What China's Pollution Means for Brands

In January 2013, Bloomberg reported that Beijing's pollution was worse than the average US airport smoking lounge. The study was one of the most polarising accounts of the severity of China's pollution at the time.

By 2014, the Chinese Government, state organisations and consumers were talking much more openly about the problem.  State organisations such as the Shanghai Academy of Social Sciences, published statements claiming that Beijing was "uninhabitable for human beings" and the China Agricultural University suggested that China would suffer conditions "somewhat similar to a nuclear winter" if smog persisted.  Consumers became more aware that the soupy mist wasn't fog, but a toxic vapour that could harm their health.

Sales growth of products such as air purifiers, face masks and even canned air soared into triple figures.  China Skinny started noticing a wholesale movement of consumers seeking healthier products, of which pollution was a strong contributor.

In addition to the obvious effects of pollution such as lung cancer, asthma and other respiratory diseases, there have been a number of other harrowing side effects such as increased obesity, Alzheimers and lower sperm counts.  A recent study found bacteria in Beijing smog can lead to antibiotic resistance. Gulp.

Whilst China's water and soil pollution continues to worsen, the result of Government policy and enforcement and slowing manufacturing, energy and construction sectors has seen air pollution improve slowly since 2014 - it's gone from really, really, really hideously bad, to just really, really hideously bad.

So what does this mean for brands selling to Chinese consumers? With every new study revealing something evil about China's pollution, it provides more emphasis on being proactively healthy - growing consumption of supplements and vitamins, healthy food grown in clean environments, and sports and fitness products. Tourism is also a beneficiary, where Chinese choose clean spots over polluted domestic destinations to enjoy their free time. Parents see overseas education institutions more attractive and migration increases - and foreign real estate sales as a consequence.

For those pinning their hopes on a positioning strategy revolving around 'clean and green' to lure Chinese consumers, there are a million other brands doing the same. Whilst it is important, you probably want to include other points of difference as well - China Skinny can assist with that.  

Here are this week's news and highlights for China:

 Environment

Scientists Find Bacteria in Beijing Smog that Lead to Antibiotic Resistance: To further worsen China's long history of antibiotics abuse, it appears its pollution also contributes to antibiotic resistance as well as resistance to carbapenems, a class of last-resort antibiotics for treating challenging bacterial infections. China is forecast to have 1 million premature deaths each year because of antimicrobial resistance by 2050.

'Green' Sector to be 3% of GDP by 2020: Official: The energy conservation and environmental protection plan for the 13th Five-Year Plan period (2016-2020) will be unveiled soon, with the green sector estimated to account for 3% of GDP by 2020, becoming one of the pillar industries of China's the domestic economy.

 Chinese Consumers

New 'Two-Child Policy' Driving Mini Baby Boom in China: The number of children born in China is set to rise by 5.7% this year compared to 2015.  According to the National Health and Family Planning Commission the growth is the result of the introduction of the country’s new two-child policy in 2015.  What didn't seem to get much credit is the current Year of the Monkey follows the undesirable Year of the Sheep, so there was going to be a notable uplift anyway.

Digital China

China's Biggest E-Shoppers Spend $45,000 a Year Online: Infographic about Alibaba's APASS (Alibaba Passport) membership program to cater for high spenders who are assigned personal account managers and invited to special events like wine tastings and automobile test drives. About 100,000 members have been admitted, and must spend at least ¥100,000 ($14,500) a year, but on average, they spend about $45,000.

Alipay’s Newest Chat Feature Lets Men Pay Pretty Female Strangers and Ask Them For Sex: Alibaba's continued aspirations to break into China's social media scene looks to have seen its most successful attempt yet. The company added 'Circles' to its AliPay app bringing together over 100 special interest groups. The most popular group “Campus Diary,” was viewed by more than 14 million people within 24 hours of launching. Curiously, the group only allowed female users to post content, although anyone could praise and tip, causing a slew of soft porn pics and apparent prostitution.

China Cross-border Ecommerce Industry Overview, 2017-2021: The total trade value of China's cross border ecommerce is expected to grow from ¥4.8 trillion ($700 billion) last year to more than ¥6 trillion ($870 billion) this year, and ¥14 trillion ($2 billion) by 2020. Chinese consumers purchased cross border goods from three countries on average with USA, Japan, Germany, South Korea, Australia, Holland, France, the UK, Italy and New Zealand being the top-10 sources.

Food & Beverage

More Chilean Wines Cheaper to Chinese Consumers: As of this year, Chinese consumers can expect to find a wider range of Chilean wine at a lower price, now they are tariff-free following ten years since the FTA was signed. More than 20 Chilean wine companies now do business in China.

China Food Rules Dent Foreign Baby Formula Makers: Bellamy’s Australia shares fell 43% after it said it was experiencing a temporary hit to sales as competitors flooded the market with cheap products ahead of the introduction of tougher standards next year. New regulations from 1 January 2018 will require all cross-border ecommerce sellers of infant formula to obtain a “product registration certificate” from China’s food and drug administration.

Chinese Tourists

Baidu Doubles the Reach of its Maps Service to Tap into China’s Global Travel Boom: Baidu Maps, which claims 70% of Chinese mapping market with 348 million active users, is adding 106 new countries to take the total to 209 countries and regions. The expansion represents China's phenomenal growth in outbound tourism, and an increasingly adventurous traveller.

Bank of China, Global Blue Team Up on VAT Refund Scheme: As Beijing continues its plan to “repatriate” Chinese consumers’ luxury shopping, the Bank of China is teaming up with international tax refund company Global Blue to start a value-added tax refund program in China available to both international visitors and returning Chinese travellers.

 Entertainment

Big Bet On Toys Could Make Wanda Billionaire Even Richer: Chinese billionaire Wang Jianlin’s already got film and television production companies, theme parks and cinemas. Now, he’s betting on toys. Non-theatrical sales are predicted to rise to as much as 70% of industry globally within five years. Few believed merchandise could work in China because of rampant knock-offs, but Wanda's Mtime sold ¥100 million ($14.5 million) worth of 'Warcraft' toys, souvenirs and clothes through its website, retail stores and mobile apps.

Will New Censorship Kill Chinese Filmmaking?: From March 2017, Chinese movies must not promote gambling, superstition, drug abuse, violence nor teach criminal methods, and should "serve the people and socialism."

 Investments

China’s Foreign Investment ‘Shopping Spree’ Over as Beijing Moves to Slash Capital Outflow: Beijing is embarking on a massive policy shift designed to stem ­capital flight by curbing outbound investment. Payments of more than $5 million will have to be cleared by central authorities, likely to put an end to a trophy-asset shopping spree by well-connected companies such as Anbang Insurance and Dalian Wanda.

 Fashion

More Chinese Models, Designs than Ever Before Hit the Runway for Victoria's Secret Fashion Mega Show: Last week's Victoria's Secret show in Paris had $3 million bras, Lady Gaga performances, and more Chinese influence than ever before including four Chinese models. Chinese media applauded the use of Chinese elements labelling it "very ambitious" and "the latest ethnic trend," calling the inclusion of an Imperial robe "appropriate" since the runway show took place in a former French palace.

 Luxury

Luxury Industry Can’t Count on China’s Reverse Silk Road: China accounts for 15% of global GDP, but 30% of expenditure on luxury products. Although growth in luxury spending has slowed down in China over the past few years, industry forecasters still pick China - particularly its lower tier cities, rather than new markets like India or Africa, as the front of future riches in the segment.

That’s the Skinny for the week! See previous newsletters here. Contact China Skinny for marketing, research and digital advice and implementation.