Chinese Consumer Spending Trends in 2022
According to a recent analysis by Jefferies, the majority of consumers in China are hesitant to spend big right now. The analysts found that the only thing that could prompt increased expenditure among these consumers would be a 20-30% increase in property prices or salaries. However, this seems unlikely given the current economic climate in China where home prices have fallen, and the focus is more on job layoffs rather than promotions.
Due to these trends, Alibaba has announced that it will be replacing its traditional Singles Day shopping event with a promotion called the “year-end good price festival”. This shift may reflect a changing consumer mindset, with a focus on daily essentials and products perceived to be of high quality.
Traditionally Chinese brands such as Kweichow Moutai and Mengniu are poised to benefit from this trend. Jefferies has listed them as top picks for the China consumer in 2024, predicting significant upside for both companies.
In addition to traditional Chinese brands, other companies identified as top picks for playing the Chinese consumer market next year include Miniso, China Pet Foods, and Gongniu. Each of these companies is expected to capture a growing domestic market and show significant upside potential.
The market for domestic and international brands in China has been challenging this year, with many experiencing declines in market volume and revenue. However, the long-term growth potential of the Chinese consumer market remains strong, driven by the increasing number of middle-income households with greater spending power.
Despite this, the market is becoming increasingly difficult to navigate, with winners and losers becoming more distinct. Companies seeking to succeed in China will need to focus on innovation, premium branding, and rapid, insights-driven responses to changing market dynamics. Overall, the Chinese consumer market is expected to continue on a steady uptrend, driven by the compelling demographics of the middle-income earners.
Andy Mantel, CEO of Hong Kong-based Pacific Sun Advisors, highlights the potential of the Chinese consumer market, yet emphasizes that global expansion for Chinese consumer brands may be limited by trade restrictions. However, with a domestic market that is large enough for growth, these companies are still poised for success.
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