The original epicentre for the Covid-19 outbreak, China is now on the road to recovery, which is good news for New Zealand exporters. China Skinny’s Shanghai-based Mark Tanner reports.
China's economic data for January and February was released on Monday and it wasn't pretty. Retail sales were down 20.5% from a year earlier, following 8% growth in December. Fixed-asset investment dropped 24.5%, property development investment sunk 16.3%, government-driven infrastructure investment plunged 30.3% and value-added industrial output fell 13.5%.
The numbers confirm how much the economy has been hurting, yet unlike most other major economies, it seems that the worst may be behind us. There were 16 new coronavirus infections on Sunday, 12 of which "imported cases" - although most of those were returning Chinese citizens, including all of Beijing's 31 imported cases.
The continued containment has seen a notable change of gear in China. At a personal level, there are signs that confidence is returning, such as people getting back to enjoying public places and even taking off their face masks there to converse with their friends and family with a degree of normalcy. At a macro level, China has made the bold announcement that its largest trade expo - the Canton Fair - will still be going ahead in April. Given the current global situation, China's 14-day quarantine and reduction in available flights, it appears to be more of a symbolic gesture broadcasting that China is open for business again. Whereas it wasn't long ago that China had an acute shortage of face masks and health professionals, it is now sending medical supplies and experts to countries such as Iran, South Korea, Japan, Spain, Africa, the US and Italy - which saw Italians belting out the Chinese national anthem and thanking China from their balconies.
It wasn't long ago when people in China weren't allowed to dine out in many cities. The country is now urging officials to dine out and shop to boost consumption, even though diners need to be spaced out. While many consumers are still cautious about wandering through shopping malls, ecommerce has seen a clear uptick in sales since the beginning of March, with a strong performance on Alibaba's March 8th shopping festival. Online shopping is a bellwether that consumers' survival phase is fading and an appetite to consume is returning.
Chinese consumers' attention is shifting away from issues directly related to the pandemic. The share of attention focused on medicine and healthcare has dropped from 48% to 38% over the past few weeks. Whereas attention to sports and fitness has grown from 28% to 38% as Chinese consumers get back to their everyday life, according to Publicis analysis.
A couple of weeks ago we noted that "in the medium term Chinese consumers may actually be more resilient than their peers in other markets." It is now looking more probable that China, although it has had a terrible Q1, is likely to again lead consumer spending growth for much of 2020.
For many businesses around the globe, the next few months are likely to be very challenging. Aside from the obvious drop in revenue, there will be a slew of other challenges. If employees are working remotely, and potentially juggling kids studying at home, productivity is likely to decrease and exporting to China may seem like a periphery need. Business continuity should be the priority for them. Yet those who have the capacity to invest in growing their awareness and preference in China are likely to be rewarded with the strength of the Chinese consumer market. The market is bouncing back and there is likely to be less competition from other foreign brands who may not have adapted to new behavioural trends in China following the coronavirus. 抓住机遇 - Zhuā zhù jīyù - Seize the opportunity.
NB: Reproduced with permission from the China Skinny weekly e-newsletter. The full newsletter is available here: View on the web