-Policy Focus and Market Expectations中国消费市场近期值得关注的趋势-政策重点及市场预期Data from the National Bureau of Statistics at the end of October shows that third-quarter GDP growth of China slowed to 4.6% compared to the second quarter. From January to September, profits of industrial enterprises above a designated size declined by 3.5% year-on-year, while profits in consumer goods manufacturing rose by 2.4%, and foreign enterprises saw a 1.5% increase in total profits. Since late September, China has launched a new round of economic stimulus measures, including interest rate cuts, LPR adjustments, reductions in existing mortgage rates to stimulate consumer market potential, and support to the stock also real estate markets. China also issued 1 trillion yuan in ultra-long-term special bonds to support consumer goods upgrades. The most groundbreaking measure is the central bank's relending program, initially set at 500 billion yuan with potential expansion to 1.5 trillion, allowing listed companies and financial institutions to use stock as collateral for financing, effectively to support the stock market.
Post-4thQuarter Policy Focus, Economic and Market Expectations
The NPC Standing Committee will hold a highly anticipated meeting in early November to decide on the scale of fiscal stimulus. This meeting is expected to introduce a larger-scale fiscal stimulus to complement the monetary easing policies since September, along with greater government involvement in real estate acquisitions. This will be a key factor in determining the future direction of the A-share market. While overall market uncertainty remains, optimism has strengthened compared to the previous lull. Following the new round of economic stimulus in late September, the Shanghai Composite Index has shown positive performance, with overall gains despite fluctuations.Performance of the Shanghai Composite Index following economic stimulus in late September
According to insights shared in a recent closed-door meeting by JPMorgan, China’s economy is facing downward pressure, mainly reflected in weak domestic demand, with sluggish investment and consumption. The root causes are low prices and tightened fiscal policies. Great Wall Securities notes that as of January 2024, China’s real interest rate is at a relatively high level over the past 15 years, which may lower CPI and suppress loan demand. Multiple investment banks agree that current policy direction is focused on promoting stable growth alongside economic transformation, with fiscal policies aimed at supporting local governments, the real estate, and the stock market.
China’s real estate market has begun to bottom out, signaling a potential recoveryFacing the 'blockages' in domestic economic growth, renowned industry experts have called to: 1. Export-oriented enterprises should focus more resources and efforts on the 'international circulation' to find new growth breakthroughs; 2. The three main issues limiting Chinese residents' consumption capacity—education, healthcare, and housing, which occupy a large share of expenses—must be alleviated to effectively increase consumer willingness, thereby driving economic growth; 3. The stock market may replace real estate in playing a significant role. If housing prices drop by 30%, the government should intervene to stabilize the market, including purchasing existing housing stock. In mid-October, the Minister of Housing and Urban-Rural Development stated that China’s real estate market has begun to bottom out, signaling a potential recovery.
The New Wave of Overseas Expansion and the Rise of Borderless Enterprises
Data shows that private companies in China contribute 82.84% of employment and 65% of GDP, playing a critical role in technological innovation and adapting to market shifts. With the challenge of insufficient domestic demand becoming more evident, overseas expansion has become an inevitable path. In 2024, Chinese companies have rapidly expanded from Southeast Asia to emerging markets like Latin America and Africa, embracing diversified brand growth. Industries such as technology, dining, cloud computing, and logistics have established an international presence.
The 2024 Top 100 Chinese Overseas Brands list covers 20 sectors, with computer, communications, and electronic equipment manufacturing leading (38 entries), followed by electrical machinery, internet services, automotive manufacturing, retail, and specialized equipment manufacturing. In fields such as online gaming, cross-border e-commerce, and short-form web series, global competitiveness has already taken shape. This international reach not only generates foreign exchange but also fuels domestic R&D, creates jobs, and stimulates the upstream and downstream industry chains.Trends in the Cultural and Tourism Consumption Sector
Starting in December 2023, China is piloting visa-free entry for short-term stays of up to 15 days for business, tourism, family visits, and transit for visitors from six countries, including France, Germany, and Italy. Additionally, 41 open ports across 19 provinces are implementing a 72 to 144-hour visa-free transit policy.Since mid-2023, Beijing, as an international hub for exchange and culture, has introduced measures to enhance convenience for foreign visitors, such as supporting foreign bank cards for subway payments. From January to September, Beijing saw inbound tourism recover to 82.0% of 2019 levels, with tourism foreign exchange income reaching 74.7%. Other cities, including Shanghai and Chengdu, reached peak numbers in September, showcasing immense potential in cultural and tourism consumption. This surge has also driven global social media interest, with many international influencers creating viral content under the China Travel trend.
Beijing and Shanghai 2035 Urban Master Plans, Data credit:Qianzhan research
Opportunities in China’s Consumer Market and Its Interconnection with Global TrendsThe McKinsey report Global Economic Intelligence, published in August 2024, highlights that the high-interest rate environment has led to a decline in global consumer confidence and a contraction in manufacturing. Consumer spending has generally slowed across the globe, except in Brazil. Although manufacturing in both the U.S. and China stagnated for the first time in 2024 and the Eurozone continued to experience a downturn, the steady growth of the service sector and a rebound in prices for certain goods brought a glimmer of hope for global economic recovery.Findings from NIQ’s Mid-Year Consumer Outlook Guide to 2025 indicate that consumers are shifting their focus from price to value, prioritizing health, sustainability, and personalized experiences. This transition from cautious to conscious consumption will profoundly influence market strategies in 2025 and beyond. Key trends affecting consumer behavior in the future include the rise of social commerce and the application of AI technology.
In the third quarter of 2024, the Kantar Media Reactions 2.0 report on the Chinese media market revealed a significant improvement in the effectiveness of short drama advertisements and OTT platform ads. This shift has prompted advertisers from industries such as beauty, food, and electronics to reallocate budgets from traditional television to short-form content. For both domestic and foreign companies in the Chinese market, it is crucial not only to understand these trends but also to align with policy directions and innovate strategies based on social structures and consumer needs to gain a competitive edge.
Panglonglai supermarket
For example, Walmart’s membership-based Sam's Club brand has experienced high growth in China by implementing a membership and direct sales model. Its success in first-tier cities contrasts with the popularity of the legendary local retail chain, Pangdonglai, in fourth-tier cities, underscoring the importance of accurately understanding economic trends for business profitability in China market.The upcoming U.S. elections in November may upgrade global geopolitical uncertainties, and the next few years are poised to be extraordinary. In the meantime, China’s upcoming Spring Festival consumption season is expected to account for about 40% of annual spending. Deep understanding of the local market trends and directions is critical to help business discover new opportunities and drive growth in Chinese market.
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