China News This Week: Wednesday 8 April 2020

This week's China market and marketing news:

Food & Beverage

Starbucks Rival Luckin Coffee Faked Nearly Half of its Roughly $732 Million in Sales: An internal investigation that found the Chinese coffee giant's COO fabricated more than $310 million worth of transactions between Q2-Q4 2019.

The Fastest-Growing Company I've Ever Seen in 5 Charts: 5 charts from January this year illustrating the fictitious rise of Luckin Coffee by store numbers (that wasn't fake), customers, items sold, revenue and gross profit growth.

Luckin Coffee’s Alleged Fraud Has Some Silver Linings (and Even More Bad News Too): After Luckin's fraud allegations, app downloads soared to three times their daily record at 300,000. “As someone living on a limited budget, I don’t care about whether the company’s financial practices are illegal or not. I just don’t want to lose an affordable alternative to Starbucks,” a typical Weibo comment reads.

Sanitary Standards Vital for Fruit Exports: Demand for fresh fruit continues to be strong in China as consumers see them as essential to maintaining health. But to safeguard the export market, exporters should apply high sanitary standards to ensure shipments are not tainted with the coronavirus. Exporters in Thailand are urged to make sure workers wear face masks and to supply enough hand gel for food pickers and packers to have their hands cleansed frequently. Some companies have a policy of firing workers who intend returning home during the Songkran festival as this will increase the risk of the virus.

A Beijing Success Story, Virus Crisis Wine Trends, 2020 Import Customs Data & More: Customs stats for January and February: year-on-year wine imports for bottled wine are down 25% by volume and 22% by value. This is on top of drops of 11% by volume and 14% by value in 2019. Given the vast majority of restaurants, bars and hotels were shut or underutilized in March, and the amount of unsold stock in the pipeline, don’t expect a quick rebound. Home drinking and 'cloud wine' sessions appear on-trend. Lowering prices is a strategy many wine importers and distributors are implementing to boost sales, however there are more creative solutions in the craft beer, spirits and cocktail bar trades.

Coronavirus

Wuhan Celebrates the End of Its Coronavirus Lockdown After 76 Long Days: As of midnight last night, Wuhan's 11 million residents were be permitted to leave without special authorization as long as they have a green QR code on their smartphone indicating they are unlikely to have the virus. The occasion was marked with a light show on either side of the broad Yangtze river, with skyscrapers and bridges radiating animated images of health workers aiding patients, along with one displaying the words "heroic city." Along the embankments and bridges, citizens waved flags, chanted “Wuhan, let’s go!” and sang capella renditions of China’s national anthem. Meanwhile, China reported no deaths yesterday - the first time since records began.

The State of Chinese Commodities Shows Recovery Taking Hold: Bloomberg Economics estimates that most of China was 90%-95% back to work at the end of last week, noting pick-ups in the steel market, construction activity and crude processing. Coal power plants and oil refiners are operating near 2019 levels. China’s drivers have returned to the roads in greater numbers than this time last year as social distancing encourages more people to use their own cars instead of public transportation. Drivers are still avoiding non-essential trips.

Nearly Half a Million Chinese Companies Close in First Quarter as Pandemic Batters Economy: More than 460,000 Chinese firms closed permanently in the first quarter, with more than half of them having operated for under three years. Around 3.2 million businesses were set up over the same period, however this was a 29% drop from a year earlier. Most of the new companies were set up in the traditional centres of economic power and close to half of them were in distribution or retail.

 Chinese Consumers

Sexism and Gender Stereotyping in Chinese Advertising: While Chinese women have undeniably acquired greater decision-making power in both their households and business in the past decade, their improved economic status has done little to uproot the deeply ingrained sexism in Chinese society, where women are objectified and expected to conform to ultra-traditional gender roles. These regressive attitudes toward women are most clearly evident in Chinese advertising, which often perpetuates harmful gender stereotypes.

China’s ‘Daigou’ Got Rich Shopping Abroad. Now, They’re Going Broke: The daigou market is worth billions of dollars a year and by some estimates employs over 1 million Chinese. Yet trade has slowed to a trickle, particularly for the luxury trade, as countries implement travel bans and compulsory quarantine periods, shutter shopping malls, cancel flights, and suspend international deliveries amid the COVID-19 pandemic. Anecdotally, the daigou trade for health and vitamins and Mum & Baby products remains strong.

China Consumer Demand for Online Services is Recovering: A pickup in lifestyle services shows that life is returning to normal in China, and that consumption is increasingly digital according to Alipay data. Food and entertainment companies, such as groceries, bubble tea shops, and movie theatres, saw different degrees of business recovery. Online sales for dental and cosmetic medical services rocketed 3,000% from March 18 to 27 compared with the previous 10 days

Digital China

Can Virtual Influencers and Avatars Change the Face of Chinese Ecommerce?: On December 31, one of China’s biggest pop stars Luo Tianyi played the classic guzheng instrument for Bilibili’s New Year’s Eve Gala before millions of mostly post ’90s-born viewers. The catch, is that Luo can never actually play "live" — she is a virtual pop star created by a Shanghai technology company. The trend is only starting to manifest — and a number of factors, both cultural and technological, mean that it’s one that is fast picking up speed.

Chinese Tourists

China’s Huangshan Mountains Swamped With Visitors as Country Tries to Ease Coronavirus Lockdown: Pictures of packed trails over the long weekend highlight difficulties in maintaining social distancing while trying to get back to normal, however indicate positive signs of consumers returning to normalcy. Yellow Mountain in Anhui province said it would be forced to close on Sunday after exceeding its 20,000-visitor limits. Hotel bookings and railway passenger flow on Saturday was largest since January.

 Investments & Property

China’s Housing Market Springs Back to Life as Sales in 30 Major Cities Triple with Coronavirus Crisis Abating: Property sales in 30 tier-1 and tier-2 cities triple in March from February in sign coronavirus crisis is abating. However, sizzling sales in cities like Shenzhen, Chengdu, Fuzhou, Hangzhou, Huaian, Yangzhou, Jiaxing are Shantou are unlikely to compensate for expected decline in nationwide sales this year.