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Two years ago on this very week before the Chinese New Year, we started to hear reports of what looked to be a serious virus sweeping through the city of Wuhan and beyond. That put a dampener on CNY 2020, but China was quick to return to relative normalcy within months. Yet recent, small outbreaks of Delta and Omicron, followed by ultra-strict policies such as keeping people in malls and office buildings for days while they await test results is spooking some consumers.

China has always taken a hard line on Covid, but it is particularly vigilant with the Winter Olympics a little over a week away in Beijing. The arrival of the highly infectious strain will scupper countless plans during China’s biggest festival, although many Chinese appear dogged in their ambitions to get home this year.

Covid is likely to have changed the world as we know it forever. Even when it finally fades, it is unlikely that life, business, supply chains and logistics will look like they did in the free-swinging decades that proceeded 2020. Although rising nationalism should temper when people can start to travel and study abroad more freely again, the world is likely to operate differently due to the larger wedge between countries and their people, not seen on such a scale since the 80s. Anyone who grew up in the 80s in the West may remember the communist Russians being the villains in what felt like every second Hollywood movie. This fuelled a lot of nationalist sentiment, particularly in America.

What has changed now is that Hollywood is much more financially dependent on countries which have different views and values to America. Rather than villainising them, it seeks to woo those audiences. Nevertheless, there are some interesting trajectories which may change that. 39% of imported films in China last year were American, down from 47% in 2019. Last year, American films collectively accounted for 12.5% of China box office, versus 29% in 2019 and close to half a few years earlier. If China continues to become less important to Hollywood, we may see the bad guys change. If things improve for Hollywood studios, more of their movies in China are likely to curb nationalism on both sides of the divide and help keep things more peaceful.

There is no question that Chinese self-confidence, China chic and nationalism are on the rise in China. This has been accelerated by Covid and how China has managed to contain it, where other countries haven’t. The lack of exposure to foreign travel, study, media and people exchanges hasn’t helped either. Yet for many foreign brands, China continues to be one of their largest and fastest growing markets globally – particularly those who have tailored their marketing strategies to the local market.

We noted last month how much Chinese embraced western-themed Christmas markets and celebrations. Similarly, the proudly-Californian iPhone has outsold every domestic brand for six weeks, leading China’s smartphone market for the first time since 2015 in what was one of the earliest categories representing the rise of China brands. Our Skincare and Beauty Trackers illustrate how foreign brands continue to dominate the premium cosmetics market.

Arguably the most interesting news related to nationalism revolved around the beautiful camellia flower. Sun Laichun, founder of red camellia-based cosmetics brand Lin Qingxuan, went on a nationalistic rant, accusing Chanel cosmetics of stealing several key employees. He also claimed that the brand didn’t have the heritage to use red camellia flowers for its The Czar skincare products. The flowers originally grew in China and elsewhere in Asia, not France. Although Sun garnered a lot of airtime for his brand, the vast majority of responses on social media were level-headed and supported Chanel.

Going into the Year of the Tiger, there will continue to be uncertainties, but China continues to look positive for well-marketed foreign brands. On that note, we wish you a Happy Chinese New Year and start to the Beijing Winter Olympics.

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

Chanel vs Irrational Nationalism in China: It’s not an uncommon technique for local brands to raise their profile, but China’s online consumers commented overwhelmingly in favour of the foreign brand this time.

China Tops Forecasts with 8.1% Growth in 2021 but Headwinds Loom: China’s economy rebounded in 2021 with its best growth in a decade, helped by robust exports, but there are signs that momentum is slowing on weakening consumption and a property downturn, pointing to the need for more policy support.

Twice as Many Chinese to Head Home for Lunar New Year Despite Call to ‘Stay Put,’ Study Finds: Despite Beijing again pushing for people to remain in the places where they work over the upcoming Chinese New Year holiday to stem further covid outbreaks, the ‘stay put’ request is expected to have less influence this year. Around twice as many people are likely to head home this Spring Festival according to the country’s top investment bank China International Capital Corp. Figures from the Ministry of Transport expect 1.78 billion trips – accounting for 72% of people – up from 840 million a year ago. A Chinese mayor has been derided by state media and on social media after a detention threat for Lunar New Year returnees.

China Widens Testing Blitz After Mail Suspected for Covid: Residents who received overseas mail between Jan 16-19 were told to take a coronavirus test within three days. Beijing residents have been asked to minimize purchases from high-risk countries and disinfect parcels thoroughly when unpacking. This is in light of Chinese officials saying that there is no evidence that you can catch covid from non-frozen goods from overseas. Beijing now requires workers in the imported cold chain food industry to hold Covid-19 nucleic acid negative test certificates within three days, instead of the previous seven days. In Beijing, consumers buying cold and flu drugs will also be tested for Covid.

China’s Foreign Firms Are Running Out of a Key Resource: Foreigners: Nearly two years of strict border controls have led to a growing shortage of foreign talent in China. As many as 100,000 foreigners may be waiting for permission to return to Shanghai alone, local media outlet SmartShanghai estimates. In a recent survey, British firms based in China named the country’s tight border controls as their number one concern. Representatives from other international chambers of commerce in China say their members share similar views. In December, a senior official in Shanghai told a forum that the city “is longing for global professionals more than ever.”

The Hunt for Beijing’s Wild Leopard Cats: Leopard cats live under the shadows of the alpine skiing slopes of the Winter Olympics. Beijing is one of the few major capital cities with a species of wild cat – which experts say shows the city is home to a diverse range of wildlife – yet little is known about how these animals live in a metropolis of over 20 million people.

Online: Digital China

Shopify, JD.com Pair Up in China as Ecommerce Competition Intensifies: Shopify merchants will be able to sell on JD’s cross-border platform JD Worldwide and open up access to its 550 million active customers in China. Shopify merchants in the US can start selling their products in China within three to four weeks.

Apple’s iPhone 13 Tops China’s Smartphone Sales for Six Consecutive Weeks: The new camera, 5G feature and lower price help the world’s most valuable company gain the top spot for the first time since December 2015. In recent years, Apple has usually sat around the No. 4 or No. 5 position in China. Chinese smartphone brands have launched a counter-attack to Apple’s surprise surge with gaming-optimised devices, foldable screens, special selfie cameras and more.

Apple Shares ‘Shot on iPhone 13 Pro’ Film Celebrating Chinese New Year: This year’s Lunar New Year sees another ‘Shot on iPhone’ movie with the story of a father, a son and a forgotten village with an out-of-this-world dream.

Premium Food & Beverage

Coke and Pepsi Copy Genki Forest’s Sugar-Free Beverages: One of the most innovative consumer brands to emerge in China in recent years, Genki Forest, has created a market for pricey sugar-free drinks. Now major global and Chinese players are piling in to compete.

Luckin Coffee May Return to the US Stock Market After Being Delisted Following a $300 Million Accounting Fraud: Luckin’s third-quarter revenue jumped 106% to $370 million, though the strong growth can likely be attributed to a decline in year-ago sales during the first year of the COVID-19 pandemic. Luckin operates 5,671 stores, about 500 more stores than Starbucks operates in China.

Video & Entertainment

Foreign Titles Squeezed in China Film Market Just 39% of the 67 imported films allowed in China last year were American, down from 46% in 2020 and 47% in 2019. Less than a third (28%) of the foreign films screened last year were 2021 titles. Most were older, and a tenth of them were archive titles that dated from before 2010. Last year, approvals were granted later than ever, often just days in advance, giving Hollywood studios little time to create effective marketing campaigns in China, compared with Chinese films which are given months to prepare and build awareness.

Cute, Fluffy Pets

China’s Pet Market Grew 21% in 2021 Amid Young Adults’ Animal Craze: China’s pet market grew 21% to ¥249 billion ($39.2 billion) in 2021 from 2020. Urban households had nearly 58.1 million cats and almost 54.3 million dogs as of last year. The average dog owner spent ¥2,634 ($415), up 17% on 2020, with cat owners spending ¥1,826 ($288), similar to 2020. 46% of all pet owners in China were born after 1990. More than a fifth of the total were born after 1995.

Premium and Luxury

In China, Spending on Luxury Goods Increased by $20 Billion Last Year: Spending on luxury goods in China has nearly doubled since the start of the pandemic, growing 36% last year to ¥471 million ($74.3 billion) according to Bain. Online luxury sales grew 56%. Leather goods were the faster growing category at 60%.

Eyeing Chinese Market, Global Luxury Brands Embrace Year of the Tiger: At the duty-free stores in south China’s island province of Hainan, tiger elements and red can be seen almost everywhere. 81 million tourists visited Hainan last year, up 25.5% from 2020. Limited edition luxury Lunar New Year items are a big hit, covering cosmetics, clothing, bags, watches, and wine, among others.

Earlier this month, Chanel launched its new red camellia skincare products as part of its Czar line. The campaign, endorsed by celebrities such as Wang Yibo, Taiwan’s Zhang Junning and China’s “first bonafide supermodel” Liu Wen, received over 100 million video views.

Yet not long after the launch, Sun Laichun, founder of red camellia-derived domestic skincare brand Lin Qingxuan, went on a nationalistic rant online accusing Chanel of stealing several key employees. He also slammed Chanel for not having the heritage to sell red camellias given 90% of the flower’s species originated from China, and the rest from Southeast Asia and South Korea.

The related hashtag #Founder of Lin Qingxuan accused Chanel of unfair competition# generated 98 million views and close to 4,000 comments. Although nationalism is increasing in China, online consumers’ responses to Sun’s post illustrates that many Chinese consumers continue to be level-headed and objective when discussing nationalist issues. Here is a summary of some of the most popular comments:

1. Companies like Lin Qingxuan should review why can’t they retain their employees;
2. Chanel have produced camellia flowers cosmetics for decades, and there are other brands producing related products.
3. It’s understandable why the brand’s founder is so anxious, given such a big competitor is much better at marketing with similar products
4. Even though I support domestic brands, I would also think of working at Chanel.

Another top comment was that many Chinese hadn’t heard of the brand before, but clearly have now. It is a relatively common tactic that domestic brands use to get some cheap airtime, much like we saw with Luckin Coffee and their headline-grabbing lawsuit about Starbucks’ monopoly in 2018.

Domestic brands less squeaky clean again?

Although it wasn’t long ago when domestic brands were often slammed on social media for poor quality control or dubious marketing ploys, nationalistic rants have become more frequent against foreign brands over the last few years. But in recent months we’ve seen some uncharacteristic nationalistic rants towards local brands, such as the snack food darling Three Squirrels, who was recently called out for a 2019 ad which was criticised for having models with eyes that looked “too slanted.”

The recent high profile brandishing of livestream queen Viya for tax evasion, who was meant to represent honesty and fairness, will have many Chinese again questioning some of their most trusted local brands and figures.

Based on the responses to the Lin Qingxuan post, the Three Squirrels slamming and Viya conviction appear to have reminded some consumers of the nationalist trolls online and that domestic brands and personalities can be less trustworthy than the foreign brands who are so easily slammed.

Chanel and camellias in France. 

Chanel is an example of a foreign brand who has built strong equity in China over the years, which would have contributed to many loyal followers standing up for it. One of its most notable initiatives was that it was the first major luxury brand to ‘standardise’ prices globally, which saw its prices in China fall much closer inline to those in Europe in early 2015. While gaffes such as Dolce & Gabbana’s aren’t easily forgotten in China, so are positive moves such as Chanel’s.

Regarding the claim that Chanel can’t theme their cosmetics with camellias – thankfully that didn’t get support. Camellias may have originated in China and Asia, but they have been popular in the Paris area since the early-1800s. It is an interesting viewpoint, but if we start opening that can of worms, what would we do with apples for example, which also originated in China and Asia. Should Ethiopia stake claim to all coffee?

We’re thankful that common sense prevailed and Chanel came out on top in this incident. Nevertheless, brands need to be as vigilant as ever to ensure that they are culturally sensitive and thoughtful with everything they do in China, as even a slight misstep can have dire consequences.

 

 

Every brand wants their campaigns to be runaway successes in China. Yet, like many marketing peculiarities in China, you need to be careful that they aren’t too successful as KFC recently discovered.

Astute Skinny readers will be familiar with the rise of China’s Box Economy since 2018-2019 anchored by brands such as Chinese toy maker Pop Mart. This month’s KFC’s promotion began as an innocent blind box promotion to celebrate 35 years since opening its first Chinese restaurant. A ¥99 ($16) family set meal came with a box randomly containing one of six Dimoo figures from Pop Mart. A seventh, hidden character, could only be unlocked after the other six were collected, adding impetus to collect the full set.

Initially, state media threw its weight behind the standout success of the campaign. China Daily described the promotion as a sizzler, highlighting the 91 million reads of the topic on Weibo within the first week. Global Times reported that online Chinese were organising paid services to help people eat their meals so they could collect the figurines without wasting food.

But the tone quickly soured after word spread about hundreds of scalpers flogging the collectables on online for as much as eight times the price of a family pack of chicken. Genuine fans were being deprived of the figures. One person spent nearly ¥10,500 ($1,650) on 106 meals to get an entire collection of toys. Many just kept the collectables and threw the food away.

These shenanigans clearly struck a nerve with the China Consumers Association (CCA), who called for a boycott of KFC. The association claimed that the restaurant chain “used limited-edition blind box sales to induce and condone consumers’ irrational and excessive purchase of meal sets, which goes against public order, good customs and the spirit of the law.”

The criticisms were of a similar vein to the hugely popular Mengniu idol promotion last May which caused widespread food waste and was a catalyst for the clampdown on idol worshipping. Unsurprisingly, officials in Shanghai have been quick to place price caps on blind boxes, stop sales to children, and ban blind boxes containing toxic merchandise, explosives or animals.

Although many brands have used blind boxes in their promotions over the past few years, their appeal doesn’t appear to have faded. Nevertheless, most blind box promotions could be better executed to reinforce an emotional connection with their brand and tell related stories, rather than the fairly generic promos that most brands use.

In addition to illustrating the popularity of blind box promotions, KFC’s campaign reinforces a bigger takeaway: Chinese consumers connect with campaigns that deliver surprises, and offer the potential to obtain ‘rare’ or exclusive elements. All in all, it underpins the importance of going beyond a standard transaction and creating a memorable experience with your brand.

Get in touch with China Skinny to learn how we can assist in creating such experiences that are on-trend and connect with consumers at an emotional level – while keeping consumer groups happy.

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

KFC Faces Boycott in China Over Meal Toy Promotion: The China Consumers Association (CCA) has called for a boycott of KFC after its promotion this month sent some customers into a buying frenzy.

Shanghai Government Caps Price on ‘Blind Boxes’, Prohibits Sale to Children Aged Below 8: The Shanghai Administration for Market Regulation said the price of a blind box shall not exceed 200 yuan ($31.46) and that sales to children under eight years old are now prohibited. The new laws also restrict speculation in the second-hand market where prices can increase to 20-30 times their original cost. Sale of toxic merchandise, explosives or animals via blind boxes are also banned.

This Chinese Convenience Store Chain Needs to take a Break from its Algorithm Obsession: Bianlifeng, a Beijing-based convenience store chain, recently came under fire for collecting massive personal information without the knowledge of customers and pedestrians. The company stealthily set up cameras in doorways of residential and office buildings, capturing footfall to determine optimal locations for stores. 70-80% of the company’s data is collected by camera. Cameras capture almost every action from customers after entering their stores to assist with decision making. Similarly, staff behaviour is also filmed to improve “store management”. The company has 700 stores and plans to open 10,000 by 2023.

China Venture Funding Hits Record $131 Billion Despite Crackdown: Venture capital investments in China reached $130.6 billion for 2021, despite the crackdown on tech companies. This set a new record for the country – about 50% higher than the $86.7 billion total the year before. Semiconductors, biotech, robotics and enterprise software were among the fastest risers. The US remains streets ahead for investment, attracting a record $296.6 billion in 2021, although China leads in areas such as chipmakers, integrated circuit designers and other semiconductor startups which received $8.8 billion in funding last year, more than six times equivalent companies in the US.

Mainland China’s urban shoppers are spending less on FMCG: In general, the categories that consumers associate with improved quality of life – such as cheese, air fresheners, mouthwash and ready-to-drink coffee – grew at high speed. Categories that were popular during the lockdown months, such as instant noodles, biscuits, disinfectants and hand wash, experienced negative growth. The foundations of future FMCG growth remain strong, including the expanding middle class, and rising ecommerce penetration.

Online: Digital China

Brands Should Consider China in Metaverse Strategy Even if Beijing Takes Tough Stance: The nature of Chinese consumers to adopt games, social media and new tech innovations point to a market that is likely to embrace the metaverse. Even though there is much speculation about how it will look, brands should consider early moves such as trademarking their brands in relevant classes. As of early January, more than 1,360 Chinese companies had applied to register more than 8,500 metaverse-related trademarks. Just 300 companies had done so 3-months earlier.

Premium Food & Beverage

The Race to Create a Whisky From China, for Chinese People: Banking on the fast-expanding middle class, Chinese and Western liquor companies are eager to build Chinese whisky brands. But with a years-long wait for each batch, domestic and international suppliers alike are betting on the unknown. Whisky accounted for just 1% of China’s liquor market in 2020, while baijiu took up 96%. Diageo has reached over 12,000 potential Chinese whiskey lovers through a “whisky culture education” institution called Diageo Whisky Academy, and has organised 13 whisky summits across China since 2017.

Overall Beauty

China Chic Beauty Start-Up Florasis Tops Douyin’s Cosmetics Sales Chart in 2021: D2C beauty brand Florasis, with its traditional Chinese aesthetics topped the Douyin sales chart in the cosmetics category. All but one of the top-10 were domestic brands such as Proya, Kans and Bio-MESO, with South Korea’s Pramy the only non-Chinese brand on the list. Western brands have been slow to capitalise on Douyin opportunities. 80% of brands that had more than ¥100 million ($15.7 million) of sales on Douyin were domestic brands.

Shiseido Enters Strategic Partnership with Tencent: Shiseido has entered a three-year partnership with Tencent to build a D2C (Direct to Consumer) model and strengthen its social commerce business to provide new services to Chinese consumers globally.

Designers and Fashion

How Fashion Can Leverage Blind Box Marketing in China: Many brands are jumping on the trend, yet over 30% of consumers in a recent survey felt that the quality of the products did not reflect the price of the blind box. Luxury brand Lanvin tested the concept during Chinese Valentine’s Day in August, attracting 50,000 players within a month and pushing up Lanvin’s WeChat views five-fold. In 2020, Tommy Hilfiger collaborated with rapper Vava and singer Ma Boqian to create a limited edition blind box.

Uniqlo Parent Expands Automated-Warehouse Network into China: Uniqlo will open a new Shanghai-area facility to serve as a distribution hub for major coastal cities in China in August.  Since 2019, its offline and online inventories have been merged in China, meaning that online orders can be shipped from or picked up at a physical store. The automated warehouse will help fulfil online orders even more quickly. A similar initiative in Japan reduced staff by 90% as the global logistic staff shortage bites. 36% of clothes purchased in China are online.

Overseas Chinese Tourists

Chinese Consumers Make Move on Travel Plans for 2022: 78% of Chinese travellers are considering outbound trips in the new year, with 55% having a destination in mind and will go ahead once outbound travel is made possible, according to a December 2021 survey. An additional 17% even have a date in mind and are waiting for international restrictions to be lifted; while 5% have started to plan their itinerary. Respondents identified several factors that will inspire the return of their travel confidence, including the safe resumption of international travel for several months (60%), end of quarantine requirements both ways (58%), lifting of China’s restrictions on outbound group tours (41%), and resumption of destinations’ visa issuance (40%). Travellers in China’s second-tier cities are found to be more conservative. Japan was the destination of choice among Chinese respondents favoured by 17%, followed by Thailand and Australia, both on 8%.

Banking & Finance

China is Pushing for Broader Use of its Digital Currency: China’s Digital Yuan, or e-CNY, can now be used on WeChat Pay or Alipay and is accepted on JD.com. The currency is also available to visitors at the Beijing Olympics with ATM machines that can convert foreign currencies to the Digital Yuan.

Premium and Luxury

What Luxury Brands Can Learn From Chinese Tea Chains: Tea chains like Hey Tea and Nayuki Tea offer examples of reaching maximum consumers via lower-key marketing methods including clever collaborations, real-life spokespeople, and thought-out nostalgia.

Happy New Year! We hope you managed some rest and 2022 has started off well. We thought a fitting topic to see in the new year is with a trusty old friend, WeChat. WeChat hasn’t been in the limelight over the past few years; partially due to the shiny new short video apps such as Douyin and Kuaishou, and because WeChat hasn’t seen any major evolutions since 2017 when mini programs were launched.

Yet despite its lack of new features, questionable security and Beijing’s crackdown on tech companies, WeChat continues to grow and retain the title of China’s – and perhaps the world’s – only true super app. Much of this growth is attributable to mini programs, which continue to be an increasingly important component of marketing strategies in China.

Last year, 450 million Chinese consumers were active every day on WeChat mini programs, 50 million more than in 2020. The frequency of use increased over 30%. More impressively, the number of users paying for things through mini programs soared 80% last year. Although Tencent hasn’t yet announced the value of transactions through mini programs, they noted it had increased “significantly” from 2020’s ¥1.6 trillion ($250 billion). Since 2019, transaction volume has surged 897%, helped by the 100 million transactions capitalising on the “Use-now, Pay-later” option last year.

Livestream commerce sales – like on many platforms – are making their mark on WeChat, growing 15-fold last year. Viewer numbers, although not quite the volumes of Taobao, aren’t to be sneezed at with 27 million tuning into the well-marketed Westlife concert and 15 million watching Meng Wanzhou return to China after her release from house arrest in Canada.

Although many brands are shifting their marketing focus and budget towards short video apps, WeChat should still remain a key pillar within strategies, particularly mini programs. Many foreign brands have already jumped on board, with the number of overseas merchants selling on mini programs jumping 268% over the past two years. But many still stubbornly insist on pushing their own apps. The appeal and simplicity of using mini programs rather than having to download another app shouldn’t be underestimated.

By nature, WeChat stores are stickier than traditional ecommerce platforms, allowing much stronger loyalty and customer relationship marketing. There is also less price sensitivity versus the seamless comparison of prices on ecommerce. To further enhance WeChat, the platform can now link with Taobao/Tmall, Douyin and other apps as a result of the government’s crackdown on tech giants. This finally allows integration between key marketing touch points and allows plenty of new, smarter initiatives between acquisition and loyalty programs.

These new developments should see brands take a fresh look at their marketing strategies in 2022, particularly with regard to WeChat and how it relates to other touch points, online and offline. Get in touch with China Skinny to learn how we can ensure your plans are optimised for the year ahead.

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

Tax-Exempt Fringe Benefits for Expatriates in China Extended till End of 2023: The government has extended the preferential IIT policy on foreigners’ fringe benefits until the end of 2023. Previously, from 2022, foreigners working in China were to lose some tax-free fringe benefits such as housing rental, children’s education costs, and language training costs. The initial plan to end the exceptions this year faced criticism as a driver for expat exodus from China.

China Will ‘Exhaust All Means’ to Lure Global Talent: President Xi Jinping says China’s push for technological independence “must not mean self-isolation.” China must implement proactive policies to lure top professionals, especially for tech advancement, Xi says.

‘Slanted Eyes’ Ad Snack Company in Hot Water Again Over Earlier Campaign Using Revolutionary Red Scarf: Just a week after being slammed online for stereotyping Asian beauty in a 2019 ad using a model perceived to have “slanted eyes”, snack maker Three Squirrels was forced to apologise again after another ad from 2019 has resurfaced featuring unauthorised use of the revolutionary red scarf.

Online: Digital China

WeChat’s Open Ecosystem Reports User and Engagement Growth: WeChat’s Mini programs’ daily users jumped 50 million to 450 million in 2021. WeChat search users grew 40% to 700 million monthly active users.

China Deletes Social Media Accounts of ‘Livestreaming Queen’: China has deleted social media accounts of Viya and stripped her of a title that promotes honesty on the internet, a day after she was ordered to pay a record $200 million fine for tax evasion. With over 110 million followers on social media, Viya reportedly sold ¥8.5 billion ($1.3 billion) in one evening during the Singles’ Day festival.

Chinese Elderly Slowly Adapt to Senior-Friendly Apps: More companies have introduced apps with larger fonts, but experts say developers need to do more to narrow the digital gap. By the end of 2021, 43 mobile apps and 115 websites — including WeChat, Douyin, and Taobao — have mostly complied with the government directive in December 2020 to provide senior-friendly versions. As of June last year, nearly 30% of the country’s over 1 billion internet users were over the age of 50.

Premium Food & Beverage

Walmart Arm Did Not Deliberately Remove Xinjiang Goods, China Exec Tells Analysts: Walmart’s Sam’s Club has faced a furore in China over what local media said was its deliberate removal of Xinjiang-sourced products from its app. The move saw a wave of shoppers cancel their memberships and Hema was quick to offer Sam’s Club members access to their similar program. Sam’s club has 4.4 million members in China. Walmart generated $11.43 billion in China last financial year.

Young Chinese Show a Growing Appetite for Plant-Based Diets: 800,000 Chinese watched a 13-hour livestream of plant-based food experts from around the world on New Year’s Eve. China’s vegan food market is predicted to be worth nearly $12 billion by 2023, up from under $10 billion in 2018, with its plant-based meat industry forecast to grow 200% over the next five years. Millennials are the main driving force, with around half doing it for health reasons, and 27% for environmental concerns. Yet China’s growing vegetarian movement has also provoked backlash in recent months.

$300 a Cup? China’s Coffee Lovers Perk Up Bean Prices: Eye-popping coffee prices in Japan can be attributed in part to the expanding ranks of coffee connoisseurs in neighbouring China, whose coffee bean wholesalers are aggressively outbidding their rivals in the international market. The top Panamanian variety is now quadruple 2017’s top price at $2,568 per pound.

Overall Beauty

China Tightens Control on Whitening Ingredients in Cosmetics: Brands are now required to receive approval from relevant authorities to sell products containing SymWhite 377 in China. Such approvals can take at least a year. The sale of skin whitening products is expected to reach $5.5 billion in 2026.

Pollution and Environment

2022 Is a Year to Call Out Greenwashing in China: President Xi Jinping’s drive for carbon neutrality is creating unprecedented levels of corporate hype about climate action. In the past few months alone, at least 10 companies have sent out invitations to us to visit their “carbon neutral” industrial parks or to learn about their “carbon neutral” products from beer to T-shirts. However, they’re often missing the key bit of information: their emissions. Several other related terms are also gaining wider adoption: “ecological”, “clean”, “green” and “environmentally friendly.” They’re even worse, as their vagueness allows companies to mislead customers, confuse the public and cover up industries and companies that continue to pollute.

Cute, Fluffy Pets

All Hail Our Feline Overlords: Cats Prove Way More Popular than Dogs in China: More than 70% of pet owners in a recent survey said they owned cats, versus 40% with dogs.

Premium and Luxury

Luxury fashion brands play it safe for Lunar New Year: Amid China’s crackdown on a myriad of sectors from celebrity fan culture to gaming, as well as Chinese netizens’ lower tolerance for tokenism, brands are approaching the holiday with caution.

Autos and Cars

Tesla Takes Customers to Court to Silence Its Critics in China: Faced with a series of public-relations and branding crises in China, Tesla is resorting to an unconventional strategy: suing its critics. In the past six months, Elon Musk’s electric vehicle giant has filed defamation claims against at least two Chinese citizens who raised concerns about the safety and quality of its vehicles. Tesla alleges the individuals groundlessly damaged its reputation and is asking for steep compensation. Meanwhile, the company’s in-house lawyers have taken to threatening social media personalities who publish similar views with legal action, demanding they retract the posts and apologise publicly. EV sales grew 254% in China last year to 3.3 million vehicles.

Around this time every year, foreign papers typically have articles about incidents such as arrests in China for selling Christmas paraphernalia, churches being shut down, the odd university banning Christmas and even Tencent culling its raining Christmas trees on WeChat. However, this year, there doesn’t appear to be messaging intended to curb the magic of Chrimbo in the Middle Kingdom.

Even without the Grinches trying to scuttle the festival, with the geopolitical challenges, rising nationalism and the continued isolation of Chinese travellers, you’d think that Christmas celebrations may be a little more subdued in China this year. But stepping out from the Skinny office in Shanghai, there is no mistaking that the traditionally-Western holiday is close.

China’s streets are filled with festive monuments that would outclass many cities in the world. Shopping streets and malls are festooned with towering Christmas trees, winter wonderland popups, festive light installations and even the occasional snow maker to add to the atmosphere. Many city blocks are adorned with the sweet scent of mulled wine and Christmas markets are as crowded as ever.

It isn’t just foreign brands who are decorating their stores with Santas and fake snow, there are plenty of local stores peddling the Christmas goodwill. Even the state-owned bank ICBC just by our Shanghai office is getting into the swing of things with a tree in the window. And there is the occasional, endearing piece of Chinglish reminding you that you aren’t in Lapland.

If a stroll down the street isn’t enough to signal that the Yuletide season is nigh, the twinkling decorations are selfie-bait for young and old, ensuring that China’s social media feeds are full of the festive spirit. For readers who haven’t been to China in a while, we’ve put together a short video so you can see some of the more Christmassy things happening in Shanghai at the moment.

Despite numerous commentaries on Guochao, or ‘Chinese Chic’, Chinese consumers’ embracing of Christmas is another reminder that many things Western remain attractive to Chinese consumers, particularly when they are portrayed thoughtfully and respectfully.

Let’s hope this Christmas brings you plenty to celebrate and be thankful for, both and in out of China. This is the last Skinny for the year, but our office will remain open through most of the Western holidays, so please let us know if there is anything we can do to assist you in China. Have a Merry Christmas, and a happy and healthy 2022. We’ll see you on the other side!

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

A Christmas Tour of Shanghai: The Christmas spirit is very much alive in Shanghai.

Mattress IPO Puts Chinese Mystery to Bed: Who’s the old white guy in Chinese mattress retailer DeRucci’s adverts? The silver-haired man in a mandarin-collar shirt, usually puffing on a pipe with a slightly upset expression, has been ubiquitous on billboards throughout Greater China and international airports for over a decade. Yet DeRucci, which has tried to pass as French for years, attributed much of its marketing success to the old man’s image, which it continues to use. Last year it made $700 million in sales.

China’s Top Buzzwords and Internet Slang of 2021: Two lists of popular 2021 slang words were published last week offering a glimpse into what’s on the minds of Chinese internet users and government officials. They included ‘Double Reduction Policy’, ‘lying flat’, ‘overwhelmed’, ‘Metaverse’, ‘profound changes unseen in a century’, ‘chicken babies’, ‘we are ready to build a powerful China’, ‘wild consumption’, ‘The Age of Awakening’, ‘moderately prosperous’, ‘a question to take on the challenges of a generation’, ‘peak carbon and carbon neutral’, ‘YYDS’, ‘abso absolutely’, ‘it doesn’t hurt, but it’s really embarrassing’, and ‘I didn’t get it, but I was in awe.’

Young Chinese Find a New Way to Explore Intimacy: Furry FandomYoung Chinese Find a New Way to Explore Intimacy: Furry Fandom: For many Chinese urbanites, dressing up in furry animal costumes has become a way of life – and a method for unlocking their true selves.

Online: Digital China

How TikTok (and Douyin) Reads Your Mind: A leaked internal document from ByteDance provides a revealing glimpse both of Tiktok and Douyin’s mathematical core and insight into the company’s understanding of human nature – our tendencies toward boredom, our sensitivity to cultural cues – that help explain why it’s so hard to put down. The app is shockingly good at reading your preferences and steering you to one of its many “sides,” and revealing your desires even to yourself. The algorithm tries to get people addicted rather than giving them what they really want. In related news, Chinese tech companies are thinking about expanding overseas much earlier in their lifecycle and there has been a rise in those growing their international business.

Premium Food & Beverage

A Chat with Genki Forest’s Tang Binsen: The Self-Confessed Pirate: The business and personal views from the CEO of China’s most successful FMCG disrupter brand, Genki Forest.

The Macallan Caters to Chinese Whisky Palate With Immersive Experience in Shanghai: Whiskey brand Macallan has opened an immersive exhibition in Shanghai to translate its heritage and history to potential customers. The brand’s 4,000 square metre tribute to nature, culture and heritage is its largest-ever event of this kind.

JD Shows Consumer Demand for Imported Fruits, Fresh Produce Rising: The popularity of imported high-end fruits can be attributed to rising disposable incomes and health awareness among Chinese consumers. The value of imported fruit in China reached $12 billion during the January-October period, up 33.5% year-on-year. China’s fresh food ecommerce trading volume reached ¥458.5 billion ($72 billion) in 2020, up 64% year-on-year and is expected to soar to ¥670.5 billion ($105 billion) this year.

Overall Beauty

Shaving Off the Excess: China Mandates Food and Cosmetics Firms to Limit Excessive Packaging and Lower Prices: China has issued new, stricter packaging regulations covering food and cosmetics products to prevent what has been dubbed the ‘excessive packaging’ phenomenon, citing a need to prevent unnecessary extra costs to consumers and impacts on the environment. The regulations apply to 31 categories of food including grains, edible oils, flavourings, meat, dairy, beverages, convenience foods, biscuits, canned foods, frozen beverages, snacks, confectionary, tea, alcohol, cocoa-based products and pretty much everything else. The 16 categories of cosmetics include liquid-based products for hair care and skin care, lotions, powders, sprays, waxes, toothpastes and virtually all other cosmetics.

Overseas Chinese Tourists

Seniors Spending More on Travel: Older Chinese consumers, especially those who were born in the 1950s and 1960s, are increasingly opening their wallets to spend on high-end travel options, according to travel operators. More of them are planning trips by themselves and driving to reach their destinations. As of October, there was a 22% year-on-year increase in the number of customers aged 60 or older registered with Trip.com, with their travel booking jumping 37%. Their spending per capita has been growing faster than those born in the 90s and 2000s. A large number of elders travelled to places with no COVID-19 cases, such as Hainan province, and many booked photo sessions during the trips.

Video & Entertainment

China’s Elderly Have a New Obsession: Video Games: During the pandemic, seniors have emerged as China’s fastest-growing demographic of new gamers — and gaming influencers. There are now 45-57 million seniors who play video games in China, and this figure has roughly doubled since mid-2020. China’s total number of gamers only grew 10% during this period.

Designers and Fashion

What Global Consumers Want in 2022 Denim Jeans: Chinese consumers wear jeans as a fashion item, with fairly short wardrobe lifecycles driven by trend and seasonality. Chinese consumers own an average of 11 pairs versus 10 in the US. 61% of Chinese consumers shop for denim to keep up with the latest trends. Among 25-to-34 year olds, that number jumps to 72%. Chinese consumers’ top denim concerns centre around comfort (92%), fit (92%), and quality (88%).

Premium and Luxury

Louis Vuitton Faces Chinese Ire Over Refund Policy: Not long after Canada Goose was slammed for inconsistent return policies in China versus other countries, LV is now facing backlash offering a 30 days return policy in North America, versus a non-refundable policy in stores in China, and seven-days online.

3 Unexpected Luxury Growth Categories Coming to China: Fragrances, winter sports and ‘home living’ are expected to see strong growth in China’s luxury sector. With 90% home ownership in China, versus 65% in the US, Chinese are seeing their home as reflecting their social status and individual personality. 53% say their home meets their needs for sleeping and 52% for relaxing.

Work-related communications have changed a lot since the pandemic hit last January. In China, increased remote working, coupled with intermittent challenges travelling domestically and virtually non-existent trips in and out of China, have seen digital communications become ever more important for business-to-business operations. This is particularly relevant for foreign businesses communicating with teams, distributors and other partners on the ground in China. For many, WeChat has been the go-to for both group and individual communications.

But late last month, managers at at least nine state-run companies including China Mobile, China Construction Bank and China National Petroleum Corp told employees that they needed to shut down and delete any group chats set up for work purposes due to the risk of sensitive information leaking from the platforms. The employees were also told to be cautious about using WeChat for any work-related communications.

Whilst none of the companies have publicly announced any security concerns with WeChat, their actions send a clear message. State-run companies are much closer to Beijing than most businesses in China, and are considered to be ‘in-the-know’ for many matters. As a result, it is likely that other companies, and potentially some consumers, will follow their lead in shifting communications to other platforms.

A survey back in 2017 found 83% of WeChat’s active users use it for work. WeChat’s ubiquity has seen it become a powerful channel for B2B operations, not just for communications and promotion, but also the many extended services that allow business dealings to operate much more efficiently and easily.

WeChat is likely to continue to play a part in many business dealings in China, but the recent security concerns will increase the drift to other, more secure platforms. Such services include Tencent’s enterprise solution WeCom (formerly WeChat Work) and Alibaba’s DingTalk which have become standard fare with China’s workers since the pandemic. Dingtalk is the biggest, adding another 100 million users between January and August this year, to clock a total of 500 million users.

Foreign brands who aren’t already using these enterprise tools, may find them useful to communicate to teams and partners in China, particularly if any dialogue involves confidential information. China’s authorities have the ability to tap into communications and data from any platform hosted within the Great Firewall, but overall, the enterprise tools are believed to be more secure than consumer-focused services.

After being largely apathetic for years, concerns about privacy have increased recently in China, particularly over the past few months with the introduction of new privacy laws. China’s new personal data law is among the strictest in the world, drawing inspiration from Europe’s GDPR but going further. In addition to regulating how businesses in China can use data, the new law has made privacy top of mind for many consumers and business partners, which should be factored into decisions about how you and your business communicates in and to China. 

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

Will China Be Number One? China is already the world’s number one exporter, and number one importer, by aggregate value. It is the principal trade partner of more than half the world’s 200 other economies. A glance at history suggests that China’s current predominance is no anomaly. Qing Dynasty China in 1700, before the Europeans surged ahead thanks to exploitation of colonies, the Industrial Revolution, sound governance, and the benefits of trade and investment liberalisation, was clearly the richest country of its era. Many trajectories indicate China may resume its historical place as Number One, but it faces growing constraints such as declining workforce numbers, skyrocketing energy prices, narrow political dependence, diplomacy and other headwinds including Covid resurgence and lockdowns, microchip shortages, endemic pollution, drought and desertification, and rural poverty.

Behind the Headlines: Why Australian Companies Are Still Doing Business with China: Despite the apparent odds, this report documents that Australian executives are still keen on doing business with China and fully intend to continue to do so. Research with executives concluded a number of reasons including 1. The opportunities in China haven’t disappeared; 2. China is not just a market. It’s a key supplier and collaborator on innovation too; 3. Engaging with China helps with diversifying to new markets; 4. Recognising and managing risk is part of what businesses do naturally. Geopolitics is one risk amongst many; and 5. Market diversification is a priority but not the only risk mitigation strategy.

Should Brands Distance Themselves From ‘Controversial’ Celebrities?: Chinese consumers tend to turn themselves into brand representatives, so if companies abruptly terminate their partnerships with celebrities, shoppers may feel betrayed by them. Consumers are also increasingly wanting ambassadors to have more intriguing backstories and deeper connections with their brands.

Nappy Manufacturers Shift Focus in China From Infants to Elderly: The Chinese market for adult diapers could exceed infant products by 2025, underscoring the swift pace of the demographic and societal transition. In response to this demographic change, Unicharm, one of the top sellers of nappies and hygiene products in China, in recent months has devoted more of its marketing budget to adult diapers than ones for babies for the first time.

Online: Digital China

Chinese State-Run Companies Restrict Employees’ Use of WeChat: Citing security concerns, WeChat groups are being shut down by some state-run companies. The companies also warned employees against using WeChat for work-related communications in general. In other WeChat news, the app now allows links from competitors like Douyin to be shared and opened directly in WeChat for the first time, further dismantling the app’s “walled garden.”

For the First Time in 6 Years, Apple is the Top Smartphone Brand in China: Apple’s sales in October grew 46% month-on-month to overtake local brand Vivo to top market share in China, largely on the back of the popularity of the iPhone 13 series, more flexibility around its proposition, and the fall of former-leader Huawei in the high end segment. China’s smartphone market grew 2% overall.

Alibaba Empowers Business Units to Be More Agile as Challenges Mount: Alibaba’s CEO is transferring power to business unit heads to function as “mini-CEOs” to become more agile in tackling rising challenges and potentially create spinoffs. The management shift, which has been taking shape over the past few months, reverses a centralisation drive begun almost three years ago to form a united front to tackle competition. To start, Alibaba is splitting its commerce division into International and China operations. Alibaba’s market value has slumped by half, wiping out some $400 billion since October last year, when Ant’s hotly anticipated IPO preparation was under way.

Shanghai’s First Drone Delivery Route Begins Testing: Shanghai’s first drone delivery route, which is expected to open for trial operation in the first half of 2022, has already begun internal testing, with deliveries taking about 17 minutes. The system led by food delivery platform Meituan and Shanghai Jinshan District will open up more time-sensitive deliveries such as urgent medication or ice cream. At present, 13 Chinese cities have civil unmanned aerial test bases.

Premium Food & Beverage

The Challenge of Healthy Snacks In China: How to Cater to the Chinese Stomach?: Tapping into China’s huge healthy snacking trend needs to be localised for Chinese palates, and weaved into communications thoughtfully.

Zero-Sugar Oreos See Weak China Response Despite Healthy Snacking Trend: Mondelez launched Oreo Zero in China in August, taking a cue from social media trends showing reduced-sugar and sugar-free diets as a key trend, and the limited availability of zero-sugar biscuits in the country. Oreo Zero cookies contain maltitol instead of traditional sugars like sucrose and glucose, and the tweak gives a slight difference in taste that only heavy consumers of regular Oreos would be able to identify. Yet “the reaction of the consumer has been a little bit disappointing … for one reason or the other, the consumers feel it is not the real thing,” says Chairman and Chief Executive Officer Dirk Van de Put. In China, traditional Oreos have less sugar than Oreos in the United States. The will continue to sell the Zero product in China, noting that Diet Coke received a muted response at first.

Will China Make Its Peace With GMOs? Chinese consumers remain deeply opposed to GMOs resulting in GM cotton and papaya being the only commercial cultivation approved. Other crops remain in the lab or are exported for cultivation. One result is that China has only become more dependent on foreign GMOs, which are permitted for import so long as they’re processed into products like animal feed to support China’s surging demand for pork and other proteins. But to ensure food security, the agriculture ministry laid the groundwork for growing genetically modified soybeans, and grains such as rice and corn, on Chinese soil for the first time.

Why China’s Taste for Beef Is Growing: Although beef is not yet a major animal protein for most Chinese consumers, its share is rising due to more Chinese consuming beef at home; the expansion of ecommerce making beef more easily available; consumers knowing more about beef quality and cooking methods; and expanding middle-to-high-income consumer segments.

Celebrities’ Promotion of Vegetarian Lifestyle Meets With Criticism, Mockery Online: Some Chinese entertainers’ promotion of people adopting a vegetarian lifestyle on social media recently met widespread criticism and mockery online, as many netizens claimed such a lifestyle is not healthy for the public, and they decried the celebrities’ blind worship of the West according to state media.

Overall Beauty

Procter & Gamble and A.S. Watson Co-Create New Skin Care Brand: The two groups have collaborated on a new skin care brand from scratch called aio, which will be sold in Watson’s brick and mortar stores and online in Greater China. The brand’s packaging is fully-recyclable.

Designers and Fashion

‘Arrogant and Superior’ Canada Goose Faces Fresh Backlash in China: Customers and consumer advocacy groups in China claim that the Canada Goose’s return policy in the country is discriminatory, worse than other countries — and confusing at best. The furor started when a customer in Shanghai told local media that the parka maker refused her effort to return a damaged $1,800 jacket she’d purchased in October. She claimed the embroidered logo was defective. This has happened just three months after the Canadian company was fined about $70,000 by Chinese government regulators for what it said was misleading advertising about its goose down.

Pollution and Environment

From Cleanfluencers to Inspirational Minimalism: China’s New Generation Wants to be More With Less: While the Chinese government has launched a crackdown on “malicious marketing tactics,” that encourage wasteful spending, the rise of cleanfluencers is bringing China’s new-gen consumers towards a Marie Kondo-inspired decluttered lifestyle. Searches for wardrobe organisation and decluttering content tripled from 2019 to 2021.

Unilever, Alibaba Roll Out Tools to Promote Sustainable Shopping: As part of the newly launched partnership, Alibaba will roll out dedicated green-shelf spaces across Tmall, Tmall Supermarket and hypermarket RT-Mart. The duo will launch marketing campaigns encouraging shoppers to adopt an environment-friendly lifestyle, and Unilever has pledged to shrink its carbon footprint by reusing shipping boxes and cutting packaging waste, among other things. They plan to add more than 1,000 artificial intelligence-powered plastic recycling machines at universities across China. Alibaba introduced a dedicated channel for eco-friendly products, leading to more than 2.5 million consumers buying 500,000 low-impact products.

For years, people have been talking about ecommerce causing the downfall of bricks & mortar stores. That chatter only intensified when Covid hit. But the reality is far from it. By July 2020, while much of the world was just getting their heads around the pandemic, China was through the worst of the pandemic and retail foot traffic had returned to pre-pandemic levels. Even in the US, physical store openings will exceed closings this year for the first time since 2017, reflecting changing views about their power to drive sales.

Online shopping provides some experiences that can’t be matched in a physical store, but it still doesn’t come close to the tactile and intimate social experience of being in a physical store. That is particularly pertinent at present as other means of having such experiences – such as overseas travel – remain off the cards. On top of that, the soaring costs of acquiring customers online, coupled with last month’s introduction of China’s personal data protection law, has made wooing customers online harder than ever.

Yet, just opening a good old traditional store is no panacea for rocketing sales in China. The shopping experience needs to be top-notch to lure consumers away from the addictive flashing screens of their mobiles.

For most Chinese consumers, shopping decisions are not ‘either-or’. Depending on their needs at the time, they may shop online or may go to the store. But they want their experience to be consistent and integrated wherever they are.

The prevalence of scanning QR codes in bricks & mortar environments, means that loyalty programs, payments and other experiences can be seamlessly integrated with smartphones. More physical stores are enhancing experiences through tech-driven features and livestreaming, but also through physical forms such as workshops and event spaces, which are also integrated through tech. 82% of venture capital invested into Chinese offline retail store openings last year was directed at retailers who were integrated online and offline.

Professor Barbara Khan from the Wharton School of the University of Pennsylvania, acknowledges how Chinese retail is leading the world. Her research has found that western retailers have been successful if they either “make it more fun, more pleasurable, more trustworthy, or they take away the pain.” In the past, being the best in one of those four quadrants was enough.

For example, Amazon addresses the pain through efficiency, allowing shoppers to get what they want spending as little time as possible on the site. But as retailing has become more competitive, retailers are needing to cover more than one of Khan’s quadrants. Chinese retailers are already doing a great job at this. Alibaba, for example, addresses the pain points like Amazon, but it also adds a lot to make shopping fun.

Khan rightly notes that the rich online and offline retail experiences in China has consumers “seeing shopping now as a pastime, as entertainment, not just about acquiring things, but also being entertained, learning all sorts of things. And along the way, making some purchases.”

That sentiment is great news for marketers, but it also means that consumers have high expectations for their entire customer journey. They want more than just a transaction. Just slapping a QR code in front of a visitor is unlikely to create happy customers and will miss opportunities to build advocates as many restaurants are finding.

Consumers want experiences that are fun, meaningful and connect with what is important to them. It doesn’t always need to be a high-tech augmented reality game, but could be as simple as recognising the importance of pets, such as Heytea, Naixue Tea and then Starbucks who let owners bring their furry friends to some cafes.

Get in touch with China Skinny to learn how you can integrate the latest retail, tech and consumer trends and insights to optimise your retail experience for Chinese consumers.

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

Professor Barbara Kahn on Retail Innovation in China: “A lot of people have said this and I certainly believe that China is way ahead of the rest of the world in retail,” says Wharton professor Barbara Khan. “And that there is a lot of innovation that was going on in China, and the rest of the world didn’t know about it … I think Alibaba was way ahead of anybody else on that, and the rest of the world is trying to catch up,” says Khan, referring to seamless integration between what you see online with what people will experience when they go through the physical store.

Western brands aim for the sky in Xi Jinping’s China: If Beijing succeeds in its Common Prosperity ambitions in channelling the bulk of wealth to the middle class, it will significantly expand the pool of potential customers for multinationals. That is why so many liquor, luxury and consumer goods companies are pouring money into the country, and financial services groups are beating down the doors to join them. Top luxury brands such as Gucci and Hermès are seeking to capitalise on investments in less expensive lines, such as cosmetics, that are accessible to a broader range of buyers.

Over 85% of Young Chinese Intend to Have Side Jobs: A recent survey by China Youth Daily shows that 85.5% of 18-35 year old Chinese are willing to take up side jobs. 15% already do. About 72% believe that a side hustle provides more possibilities, while 63.5% said that it enriches spiritual life and offers a more colourful life outside of work. Popular choices include online businesses, being internet celebrities, and selling online courses.

Online: Digital China

Live Streaming is the New Bright Spot of China’s Singles Day: Among the respondents surveyed by Kantar who have watched live streaming during the Singles’ Day festival, 83% said they watched “live streaming from the brands I am interested in”, higher than “professional KOL’s live streaming” (43%) and “live streaming with celebrities” (30%). In related news, L’Oréal had a public spat with livestreaming stars Viya and Austin Li after promising to give them the lowest price for a face mask and then effectively sold it cheaper on the L’Oréal livestream.

Premium Food & Beverage

Scan-to-Order Sweeps Across China, to Customers’ Chagrin: Increasingly, restaurants across China are implementing a system in which diners scan a QR code and self-order from their phones. For many diners in China, this is the new procedure at sit-down restaurants. Want to see a menu? Scan the QR. Want to order? Just do it from your phone. Need the bill? It’s all at your fingertips. But is this a convenience, a hassle with major data privacy concerns, or a missed opportunity to provide a memorable experience?

Chengdu Becomes the Largest Imported-Wine Market in China: JD’s Data: Chengdu pulled ahead of Beijing and Shanghai, two of China’s largest metropolitan areas, becoming the largest consumer market of imported wine, accounting for roughly 20% of the value of the country’s overall import wines during the Singles’ Day promotion on JD Supermarket. Imported wine sales showed a trend towards high-end brands. Consumers under age 35 have purchased 62% of all imported wine. Deluxe single malt whisky increased by 16 times YOY in the first 10 minutes of the promotion and sales of fruit cider increased by 24 times compared with last year.

Oatly Opens Its First China Factory To Double Down On Asian Market: Oatly has opened its first factory in China, just months after it established its first Asian production site in Singapore. The Swedish oat milk giant described the new factory in Ma’anshan, Anhui province as part of its “wider initiative to build factories fit for the future” and to meet growing demand across Asia. The factory will be able to produce 150 million litres of oat-based products each year at full capacity.

Kids Parenting

China’s Record-Low Birth Rate Underscores Population Challenges: China’s birth rate dropped to a new low in 2020, confirming the demographic challenge facing the government as it tries to deal with a shrinking labour force and growing population of elderly people. There were 8.5 births per 1,000 people last year, the lowest in data back to 1978. For Chinese men, starting a family now comes at a price. But not all love is lost as dating blind boxes take off in China as younger generations look for love on social media.

China Finds 12 Million Children that it Didn’t Know Existed: China undercounted the number of children born between 2000 to 2010 by at least 11.6 million – equivalent to Belgium’s current population. The difference could be the result of some parents failing to register births to avoid punishment if they breached the one-child policy. About 57% of the children later registered were girls, indicating the discrepancy could be partly linked to parents not reporting girls so they could continue to try for a boy.

Overseas Chinese Tourists

China Outbound Tourism Set to Jump More than 25% this Year — State Media: Chinese outbound tourism numbers are set to jump by more than 25% this year from 2020 but remain “basically at a standstill” compared to pre-pandemic levels. A total of 25.62 million Chinese tourist trips overseas are expected to be made in 2021, up from last year’s 20.3 million which plunged 86.9% on 2019. Macau was noted as the ‘bright spot’ of those numbers. CCTV suggests that the pace of recovery in 2022 will depend on ‘how other destinations handle tourism’.

Schooling and Education

China Remains the Top Sender of International Students to the United States in 2020/2021: More than 317,000 Chinese students enrolled in US institutions in 2020/21 as China remains the number one source of international students in the country. The number represented a 14.8% drop from 372,000 the year earlier, just lower than the 15% drop of international students studying in the US overall. Mission China has issued over 90,000 student visas since May 2021.

Chinese Parents Find New Ways to Give their Children an Edge: Beijing’s crackdown on tutoring has not stopped families wanting the best for their kids. Instead of signing up for barred foreign language classes, parents instead opt for non-core curriculum subjects like art, which are taught in English. New Oriental offer “new concept camping” holiday courses where children stay at university campuses with classes in the day. Zhipin and Liepin, two local recruitment websites, are strewn with adverts posted by parents looking for domestic staff with bachelor’s degrees and foreign language skills who will help “look after their children” — with no housework skills required. BE Education, an educational consultancy advising Chinese families on overseas studies, says interest in UK boarding schools is picking up after plummeting during the pandemic.

Video & Entertainment

China Eyes 100,000 Movie Screens and Closer Ties to Cannes: Six Takeaways From Country’s Five-Year Film Plan: Over the next five years, China plans to expand its fleet of movie screens to more than 100,000 – up from 77,769 screens as of this March – and release at least 50 $15 million-grossing films a year as it seeks to retain its title as the world’s largest film market. Every cinema in the country based in a county-level city or above must devote one screening hall to the so-called “People’s Cinema” circuit for the showing of propaganda films. The plan’s ultimate goal, however, is to build China into a “strong cultural power” by 2035, spreading positivity, patriotism and a “loveable image of China.”

Premium and Luxury

In China, Luxury Must Bridge Digital and Physical Like Never Before: With the recent Shanghai instalment of its Women’s Spring-Summer 2022 Fashion Show, Louis Vuitton balanced the traditional premium it places on lavish, exclusive events with the democratising effects of livestreaming and social platforms. The livestream of the event was viewed a total of 158 million times on Weibo, WeChat, Tencent Video, Douyin, Kuaishou, and OTT. Weibo hashtags related to the event were used nearly one billion times in total.

Like many Skinny readers, we’ve watched with interest as big numbers have rolled out of China over the years. GDP has ascended from $1.2 trillion to $14.7 trillion over the past two decades. The number of passenger cars on the road have shot up from around 75 million to 300 million since 2011. And China has added 500 million internet users over the same period.

But after years of being conditioned by soaring statistics, it has been some time since we were genuinely blown away by data from China. That was until we saw some recent data crunched by McKinsey. Between 2000 and 2020, Chinese consumers’ collective net worth has skyrocketed from $7 trillion to $120 trillion – scaling up almost 50% faster than GDP. China’s wealth accumulation, largely driven by property appreciation, has seen it account for almost a third of growth in global wealth to overtake the US for the top-spot.

Unfortunately, more than two-thirds of China’s wealth is held by the richest 10% of its households, and their share has been increasing. This doesn’t sit well with the top brass of the Chinese Communist Party, and has been a large factor behind the Common Prosperity drive which aims to see more people benefit from China’s growing affluence.

Few of Beijing’s catchphrases have impacted the way businesses and brands behave as swiftly as Common Prosperity. Singles’ Day was without its usual razzmatazz as a result and more recently, lifestyle platform RED has banned users from flaunting wealthy lifestyles. Largely recognised as the go-to social network for emerging trends – particularly among women – RED has flagged thousands of wealth-bragging posts and improved algorithms to detect such content. This will undoubtedly impact consumption behaviour in China.

Beijing’s ideals have long been broadcast over state media, but ‘privately-run’ social networks which are more influential than traditional media, are increasingly making it difficult to convey messages that don’t align with Beijing’s mandate. This is reflected in policies such as RED’s, and even more extreme measures such as content on entire subject matters disappearing online. For these reasons alone, every brand in China should take note of Common Prosperity and other policies from Beijing.

Does Common Prosperity mean everyone will drop the Max Mara cashmere coats and don Mao Suits? No, it won’t. But we’re likely to see toned-downed displays of wealth in China. Chinese consumers were already transitioning from bling-driven purchases to products that reflect more introspect, but this trend has accelerated. And the meaning of ‘status’ is transitioning to understated craftsmanship and niche brands from being in ‘the-know’, in addition to other more accessible traits such as love for the motherland. A number of brands, particularly those in the luxury category, have already started to reflect this in their hero products, comms and VIP programs. Even in the FMCG category, Mengniu learnt not to run promotions that would encourage food waste.

Interestingly, lower tier cities which are driving a lot of China’s luxury growth, are traditionally less sophisticated and ‘more-bling’ than their peers in higher tier cities. As a result of Common Prosperity, they are likely to have to mature much faster than their big city cousins did.

Just as Dior recently discovered, brands need to keep track of both Chinese consumers’ and Beijing’s cadence, and adapt their marketing strategy to reflect this. Contact China Skinny to learn how we can assist you with this.

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

Global Wealth Surges as China Overtakes US to Grab Top Spot: Global wealth tripled over the last two decades, with China accounting for almost one-third of the growth, overtaking the US for the top spot worldwide according to McKinsey. China’s wealth skyrocketed to $120 trillion from a mere $7 trillion in 2000.

China Condemns ‘Money Worship’, Corruption of Reform Era in Key Document: China’s ruling Communist Party slammed the “money worship”, “extreme individualism” and corruption that emerged in the four decades since the country opened up, calling for stronger party leadership and moral discipline in a key resolution released on Tuesday.

China’s Retail Sales Beat Forecasts in October, Despite Property Market Slump: October retail sales grew by 4.9% from a year ago, beating a Reuters’ poll forecasting 3.5% growth and up on the 4.4% rise in September. Fixed asset investment in the first 10 months of 2021 rose by 6.1% from a year ago.

Online: Digital China

China to Rein In Internet Firms for Risks on the Rising Community Group Buying Business: The State Administration for Market Regulation (SAMR) has announced it will take a series of measures to prevent internet tycoons from monopolizing grassroots community markets in the name of online community group buying. The huge community buying trend will be investigated and punished if they ‘conduct illegal violations like dumping’. On the other hand, China will perfect its management system for online platforms by pushing the amendment of the anti-monopoly law and detailing relevant regulations.

China’s Walled Garden is Not Yet Down, the Tunnel Warfare Goes On and On: On the surface, there appears to have been much progress for interconnectivity between China’s apps, but in reality walled gardens still persist. On October 28, Alibaba announced that it had begun testing a new function for its e-commerce app Taobao — letting users share their Taobao shopping carts directly to WeChat with just one click. Alibaba anticipated the feature to be officially made available by October 27th, two weeks before Double 11. The function never came online. Similarly, a rant from a developer from Taobao’s group buying grocery app went viral after WeChat has refused to approve its mini program updates for seven months.

Premium Food & Beverage

China Food Security: Beijing Signals Overhaul of GM Crop Rules in Push for Seed Industry Breakthrough: The Ministry of Agriculture has proposed a series of regulatory changes to enhance competitiveness of China’s seed industry and heightened food security concerns. Concerns about food supply have heightened over the past 18 months amid coronavirus disruptions and rivalry with the US.

White Paper on Snack Food Category in O2O Consumption: Offline sales of snacks account for 64% of sales, with online sales at 18% of the market, leaving o2o as a large area for growth. About 72% of consumers want to purchase snacks as soon as they see them. In related news, spicy snack maker, Weilong Delicious, has filed for a HK IPO, with the company expected to be worth $10 billion.

SA Wines Get Boost from Dispute Between Australia and China: Australia’s Chinese market share fell from more than 40% in 2020 to 5% in 2021, whereas France picked up most of the drop growing from 25% to 45% in the year. Chile now dominates among new world wines, gaining about 7% year on year. South Africa was the fastest growing region at 124%, accounting for 2% of the market.

Startup Mixing Skin Care with Beverages Grabs Investor Attention: Meiji Yinpin, a beverage and beauty brand founded in 2020 that offers tea-based drinks, just received ¥10 million ($1.5 million) funding. The company claims its beverages offer health and cosmetic benefits to women, with offerings including Hyaluronic Acid Jasmine Fruit Water, Jasmine Collagen Coconut Milk, and Peach Collagen Coconut Milk.

Overall Beauty

Tapping Into the Explosive Growth of Personalized Beauty in China: Consumers’ shift to a rational, healthy, and eco-friendly lifestyle and strong sense of self-expression are changing the beauty product landscape. For personalised beauty, Skinsei’s quizzes consumers about holistic lifestyle factors to provide a customised beauty experience.

Overseas Chinese Tourists

Asia’s Hungry Travel Sector Is Missing a Key Ingredient: China: China accounted for nearly 40% of the 240 million tourist arrivals across Asia in 2019. China is looking likely to stick with a Covid Zero strategy and patrol its borders tightly until at least the Winter Olympics in February 2022. Chinese tourists are unlikely to travel abroad while the mandatory quarantine (up to 3-weeks at present) and paper work persists.

Video & Entertainment

House of Screams: Inside China’s Hidden Horror Trade: Du “Mr. Mask” Xifan is making a killing by feeding China’s growing fascination with ghouls, gremlins, and gore. Chinese media regulators impose a number of restrictions on horror content and the mainland film industry has produced few hit horror flicks, but the genre still has a big following in the country. The Hollywood-made “Saw” franchise and Japanese cult classic “Ring” are particularly popular. Escape rooms, haunted houses, and murder mystery-style role-playing games — known locally as “script murder” are also fast-growing in China. But China is getting stricter on the $2.6 billion role-playing murder mystery games industry, with Shanghai planning to ban content that is likely obscene, violent, or have crime-related plots. An outbound tourism opportunity when things open up?

Chinese sport Sport

China Hails Country’s First Formula One Driver, Zhou Guanyu: Shanghainese 22-year old Zhou Guanyu has become China’s first-ever full time driver to compete in F1, signing with Alfa Romeo for the 2022 season. Despite the annual race in Shanghai and promotional efforts by the organization, F1 never managed to make a big splash in the country, but having a Chinese driver is likely to improve the sport’s fortunes.

Designers and Fashion

Chinese Fashion Brand Peacebird Accused of Plagiarism (Again!): Hashtag “Peacebird Repeatedly Accused of Plagiarism” drew in over 230 million views on Weibo after the company produced an exact copy of a fluffy white and violet number from SOS Seamstress, only at five times the price. The brand has been called out for allegedly plagiarising other brands including Annomundi, UNALLOYED, Moussy, Off-White, FREI, Maje, and other domestic and international brands.

Premium and Luxury

Dior, an Apology is Overdue: Dior is the latest foreign brand in the dog box after a handbag poster apparently tarnishing the image of Chinese women sparked a furore on Chinese social media. In the poster at A Lady Dior exhibition at an art centre in Shanghai, a young woman with dark skin and freckles dressed partly like a woman in the Qing Dynasty (1644-1911) blankly stares at viewers. According to China Daily, what has outraged Chinese consumers is the portrayal of “Chinese women as outdated and ugly, with the use of exaggerated makeup and outmoded style of dress, and also its arrogance and lack of appreciation for Chinese beauty and its disrespect for the different aesthetics of Chinese culture.” Here is the ad.