Here are this week’s news and highlights for China:
China Economic Update – May 2018: The World Bank’s latest update points to China’s GDP growth still bubbling along at 6.9% last year and 6.8% in Q1 this year. Consumption remains China’s growth driver, although investment has rebounded from 2017 lows, particularly in the private sector.
China’s Q1 Consumer Confidence Index Reaches 10-Year High: Nielsen’s China Consumer Confidence Index (CCI) climbed one point from Q4 in 2017 to 115 points in Q1 – the highest score over the past 10 years. Job prospects surged to 77 up from 74 in the last quarter. Personal finance and the willingness to spend maintained steady growth, with both figures increasing one point to 71 and 62 respectively.
Consumption to Replace Investment as Key to China Growth: In 2000 US consumption levels were 13 times higher than China. They are now only three times higher and the gap is closing.
Increasingly Wealthy Chinese Go Upmarket in Consumer Spending: An estimated 22% of Chinese expenditure goes to food and beverage with trading up happening across every FMCG category. Cosmetics, spirits, dairy, haircare, rice, fresh produce, beer and ice cream are seeing the highest portion of demand for premiumization. The trading up should be good news for foreign brands selling premium products, but they have been slower to react than domestic competitors.
Chinese Consumers Show Strong Demand for Imported Products: Over 20% of consumers claim imported products account for 30% of their total consumption according to a Ministry of Commerce survey. Cosmetics are the most popular imported product, followed by maternal and infant supplies, watches and glasses. 31% of respondents expect to increase spending on imported goods in the next six months. 24.4% of commercial enterprises like retailers said sales of imported products account for over half of their total sales. Chinese firms plan to increase imports for over one third of 92 surveyed product items. Popular imported products include wine, fresh fruit, beer and milk.
Latest Report Links Brand Value and Customer Experience to Business Growth: The BrandZ Top 100 Most Valuable Global Brands 2018 report shows customer experience has never been more vital for the bottom line. In a world where purchasing decisions are increasingly made by algorithms, brands need to encourage proactive selection by delivering consistent, meaningfully different products and experiences. Building branding spans every touch point and needs to match the need of a more complex relationship.
Quick Tip for China’s Video Makers — Keep It Short: One of the fascinating insights from the latest Mary Meeker’s annual Internet Trends is that while time spent on short videos (under five minutes) in China climbed 360% in 2017, the growth was largely at the expense of longer form video, and well ahead of gaming and live streaming. Although younger Chinese install more than 20 apps apiece on their phones; 76% of all consumers have just a single short-video app – Douyin and Kuaishou being the most popular. The apps both have over 100 million daily active users and an average 52 minutes spent per viewer on their apps each day, with approximately half of all monthly users returning on a daily basis. The full Mary Meeker report is here, with China-related content from page 212. A good summary is here.
Chinese Equivalent to Netflix? No, We Want to be China’s Online Disney, Says iQiyi CEO: China’s largest online video-streaming service says its limited international appeal means it won’t follow the “horizontal” expansion of Netflix worldwide, rather iQiyi will focus on a “vertical” business model to go deeper in the Chinese market. It plans to create a Disney-like ecosystem of businesses creating games and merchandise for cartoons and TV dramas. China’s online entertainment industry nearly trebled in the four years to 2016 to ¥157 billion ($24.5 billion) and is expected to become a ¥690 billion ($107.3) market by 2022. iQiyi has about 61 million paying subscribers, out of 527 million monthly active users.
WeChat’s Closed Beta Redesign Hints at the Future of the App’s Look: The user interface of WeChat’s Moments, Official Accounts, and chat windows are likely to change with less of the big solid grey bar, and a thinner, more transparent status bar allowing a little more screen to woo users with visuals. Other new possible features include the ability to find recently-used emojis and new functions for double-tapping. WeChat has also introduced AR-based real time translation – cool!
Over-Reliance on Chinese Ecommerce Platforms Means Losing Local Knowledge and Risking Future: At face value, using Alibaba would seem a smart move for an exporter seeking to test the waters in China without spending too much money on marketing and logistics. But this approach risks brands losing touch with the market and providing Chinese consumers with that they actually want.
China’s JD.com Steps Up Imported Wine Business: JD is stepping up its imported wine arm with a “one-stop service” cutting out the middle-man with direct sourcing from wineries to Chinese consumers. The move is partly motivated by counterfeit or copycat wines appearing on online platforms, which JD believes direct sourcing will guarantee authenticity. JD.com sold 40 million bottles of wine in China last year; 34.4% French, 23.9% Chinese and 19.9% Australian. The majority of wines sell for ¥100 ($16) and ¥200 ($31).
Sexist Comments Flourish on Airbnb in China: Once regarded as a fun social aspect of online services in China, the proliferation of reviews talking about women’s looks – from guests being called “a babe” to comments on a host’s sex appeal – is now drawing fire as a potential safety hazard. While China has long tolerated sexism, recent scandals in the sharing economy such as Didi have triggered a backlash.
Fan Bingbing’s Leaked Contract Breaks the Chinese Internet: China’s internet has been divided following TV personality Cui Yongyuan’s release of what appeared to be Fan Bingbing’s employment contract – blurred-out in places – stating acting fees of ¥10 million ($1.6 million) and ¥50 million ($7.8 million) for four days of acting, plus conditions such as the right to amend the script and refuse hairstylists, a personal makeup artist commanding a monthly fee of ¥80,000 ($12,440), access to two luxury cars, her own voice artist, and a daily food allowance of ¥1,500 ($233). Aren’t these terms quite light relative to many Hollywood stars? Fan has been China’s highest-paid celeb for the past four years and following Cui Yongyuan’s Weibo posts, she is now being probed for tax evasion.
Tmall, Intersport Open New Retail Megastore in Beijing: Switzerland-based Intersport has co-branded a two-story, 1,300 square metre store in Beijing complete with interactive features such as an AI Shopping Assistant interactive mirror that recommends related accessories or items that complement the tried-on clothes. A 24-hour interactive window display means people can shop around the clock using motion-sensor technology that distinguishes gender and approximate age to recommend shoes for consumers passing by.
Luxury Brands Are Repeating the Mistakes of Smartphone Marketers: Like no other nation on earth, phones dominate life in China, and whilst their functionality is becoming ever-more highly evolved and dynamic, mobile phone advertising is the opposite – a one dimensional focus on Selfie quality. Luxury brands are taking a similar one-feature approach, with the handbag becoming the stand-in for the brand, leaving little scope for differentiation.