The impact of the spectacular rise and fall of China’s stocks is anyone’s guess. It would appear that China is imploding if you read some news reports – stories of a weaking China attracts readers in some countries. Discuss it with Chinese consumers buying food for their kids in high end supermarkets, and they will shrug it off, unphased; China has made it through bigger economic challenges.
Of course some consumers will be feeling less confident, but it is unlikely to have the same impact on consumer spending as a crash would in markets like America. In January this year, following a 122% rise in the Shanghai Composite Index over 12-months, retail sales grew at their slowest rate in five years. At the time, just 6% of Chinese households owned stocks versus 55% of Americans. The latest spike would have drawn a few more in with Beijing’s encouragement, but as a whole, fewer Chinese consumers gamble on stocks – China’s reputation for being conservative with their high savings is well deserved. Although consumer investors make up a large portion of the owners of China’s stocks, their share of the overall market value is estimated to be 5% or less.
China needs healthy capital markets to finance the ongoing development of its economy, and will need a different approach to what we have seen recently. Nevertheless, the biggest impact on consumption growth in both the US and China is wage growth, which has been rising faster than GDP in China. IMF is keeping its pre-crash China GDP forecasts from April, as it believes China’s stock exchanges are so disconnected to the wider economy, and are small relative to the overall economy.
The rate of growth across many categories is slowing in China, but that was happening before the market meltdown. We expect Chinese consumers, particularly those born post-80s and 90s, will carry on in the consumer groove. Consumption will continue increasing in areas such as premium food and beverage, tourism and experiences, health and wellbeing, affordable and some niche fashion, overseas investments and anything to do with the precious only child – food, clothing and education – just look at the 50% growth that Lego has experienced in China over the past two years, despite counterfeits costing a quarter of the price.
China’s affluent and middle class base will continue to grow -an extra million USD millionaires came on board in China last year, despite the reports of doom and gloom. One loser will be state media who have been cheerleading the stock market, further eroding trust in traditional media and driving even more consumers to objective digital channels. We hope you enjoy this week’s Skinny.
The Chinese Stock Market and the Chinese Economy Have Literally Nothing To Do With Each Other: “We don’t see it as a major macroeconomic issue,” said IMF’s research chief Olivier Blanchard referring to China’s recent market meltdown, citing many examples of the disconnect between China’s stocks and its wider economy. Despite the recent drop, Shanghai stocks are still up more than 80% over the past year, and the Chinese stock market is small compared to the overall economy, the world’s second biggest.
Landmark Trademark Victory for Menswear Designer Michael Bastian in China: A trademark squatter has lost its ability to use the Michael Bastian brand that it registered in China. It is the first time a trademark registration application has been rejected in China in favour of a non-Chinese individual or entity. Nice work Foley & Lardner!
Megalopolis: the Future of Urban Planning in China: A massive new economic area encompassing 100 million people living Beijing, Tianjin and the province of Hebei is likely to become a model for China’s future urbanisation. One joint plan will cover economic and social development; urban and rural planning; and land use for the area larger than Uruguay, with a population roughly the size of Japan.
Uber Said to Seek Up to $1 Billion Funds for China Carveout: Uber has been claiming a $7 to $8 billion valuation for its Chinese unit, which has been marred by police shutdowns and volatile regulations. Investments from local, Beijing-connected firms such as Baidu will help their cause.
Foreign Brands Losing Lustre in China: Local FMCG brands gained more ground than foreign brands last year, with local market share growth strongest in skincare, fabric softener, colour cosmetics and infant formula, juice and biscuits. Foreign brands increased their share in the toilet tissue, beer, chewing gum, hair conditioner and chocolate segments.
Lego Builds on Strong Success in China as Playful Children Discover Their Creative Side: Lego’s Mainland sales have surged more than 50% over the past two years as parents recognise that playing with interlocking plastic bricks boosts inventiveness.
A Significant Group of Consumers is Ditching Android for the iPhone: 53% of Chinese who own an iPhone switched from an Android according to a CLSA survey. 32% of Android users who plan to buy a new phone in the next 12 months will switch to the iPhone. This is representative of Chinese consumers upgrading their products across a number of categories. It comes at a time when Android-based Samsung is facing more bad news in China, with lawsuits for loading its mobiles with unneeded and unwanted apps.
Chinese E-Commerce Loophole Set to Close: Many Western companies have been avoiding strict Chinese consumer laws, such as the requirements for animal testing, by selling to consumers for “personal use” directly via e-commerce. This loophole is likely to be closed by the Chinese Government.
McDonald’s, KFC Go High-Tech In China With Customization, E-Payments: KFC is hoping to resonate more with China’s lucrative youth segment by accepting Alipay, rolling out Wifi and launching a menu app. Likewise, McDonald’s is piloting its “Create Your Taste” burger customisation in three Shanghai stores.
Top Chinese Wines Have Gone From Bad to Good. Will They Become Great?: China now has more acres of vineyards than France. Locally grown wines are getting more impressive too.
Xu Jinglei Being Sued for Making False Health Claims About Cookies: Actress and director Xu Jinglei is being sued for endorsing “river monkey mushroom stomach cookies,” claiming they are good for the stomach, when they are no different from other cookies.
JD.com’s Richard Liu Buys Into Australia’s Biggest Milk Processor Murray Goulburn: JD.com snapped up 4.6% of Australia’s dairy cooperative trust for A$20 million, not long after launching an “Australian Mall” on the platform while CEO Richard Liu was in Australia.
U.S. Tops Chinese Tourists’ Satisfaction List in Q2: Chinese travellers are most satisfied in the United States – 3.1 points higher than the average rating of 77.86 for 24 countries, according to a China Tourism Academy survey. Singapore topped Asia, with Mongolia and India reaching record highs. Complaints mainly focused on public services and travel agency services, such as a lack of Chinese translations of public information and poor transportation.
Opportunities for Growth In Challenging China Market: Chinese consumers expect to spend more on children’s clothing, women’s casual, shoes, men’s casual and health, beauty & accessories over the next 90 days according to analysis by Prosper China.
Have Chinese Consumers Started to Look Beyond Beauty Products?: By 2013, only 5 million Chinese women had some form of cosmetic surgery. By the end of this year, an estimated 7 million will have, and 11 million by 2018. 15% of Chinese women are considering using plastic surgery for anti-aging, with the highest rates in Tier 1 & 2 cities.
Eight Surprising Facts About The Chinese Luxury Consumer: Eight characteristics about Chinese luxury consumers: 1. They’re younger than you think; 2. They’re not as well off as you’d expect; 3. Most are married and have children; 4. They’re mobile natives; 5. They all have WeChat; 6. They prefer Chinese brand names; 7. They like to shop at retail; and 8. Alipay is an important method of purchase.