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CHINESE MARKET

CHINESE MARKET RETURNS TO STRONG GROWTH,
WITH INCREASING RELIANCE ON DOMESTIC CONSUMPTION

 

Still cut off from much of the  world because of its government’s “no-COVID infections” policy, China’s economy nonetheless appears no worse for wear, with its retail sector even appearing to have returned to the double-digit growth that typified it more than five years ago.

The economy in general seems as solid as ever, albeit more insulated, in part because because the self-imposed isolation as a result of pandemic. With less input relatively from exports, the country is forecast to be increasingly reliant on state investment and domestic consumption, but there will shortage of those. 

According to the British consultancy Centre for Economics and Business Research (CEBR), China’s GDP should rise at an average annual rate of 5.7 per year through 2025 and then at 4.7 percent annually until 2030. At such a pace it will overtake the United States as top ranked economy by 2030.

It is believed that China’s total GDP stood at about $18 trillion in 2021, still well below the $23 trillion of the United States.

Insider Intelligence reported that total retail sales in China grew by 11 percent in 2021, registering its strongest growth since 2017. This can be attributed to brick-and-mortar growth, which rose to 8.1 percent

A Chinese city in development

Photo by Jezael Melgoza on Unsplash.com.

CHINA BECOMING MORE CHINESE

The country was already reducing its reliance on foreign consumption before the onset of the COVID pandemic, with much of its economic growth generated by domestic consumption.

China’s domestic consumption accounts for 60 percent to 70 percent of the country’s GDP growth, and this has led to a fall in the trade surplus as a percentage of GDP from 8.7 percent in 2007 to 0.8 percent in 2018.

Furthermore, as China’s consumer market and domestic supply chains have matured, more goods and services are being produced and consumed domestically, and a lower proportion is exported.

According to McKinsey, China is becoming more Chinese.

This does not mean that it share of global consumption has fallen. On the contrary, it rose from 9 percent during the first half-decade of the millennium to 23 percent during the 2013-2018 period. In the luxury segment, Chinese held a 32 percent share of global consumption in 2018, and it is expected to account for 40 percent by 2025.

HOME GROWN BRANDS BENEFIT

Massive economic growth, a growing wealth base and a more inward tendency suggest that among the primary beneficiaries will be China’s on home-grown brands.

According to the 11th edition of Kantar BrandZ’s ranking report, the Top 100 Most Valuable Chinese brands have gained 57 percent in value in 2021, reaching a total value of $1.56 trillion. The largest among them is Tencent, the world’s largest gaming company and owner of the ubiquitous WeChat social application. Unsurprisingly, the second largest brand was Alibaba.

The largest Chinese jewelry business is Chow Tai Fook, which reported that during the final quarter of 2021 sales rose 31 percent when compared to the same quarter in 2020. It attributed the increase to strong domestic consumption.

Chow Tai Fook

China’s largest jewelry company, Chow Tai Fook, opened 432 new points of sale opened during the final quarter of 2021, bringing the chain’s total number of stores to 5,646.

Chow Tai Fook’s sales just about matched reported by the National Bureau of Statistics of China, which reported that during the period of January though November, sales rose by 34.1 percent year on year.

But it was the growth in new sales outlets on the Chinese mainland that was Chow Tai Fook’s most impressive achievement, with 432 new points of sale opened, bringing the chain’s total number of stores to 5,646.

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