrown in and it’s wonderful to see,” says Luo. The award-winning photographer has had solo shows in Paris, Berlin, Austria, Hong Kong and Bangkok, and will showcase his photos in Melbourne this month.

China Loyalty Programs Market Intelligence Report 2022: Chinese Consumers are Comfortable Sharing their Data Compared to Consumers in Other Markets: China’s loyalty programs market grew an average of 13.7% a year between 2017-2021 to $15.7 billion. It is expected to grow 13.0% a year over the next four years. To promote a more sustainable lifestyle and attract consumers who are driven by eco-friendly brands, quick-service restaurants are launching green rewards programs that incentivise consumer behaviours.

Online: Digital China

Elon Musk Praises WeChat Model as He Discusses Plans for Twitter: Elon Musk praised WeChat as “really an excellent app” and labelled it “a good model” during the All-In Summit 2022 on Tuesday, as he discussed his stalled takeover of Twitter. “We don’t have anything like that,” said Musk, as he complimented the Tencent super app’s offering of services like Twitter, PayPal and more “all rolled into one.”

Premium Food & Beverage

Iconic South Australian Wine Brand Penfolds to Launch ‘Made in China’ Vintage in Effort to Skirt Chinese Tariffs: The wine will be fermented and bottled in China with grapes from Ningxia and Yunnan. It is hoped the move is “a way to keep Australia’s presence in the market.” China is tipped to become the world’s second-largest wine market by next year, with an estimated 52 million regular wine drinkers, with Australian wine ‘still in demand.’

Baijiu Ice Cream Chain by Kweichow Moutai Receives Chilly Reception: The Chinese liquor giant launched its own ice cream parlour called iMoutai at its flagship store in the Maotai International Hotel, Maotai, in Southwest China’s Guizhou province. Baijiu is a key ingredient in iMoutai’s ice cream, which costs ¥39 ($5.84) per scoop. The brand plans to open more ice cream parlours across China, although it hasn’t been warmly received by everyone.

COVID Can’t Seem to Touch China’s Beer Industry: China’s beer industry seems to be taking COVID in its stride, and producers are investing heavily in high-end products that are increasingly in demand in China. Domestic beer companies reported total profit growth of 38% in 2021, exceeding even the 33% growth rate of the liquor industry as a whole.

Beyond Meat Launches Plant-Based Lunch Boxes Into 2,300 Lawson Stores in China: More than 2,300 Lawson convenience stores in Shanghai and Zhejiang, Jiangsu, and Anhui provinces now carry lunch boxes by Beyond Meat. Prices range from ¥14.9 ($2.24) to ¥17.9 ($2.69) for noodles and rice boxes. Plant based chicken brand Haofood also recently announced a partnership with Lawson to sell their all-new satay nugget on a stick as the chain doubles down on meat-alternatives.

Overseas Chinese Tourists

Hong Kong Considers ‘Closed Loop’ for Free China Travel, Report Says: Hong Kong plans to propose a closed-loop system to facilitate quarantine-free business travel between the city and mainland China.

Airbnb is Closing its Domestic Business in China, Sources Say: Airbnb formally launched its mainland China business in 2016 and has faced mounting competition from domestic players. Stays in China have accounted for approximately 1% of revenue for the last few years. All mainland Chinese listings — homes and experiences — will be taken down by this summer, but Airbnb will continue to maintain an office in the country to focus on outbound travel.

Premium and Luxury

Gucci, Adidas’s Leaky $1,644 Parasol Faces Backlash in China: Gucci and sportswear firm Adidas are grabbing headlines in China for selling an ¥11,100 umbrella that doesn’t even stop rain. The disclaimer that the parasol doesn’t block rain, but instead should be used as shade from the sun and for fashion purposes doesn’t appear to have done down too well, with a related hashtag attracting more than 140 million views on Weibo.

This week’s news and trends in China:

Consumers,  Chinese Consumers

As Shanghai Nears End of Lockdown, Covid Angst Spreads in China: Shanghai aims to ease its lockdown restrictions by May 20, helped by yesterday’s report of no community spread. The Shanghai Government has announced that life is expected to be back to normal mid-late June. Beijing is still on knife-edge in its gruelling battle against omicron. Whereas previously Chinese citizens could favourably compare their lives to friends and family who lived overseas, now their belief in the superiority of the Communist Party’s approach has been shaken.

China’s Consumer Prices Hit a Six-Month High as Covid Prompts Locals to Stock Up on Food: China’s consumer price index rose by 2.1% in April from a year ago, the fastest rise since November. It still isn’t a scratch on the 8.3% CPI in the US and high rates in other countries. Fuel for transportation rose 28%, fresh veges were up 24% and fruit climbed 14%, sending prices higher, whereas the 33% plunge in pork prices helped moderate inflation. Excluding food and energy prices, the consumer price index rose by a muted 0.9% in April from a year ago.

COVID-Induced ‘New Economy’: Advent of Outdoor Camping, Ready-to-Cook Meals, Nucleic Acid Testing: New business opportunities have resulted from the pandemic including outdoor camping, ready-to-eat meals, smart logistics, VR/AR devices, nucleic acid tests-related industries to fight the virus, and other sectors.

JD Rolls Out Online-to-Offline Department Store Business with Plans for Physical Outlets: JD has launched a new department store channel by integrating several existing businesses from its fashion and lifestyle sections, including clothing, cosmetics, and housewares. In addition to online channels, the company will build an offline presence for the service with plans to open themed bricks-and-mortar stores in major cities. The first in Beijing, Chengdu, and Xi’an will open before June 18 this year.

Overseas Chinese Tourists

Applying for a Chinese Passport? You May Need a Fake Job Offer China has stopped issuing passports for “non-essential reasons” as part of its “Covid-zero” policy. The result: a thriving market for fake foreign documents. In the first half of 2021, China only issued 335,000 passports — 2% of the total for the same period in 2019.

Online: Digital China

TikTok Parent Aims to Double Ecommerce Volume on China App to $240 Billion: ByteDance this year aims to double the amount of shopping that happens on Douyin in China to nearly $240 billion. Now ByteDance is eyeing a global e-commerce expansion.

China Restricts Minors from Live Streaming, Citing Need to Improve their ‘Physical and Mental Health’: Users aged between 16 and 18 must obtain permission from their parents or guardians before doing live-streams. Internet platforms will need to strictly implement the real-name registration requirement, and prohibit offering minors’ tipping services such as cash top-up, gift purchase, and online payment. China’s tighter rules on the live-streaming sector appear to be following a similar path as that for video games.

Operating Income of China’s Courier Sector Exceeds 1 Trillion Yuan in 2021: A total of 108.3 billion parcels were handled by the country’s express delivery companies, up 29.9% year on year – almost 80 parcels for every man, woman and child in China. The operating income of the industry grew 17.5% to ¥1.03 trillion ($147.3 billion).

Premium Food & Beverage

Meeting China’s Demand for Meat and Dairy: The Ministry of Agriculture and Rural Affairs’ Five-Year Plan released in December 2021, set out China’s new self-sufficiency targets. This includes full self-sufficiency for poultry and eggs, 95% self-sufficiency for pork, 85% for beef and mutton and 70% for dairy. China’s current self-sufficiency levels for meats and dairy are already high, but rising incomes and rapid urbanisation means that China is consuming more animal proteins. Maintaining the current level of self-sufficiency will require greater domestic production. China’s meat output target for 2025 is 89 million tonnes, about 15% higher than 2020.

Chinese Drinkers Popped Record Champagne in 2021, and Here’s Why: Chinese consumers are increasingly open to white wines, including Champagne, which used to be shunned for its razor sharp acidity and cold serving temperature. Champagne exports to China in 2021 grew 15% in volume and 70% in value over pre-Covid 2019 to $69 million. China’s relatively uninterrupted hospitality scene largely attributed to the growth as it could still flow in restaurants and venues, in addition to consumers being more open to drinking at home. Chinese consumers are also more open to training and education, particularly online. By categories, vintage Champagne and rosé have seen the best growth in China.

How Innovations in Channels, Scenarios are Driving China’s Alcopop Market: As the alcoholic beverage market expands its reach to Gen-Zers and women, channels play a bigger role for domestic brands. Creating scenarios through self-owned offline stores or unconventional channels to attract consumers seems to be the trend in the market.

Would You Like Coffee with Your Sneakers? Chinese Sports Brand Li-Ning Registers Its ‘Ning Coffee’ Brand: An unexpected competitor is joining China’s coffee market. With over 7,000 stores in the country, Li-Ning has the potential to become the biggest athletic coffee chain yet. The brand will provide in-store coffee services to enhance customers’ shopping experiences.

Overall Beauty

A Closer Look At China’s Hair Care Market Boom: The demand for high-end shampoos – above ¥120 ($18.20), conditioners, leave-in hair oils or serums and hair masks is growing faster than its mid-price market counterpart. Volume, oil control, anti-dandruff, and anti-itch products are strong, while silicone-free, ginger, fluffy, and coconut fragrance are new trending keywords. The market for high-end conditioners is growing twice as fast when compared to mass-market brands. 66% of consumers in a survey said they don’t like to keep using the same hair care products.

Chinese sport Fitness

Furious Chinese Netizens Are Boycotting Lululemon: Lululemon was fined ¥81,000 ($12,000) for selling poorly made products. Following this, the hashtags #Lululemonsellspoorlyqualifiedproducts and #Lululemonapologies trended on the platform’s Hot Search List garnering a combined 200 million views. The company has grown 70% over the past two years in China.

Crazy Art

$800,000 for Skateboards: China’s Gen-Z Collectors Upend the Art Market: Chinese collectors under 40 are reshaping the art market by pushing up prices for sneakers, cartoon-like art, dinosaur artefacts, luxury watches and vintage cigars. Sotheby’s says it’s selling art to at least 4,000 Asian collectors under the age of 40 now, twice as many as three years ago. During Sotheby’s Hong Kong spring sales, which sold $496 million in art, Asian people under 30 accounted for a third of the bids. Overall art sales last year in China grew 35% to $13.4 billion.

The changes in the Chinese consumer market over the past two decades have been nothing short of astonishing. Between 2000 and 2020, the average disposable incomes of urban Chinese grew seven-fold from around ¥6.3K to almost ¥44K. Even more of note is those consumers’ collective net worth, which skyrocketed from $7 trillion to $120 trillion.

This has supported the emergence of a massive consumer class in China, fuelling everything from car drivers to milk drinkers. Yet the most visible transformation has been the rise of Chinese outbound tourists. In 2000, Chinese travellers made around 10 million trips outside of the mainland, mostly to Hong Kong. By 2019, they made 155 million trips, with less than a third to Hong Kong.

Rising wealth undoubtedly was the largest contributor to the increase in overseas travel, but friendlier visa policies and accessibility was also a significant driver, coupled with more and easier flights. Between 2015 and 2018, the number of direct city air connections between Thailand and China grew from 69 to 148, for example. There were also the social drivers such as the status from travelling overseas, inspired by social media posts from friends, family and colleagues abroad. Chinese consumers’ curious natures and desire for new experiences were whet by the ability to increasingly travel.

That is why many Chinese will be pretty disappointed by Beijing’s announcement last week that it would “strictly limit” overseas travel for “non-essential” reasons. It is the latest initiative to support China’s unwavering zero-covid policy. Some consumers defended the de facto travel ban, saying it was reducing the risk of covid infections. Others have supported the decision to keep Chinese safe, protecting them from risks of travelling to Europe during the Russian-Ukrainian war, or to America in light of the shootings in Buffalo. For others, the news couldn’t have come at a worse time, when they are already questioning China’s increasingly punitive lockdowns, driving a spike in those considering migration.

One of the key drivers of Chinese nationalism since the pandemic began, aside from the inability to open minds through travel, has been the way that Beijing has handled Covid. People in China have lived mostly-normal lives since the short and sharp lockdowns in early 2020, and watched as other countries like the US and UK imploded under the weight of the pandemic. That helped boost national pride and question the credibility of other countries. Chinese consumers – particularly those in Shanghai – seeing friends, families and strangers overseas getting back to normal lives and travel, are now questioning if China’s approach really is the best approach.

As a result, the travel ban could go one of two ways. It could further increase nationalism through the resulting isolation. But there is a good chance that we may see a reverse of nationalism from some camps as consumers become fed up with stringent dynamic zero-Covid policies.

Other countries may start to look increasingly aspirational again and, by proxy, brands and products from those lands. The allure of foreign brands may gain appeal as they are considered more exclusive, we may even see the renaissance of the daigou trade as a result, when logistics allow it.

The measures may also have an impact of increasing foreign student numbers. Studying abroad remains a way Chinese can get passports and tickets to travel, and could be seen as a pathway to break the cabin fever and explore the world again.

Chinese consumers are generally quite stoic and adapt to new Beijing policies and regulation. But the inability to travel for the foreseeable future is likely to test some tolerance. They have tasted the forbidden fruit of overseas travel, and taking that away for longer, while most of the world enjoys it again, may lead to some unintended consequences. We will be monitoring closely at the Skinny.

Click/tap here to see this week’s most important China market and marketing news.

This week’s news and trends in China:

Consumers,  Chinese Consumers

Chinese Consumers More Optimistic About Future – Ernst & Young Report: Chinese consumers are more likely to be optimistic about the future, in sharp contrast to the declining global consumer confidence. 60% of Chinese consumers believed their personal finances would improve in the coming year, higher than the global average of 48%.

China Set to Power World Economic Growth Against Headwinds: In the first quarter of 2022, foreign direct investment into the Chinese mainland expanded 25.6% year on year to ¥379.87 billion ($57.5 billion).

China’s Listed Companies Post over 19% Profit Rise in 2021: China’s 4,669 listed companies collectively posted an increase of 19.8% rise in revenues last year. About 80% of listed companies grew their revenues last year, the third consecutive year of revenue increases for 40% of them.

Local Governments Again Break Out the Coupons to Boost Consumer Spending: At least 12 provincial-level regions said they’d distribute coupons. Guangdong province announced they’d hand out ¥1.1 billion ($166.4 million) worth of coupons during the last three days of the five-day May Day holiday. Peking University analysis into the voucher schemes in 2020 found the number of transactions on WeChat in regions that issued coupons was 25% higher than those that didn’t.

Eileen Gu Angers Chinese Fans with ‘Unpatriotic’ Farewell Message and Video Showing Her Flying Private: It wasn’t long ago that the “Snow Princess” could do no wrong in China, but a parting “Thank you China” message on Weibo on April 27 didn’t go down so well with many Chinese online. Nevertheless, she still set Chinese social media alight after she attended last week’s notoriously exclusive Met Gala in a figure-hugging Louis Vuitton mini-dress, with #EileenGuMetGalaRedCarpet viewed over 250 million times.

Online: Digital China

Fake Friends Shilling Lipstick: Welcome to WeChat’s Hottest Sales Trend: Thousands of entrepreneurs in China are using WeChat to capitalise on a marketing trend that has taken the country’s e-commerce industry by storm: private traffic. Traditional open ecommerce marketplaces like Taobao and Tmall are arguably impersonal and dull, keeping brands removed from a true connection with shoppers. Brands use private traffic to turn occasional shoppers into dedicated consumers by interacting with them in the same way they might text family and friends. But the intimacy is a veneer — enabled by a suite of technologies that help companies collect data on consumers, automate interactions with them, and, in some cases, create altogether synthetic influencers. Sales via private traffic is forecast to top ¥3 trillion ($454 billion) this year.

Chinese Social Media to Display User Locations Based on IP Address, Including Platforms from ByteDance and Zhihu: Weibo, Douyin, Kuaishou, Xiaohongshu, Jinri Toutiao and Zhihu are displaying locations of users based on their IP address. The measure, which is not mandated by law, is aimed to “prevent netizens from pretending to be locals and spreading rumours.” It is also valuable for us at China Skinny, allowing further geographic segmenting for our social listening services.

Premium Food & Beverage

Can Yili be China’s First Global Milk Industry Champion?: China has a domestic milk industry champion that rose steadily over the last few decades and is now ready to take on the world. In 2020, it made it to the top-5 dairy companies globally and aims to enter the top-3 ranks. Yili already sells products in 60 countries.

Understanding the Plant-Based Market in China: Consumption Trends and Customer Personas: Short term activation opportunities include increasing product trials, using novelty campaigns to engage social foodies, and attracting ‘Nutrition Optimisers’ with macro-nutritional advantages. Retention and broader adoption in the mid-term requires genuine competitiveness with animal products such as price, taste and mouthfeel. Mass adoption in the long-term will likely require shifting entrenched beliefs of plant based meat, meat consumption and plant-based nutrition.

Staying Health

Lockdown Stockpiling May Edge China’s Supplements Market Into Global Top Spot: Chinese consumers are stockpiling dietary supplements again against the backdrop of new coronavirus lockdowns in parts of the country. In 2021, China’s supplements market was estimated to be about ¥271 billion ($34 billion), about two-thirds the size of the US. The China market is unsaturated, with per capita spending at just $30, versus $177 in the US, $151 in Australia and $146 in Japan.

Schooling and Education

China’s Prestigious Universities Exit International University Rankings: Beijing’s Renmin University has withdrawn from the international rankings. The university notes that China’s knowledge system has been developed for thousands of years, and is the oldest, richest and most profound knowledge system in the world. The university hopes to “develop Chinese cultural traditions in an innovative way, create China’s independent knowledge system, and safeguard China’s education and cultural independence.” The university was ranked outside the top-500 globally.

Overseas Chinese Tourists

Tour Guides Turn To ‘Cloud Tourism’ as Omicron Empties Scenic Spots: Domestic tourism over the lucrative Labour Day break took a hit as China battled with the latest Covid-19 wave. Tourism spending declined 43% over the holiday, with domestic tourist trips falling from 230 million to 160 million. Tour guides have been forced to adapt, some switching careers and others learning new ways to do their job, such as taking their tours online. Cinema ticked sales fell 81% from 2021’s holiday.

As Long-Distance Travel Plummets, China Vacations Close to Home: Ahead of the Labour Day holiday, online travel platforms forecast that local trips would be the dominant form of travel, especially trips to the rural outskirts of the same city. Trip.com said that rural hotel bookings rose by 560% compared with the three-day Qingming Festival in early April, and 88% of the orders were for stays of one to two days. Qunar’s ticket sales for parks that allow camping increased by over 50% compared with the same period last year. Many people attribute Xiaohongshu (RED) to the rise of  camping and “glamping.”

Chinese sport Sport

China Makes Real Difference in Sport Over Past Decade: By the end of 2021, sports venues in China totalled 3.41 billion square meters in area, with a per capita area of 2.41 square meters. In 2011, it was just 1.05 square meters per person. Trips related to ice and snow tourism soared from 170 million in the 2016-17 tourism season to 254 million in the 2020-21 period, and are forecast to reach 305 million during the 2021-22 season.

Premium and Luxury

Luxury Brands Navigate Shanghai’s Lockdown to Keep VIPs Pampered : For the more wealthy, banks and high-end hotels have joined luxury brands in sending out goodies – a privilege not unnoticed on social media. Besides gifts, some brands have organised online classes. La Mer has taught DIY facial massages while Dior has offered seven-day passes for virtual classes at a premium yoga studio. Prada has hosted a virtual cultural club, inviting writers, directors and musicians to recommend books, movies and albums. As much as 12% of China’s offline luxury retail is in Shanghai.

Nothing beats a good lockdown to dull the spirits of Chinese consumers. As Shanghai’s severe lockdown has passed 50 days for some residents, and has recently been re-tightened, a large number continue to struggle to order the staples, let alone purchase discretionary goods and services. Although consumer spending has been hardest hit in Shanghai, consumers in other cities, such as Beijing, have pulled back on shopping due to containment measures and the uncertainties ahead. Starbucks has said that 72% of the 225 Chinese cities that it operates experienced Omicron outbreaks last quarter.

With the resurfacing of the Cultural Revolution-era catchphrase “persistence is victory,” it is clear that Beijing won’t be straying from its “dynamic zero-Covid” policy any time soon. A recent Fudan University study forecast that 1.6 million people would die if China abandoned its strategy, with the 38.5% of over-60s without a third vaccination particularly vulnerable. Although many Chinese consumers still believe the policy is the best approach, they know that there may be more lockdowns and many more mandatory Covid tests.

Although consumers in China are rushing to buy long life food supplies, dietary supplements, bigger freezers and kitchen appliances, there are many signals that consumer confidence and spending has slipped as the pandemic again impacts their lives. Confidence has also been hit as many Shanghai manufacturers and nationally-significant logistics services have been impacted, affecting both products and crucial supply chain components.  These have come off the back of a slowing economy from measures to curb the all-crucial real estate sector, and crackdowns on tech, education and other areas. Together, this has led external forecasters to downgrade China’s GDP growth projections to around 4%.

But don’t write-off the China market just yet. There isn’t a government with more levers it can pull to drive economic growth. We’ve seen it pull rabbits out of the hat during the GFC and the early days of Covid, when China was one of the few economies that didn’t contract. This is likely to be the its toughest battle yet, but Beijing will do everything it to maintain growth to ensure the all-important stability and CCP credibility remain.

Expect to see a spend up on infrastructure as we saw during the GFC. Planned investment this year amounts to at least ¥14.8 trillion ($2.3 trillion), with more than half of the projects directly supporting the manufacturing and service industries. Investment already increased 8.5% in the first quarter of this year from 2021 and should grow further still. More tax and fee cuts for businesses are also on the cards.

Beyond investment and business, significant focus will be on mobilising the billion-plus army of consumers. For some context, consumption contributed 69% of China’s GDP growth last quarter. Chinese consumers are intrinsically among the most optimistic about the future globally. Although many of the infrastructure and business policies will indirectly support consumption, there will be further consumer-specific policies to keep spending ticking along.

We have already seen the first of the vouchers over the May holiday, but there are likely to be more structural changes. These could include stimulus payments and living allowances for unemployed migrant workers. The central bank has pledged to support housing demand and step up support for housing leases. Beijing is also said to be ending the regulatory storm over Big Tech – one of the big drivers of consumption – to give the sector bigger role in boosting the economy. Beijing has also effectively guaranteed spending on science and technology, modern agriculture, health, education and other key areas related to people’s livelihoods and regional development, indicating that these areas will be a target for consumption growth.

Although cities like Shanghai and Beijing account for a fraction of China’s total population, this quarter is likely to be slow across China for many brands. Nevertheless, many consumers outside of locked-down cities will continue to make discretionary purchases. China is a long game, and local consumers don’t take lightly to ‘fair weather’ brands, so brands would be wise to continue to connect with them as luxury brands have done. This will position them well to take advantage of the bump in demand when things return to normal, helped by Beijing’s initiatives. Contact China Skinny to discuss the best strategies going forward.

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It was March 2021 when the EU-China agreement protecting geographical indications (GIs) came into force. This aimed to recognise and protect around 200 distinct agri-food producing regions. It included well known specialties such as Feta, Prosciutto di Parma, Irish whiskey, Münchener Bier and Ouzo from Europe and Pixian Bean Paste, Anji White Tea, Panjin rice and Anqiu Ginger from China.

A year on, we were interested to see that one of the eight food staple trends in a recently-released report from JD Super, was the rise in agricultural food with GI. Over the past year, Chinese consumers have become increasingly interested in food products possessing qualities or a reputation based on where they are produced.

JD Super noted that demand for Wuchang rice grew 105% in 2021. Similarly Ningxia wolfberries were up 78%, Gutian mushrooms rose 60% and Shanxi aged vinegar grew 56%. Although the examples cited were for food produced in Chinese regions, they represent wider recognition from Chinese consumers seeking out a food or beverage’s qualities based on the specific region that they are grown in.

The country or continent of origin has long been a key driver for Chinese consumers buying food and beverages, but the increased interest in regional provenance is symbolic of the further sophistication in Chinese consumers’ decisions when making purchases.

The GI trend presents an opportunity for food producers who come from areas where there is a point of difference in their fare. China imports food from more than 180 countries, with over 25 of them exporting edibles worth over a billion dollars a year. This, coupled with increasingly savvy domestic food marketers, makes it more difficult to stand out in a very crowded market. A unique angle for food exporters such as a regional claim allows them to play to China’s love of novel and differentiated. It appeals to both their individual curiosity, and their ability to build status by sharing online.

Chinese drinkers are increasingly exploring different regions for foreign wine and, as a nation of foodies, it is inevitable that regional variations will continue to become more important in other imported food and beverage choices.

For smaller food producers and brands, banding together with similar producers can provide the scale needed to cut through the clutter and engage with distributors, research and other services at a meaningful level. It also helps them add value to their products and create more iconic offerings. Even smaller regions which don’t have the scale of Feta cheese or Parma ham from either a marketing or supply angle, can focus on a specific city or region in China that shows a strong propensity to their offering.

Selling a regional food and beverage story is much bigger than the food itself, and should be considered in unison with tourism organisations to enrich the appeal, as they will stand to benefit from visitors once China opens up again. Food and beverage has long been one of the primary decisions for Chinese travellers choosing a holiday destination.

For food producing regions who weren’t part of last year’s EU-China agreement, the first step in promoting your region is to protect the GI. The Champagne journey over the past three decades, should provide a roadmap for this. Once that is covered, the fun stuff starts, such as defining the target audience and geographies and localising your unique proposition for the China market. China Skinny can work with you to determine that and the best steps forward, please contact us to learn more.

There’ll be no Skinny newsletter next week due to the Labour Day May Holiday. Those of us in Shanghai and some other cities will be spending it a little differently than usual. We’ll be back after the break.

Click/tap here to see this week’s most important China market and marketing news.