Making Sense of China's Economic Indicators
Batten down the hatches! China's GDP growth is expected to slow to 7.2% this quarter year-on-year from 7.5%. While those growth rates would have most countries salivating, it is not quite the blistering expansion that China has enjoyed since last millennium. Couple that with luxury sales, which are expected to decline 1% in the Mainland this year, and house prices dropping 1.3% in September - the sector's first yearly fall, and things don't sound overly positive.
For some categories, the golden run may be over. Yet, if we scratch the surface, most products and services targeting consumers have plenty of reasons to be upbeat about China.
Retail spending was up 12% in the first nine months of this year, growing two thirds faster than overall GDP. Online retail grew 49.9%. That's on the back of a 10.5% annual rise in disposable incomes (8.2% in real terms) and an ongoing trend to spend on one's self, particularly among the high earning youth.
Certain segments such as international tourism are forecast to grow from around 100 million outbound tourists last year to 220 million in 2017 due to rising affluence, easing visa restrictions and more Chinese willing to spend on experiences.
As consumers become increasingly health-conscious, they're prepared to pay more for safe and healthy imported food and beverages. Although the luxury sector is declining in the Mainland overall, sales of less mainstream brands are picked to double by 2017. And lowering residential property values in the Mainland is driving Chinese home buyers to snap up homes abroad at unprecedented rates - just ask Cher. Growth in fast fashion has brands like Zara, Uniqlo, H&M and Gap expanding like no tomorrow.
The number of households in China's cities are forecast to climb from 256 million in 2012 to 357 million in 2022. According to McKinsey, the portion of those households that will be affluent and upper middle class is expected to grow from 17% to 63% over that period - that's a lot more consumers with the discretionary income to buy premium Western goods and services.
There's no shortage of growth areas for those businesses who read the market, adapt and have a strong digital presence.
We hope you enjoy this week's Skinny.
Chinese Consumers
Trade Growth Remains a Huge Opportunity for Business: China Skinny's Mark Tanner talks on ABC's The Business about opportunities with China, particularly around pollution.
China's Retailers Need Digital Agility: Online retail is growing 49.9% a year, about four times faster than overall retail in China. Traditional retailers need to be more agile to keep up. Those who embrace online to offline integration and utilise data stand the greatest chance of success according to Forrester.
China's Favourite Foreign Celebs: From Audrey Hepburn to Nicolas Cage: Kobe Bryant, David Beckham, Angelina Jolie, Lionel Messi and South Korea's Lee Min-ho round out the top-5 most engaging foreign celebs in China. 20 years after her death, Audrey Hepburn still comes in at number 7, just ahead of Japanese porn star Sola Aoi.
China Spends $1.5 Billion Pampering Pets: China's pet care industry is expected to grow 43% over the next 5-years to $2.2 billion. Premium pet food is on the rise, as are dog services such as acupuncture, Chinese herbal remedies, fur dyes and perms, pretty manicures and dog yoga (doga). 7% of Chinese households have a dog and 2% have a cat.
Internet, eCommerce & Mobile
Xiaomi Sold 18 Million Smartphones in Q3 2014: Xiaomi sold 70% of their smartphones online, valued at more than ¥10 billion ($1.63 billion). The company's smartphone market share was just 2% behind Samsung's 23% for the first 5-months of 2014. Xiaomi hopes to double last year's Singles Day sales and shift 600,000 units online over the 24-hour period.
Food & Beverage
Chinese Consumers Eat More Meat, By Calories, Than Americans: This surprised us, but according to a National Geographic study, Chinese eat more meat calories than Americans on average, mostly from pork. Chinese meat consumption has grown 1,442% in the past 50-years, with overall calorie intake doubling. Chinese consume about 84% of the calories of Americans per capita, but a much lower portion of that is fat and sugar. In related news, Chinese consumers eat the most meals out of home and placed the highest value on balanced, healthy eating according to a global survey.
McDonald’s China Challenge: Rising Competition: McDonald's 2,000+ restaurants are said to have contributed to the chain's 9.9% drop for same store sales in AsiaPacific, Middle East and Africa for the past quarter. Food scandals, coupled with increasing competition and loss of the novelty factor all contributed to the fall.
Environment
Boeing and Chinese Partner to Make Jet Fuel From 'Gutter Oil': Great to see something positive coming from gutter oil - hopefully it will divert some of the toxic grease being used by restaurants and street vendors.
Chinese Tourists
Chinese Couples Fly to Korea for Wedding Photos: Korea joins the list of popular spots for Chinese couples to get their wedding photos, with numbers expected to grow almost 50% to 10,000 this year. Locations from popular soaps are common backdrops.
Sports
Ambitious Nationwide Plan to Develop Sports Industry - and Get People Fit: China is aiming to raise the value of its sport industry to ¥5 trillion ($840 billion) by 2025 - almost double its 2012 share of GDP. Foreign companies currently account for 23% of the China's sporting goods market. The Government is looking to reduce the red tape required to host sports events to encourage the involvement of private capital and sports companies listed on the stock exchange.
Property
Even Cher is Worried About Chinese Investors in American Real Estate: Cher has been Tweeting anti-Chinese property messages, suggesting a boycott of Zillow who recently made listings available to Chinese. China accounted for $22 billion of the $92.2 billion foreigners spent on US real estate for the year ended March 2014 according to the National Association of Realtors.
Is Xi Turning His Sights From Corrupt Officials to Creative Architects?: China's president Xi Jinping has hit out at China's creative modern architecture with buildings such as Beijing's stunning CCTV building not aligned with his vision of China.
Auto
'Connected Car' Rewiring Consumer Demand: China's love for tech and the Internet is particularly relevant for cars. 87% of Chinese consumers understand the concept and products for 'connected cars', versus 57% of American consumers according to Nielsen. Of the 42% of Chinese drivers who have telemetrics in their cars, 94% use them.
Luxury
Bain & Company’s 2014 Annual Global Luxury Study: China's luxury spend looks to be showing a negative trend for the first time due to the Government's austerity campaign and changes in consumption habits. Less mainstream brands are bucking the trend and are expected to double by 2017. Chinese outbound tourist spending on luxury goods grew 10% in the first eight months of 2014.
That's the Skinny for the week! On the to-dos this week, why not contact China Skinny to discuss how we could help with your marketing, online initiatives or research to take advantage of China's opportunities. Just email us at info@chinaskinny.com or call us at +86 21 3221 0273 so we can learn more about your objectives and let you know how we can help.
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