Liberal Global Trade, with Chinese Characteristics

Happy Year of the Rooster. Welcome back from what was a consumption-driven Lunar New Year break with spending up 48.1% from last year.

Much of the crowing leading into the Rooster was about China taking the lead in driving global trade as other major economies speak of regressive trade policies.

"Pursuing protectionism is just like locking oneself in a dark room. Wind and rain might be kept outside but so are light and air," noted Xi Jinping at Davos.  Whilst President Xi's speech and much of the subsequent media commentary is cheerleading China's stance on trade, it should be tempered with some facts and developments illustrating that China may be coming to the party, but the punch could still do with more fruit.

While the much-heralded Free Trade Agreements can be a boon for exporters, many non-tariff measures such as regulatory barriers, inconsistent application of ­import rules between different ports, and lengthy, uncertain processes to register products and ­export facilities still throttle trade. Exporters also commonly get caught up in political differences, as South Korean brands recently discovered.  Regulations often favour local players.  Take the cosmetics industry for example - foreign brands have to test on animals to sell in China, while local brands don't. The all-present state media propaganda also regularly advantages domestic companies.

One of the more curious recent developments was last month's announcement that China would be making it even harder to use a VPN to access websites outside the Great Firewall. China has its reasons for its Internet policies, but its timing around President Xi's Davos address was interesting. As Jack Ma will profess, few things assist international trade more than unobstructed Internet access.

One category that is likely to see less trade is residential property investments overseas.  New policies aimed at slowing China's capital flight appear to be taking effect - in the short term at least - much to the relief of first home buyers in cities like Vancouver, Los Angeles, London, Sydney, Melbourne and Auckland.

Nevertheless, Chinese trade has come forward in leaps and bounds since opening up in 1979 and is generally moving in the right direction. Countless foreign brands from wagons to wine have enjoyed its benefits. With the number of Chinese earning more than $35,000 a year set to quadruple over the next decade, many more brands are likely to benefit too, particularly those who understand their target market and the tools available to reach them. Agencies like China Skinny can assist with that.  

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

 Chinese Consumers

Chinese Consumers Spend More During Lunar New Year Holiday: For those wondering if Chinese consumers are still upbeat, their domestic and international spending grew to ¥462 billion ($67 billion) during the Lunar New Year holiday, 48.1% more than last year according to UnionPay. Most of the spending went on dining, shopping, travelling and transport.

Global Retailers Try to Attract Chinese New Year Consumers: From Bloomingdales to watch makers, more and more brands globally are paying homage to China's Lunar New Year.

Chinese Households With Incomes over $35,000 Expected to Surge 300% Over Next Ten 10 Years: Chinese households earning more than $35,000 is forecast to grow from 40 million today to 160 million in 2025 according to Oxford Economics.

Digital China

China's Great Firewall is Doubling up on VPN Regulation: Just as China has been trumpeting global trade, authorities are making it even harder to access websites outside the Great Firewall through a 14-month campaign targeting the use of virtual private networks (VPNs) and other "illegal" internet practices.

Data Reinforces that WeChat IS the Chinese Internet: Further reinforcement of WeChat's significance in the China market, with over 80% of downloaders using it weekly opening it an average of 24 times a day, with embedded functions and apps now seeing countless tasks done without leaving the app. WeChat users sent a record 46 billion digital Hongbaos (red envelopes) between 27 Jan and 1 Feb - 43% more than last year.

Food & Beverage

Ann Bierbower Discusses China's Food Scene: China Skinny's Ann Bierbower talks to CCTV's China Global Television Network (CGTN) about food trends in China.

Ten Innovative Food and Drink Products Launched in China in 2016: From baby water to black cereals and even beauty-enhancing juices, innovations in China’s food and drink market were particularly dynamic in 2016.

Identifying the Next Wave of Chinese Wine Drinkers Will be Key to Australia’s Success: Australian wine had a good year in 2016, growing 40% from 2015 with sales of A$520 million. 10 years ago it was A$27 million. The next step to continued growth is looking at people who are light buyers or non-buyers and to really understand how to grow the demand. 93% of regular wine drinkers are aware of France as a winemaking country, with awareness of Australia the second highest at 70% [paywall].

Chinese Tourists

5 New Travel Startups From China that Challenge the Status Quo: Chinese travel start-ups are innovating, not cloning, these days with businesses offering virtual reality to sell luxury travel in physical stores, integrated workflows for corporate travel planners, and an Uber-like user interface for an old-school wholesaler model.

Luxury Hotels for Furry Guests Boom: Lavish pet hotels were fully booked over the Lunar New Year charging as much as ¥580 ($85) a night for a pooch.

 Property

Travelling Chinese Consumers Plan To Hunt For Property During Chinese New Year: 57% planned to purchase property in the country they travelled to over the Lunar New Year and an additional 26% would consider doing so according to a small Juwai survey.

China’s Army of Global Homebuyers Is Suddenly Short on Cash: Less than a month after China announced fresh curbs on overseas payments, anecdotal reports from realtors, homeowners and developers suggest the restrictions are already weighing on the world’s biggest real estate buying spree. All buyers of foreign exchange must now sign a pledge that they won’t use their $50,000 quotas for offshore property investment. Violators will be added to a government watch list, denied access to foreign currency for three years and subjected to a money-laundering investigation.

China’s Millionaires Less Inclined Towards Emigration as Economy Seen Improving: The proportion of mainland millionaires who say they won’t emigrate has risen for a third straight year to reach a record high, although 55.5% still say they would like to move to another country according to Hurun.

Cars

In China, American Brands Cadillac, Jeep, Buick And Lincoln Score Best Year Ever: American automakers and their Chinese joint venture partners sold a record 5.3 million vehicles in China in 2016, with Jeep's sales growing 94%, Ford up 14% and GM increasing 7%. German luxury makers still control 75% of China's premium vehicle market.

 Luxury

The Chinese Rediscover Luxury: Xi hasn’t ended his anticorruption drive, but its chilling effect on spending is easing. A rebound across all luxury categories is now in progress, particularly for sales in Mainland China, with everything from Swiss watch imports, Porsche sales, Tiffany jewellery and Rémy Cointreau reporting positive results.  Foot traffic in opulent Shanghai malls rose in the second half of 2016.  This sentiment is echoed by wealthy Chinese, whose interest in luxury goods has increased 20% according to Hurun.

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