The Coronavirus China Economic Impact report covers the spread of the outbreak in China, what industries are growing and which industries are severely impacted. We also zoom in on the economies of Wuhan and Hubei, as well as Coronavirus impacts on the global supply chain. Lastly we share how the Chinese government is reducing the burden on enterprises. Our Coronavirus China Economic Impact report is available for free to anyone seeking to understand the COVID-19 outbreak’s effect on businesses in China.

This report is routinely updated and contains everything businesses need to know about the economic impact of the Coronavirus in China. It is a collection of research from many respected firms and organizations combined with our own careful analysis.

Overview of COVID-19 spread in China

Coronaviruses are common causes of respiratory infections. They have previously been implicated in viral outbreaks, including SARS-CoV and MERS-CoV, but are also responsible for some common colds. From the perspective of virus evolution, COVID-2019 is more advanced type than its two predecessors. It has never been found in humans before.

How COVID-19 starting during the Lunar new year affected spread

The 2020 Spring Festival migration started on January 10 and ended on February 18. The estimated number of people who have had contact with confirmed cases gradually increased at beginning of the Lunar new year and stabilized until the end of it. That’s because flow of people participating in the Spring Festival Transport is very large, which makes the chance of cross infection increase and directly lead to the peak of the epidemic. Government restrictions on the flow of people helped to reduce the spread of the virus by decreasing contact and increasing physical distance between those who have COVID-19 and those who do not. However, within China, the confirmed cases have flattened since February 13.

How long will the coronavirus last in China?

As of early March, the number of infections in China continues to decline, with the exception of Hubei, the infection in all regions seems to be controlled. As long as no new infections appear during the duration of a full incubation period, then the epidemic can be considered to be officially over. Currently, the rate of infection is minimized by the quarantine efforts and shutting down of workplaces and public places.

What is the Coronavirus economic impact in China

Do we need to worry about the impact of coronavirus on GDP?

According to chief economist from Zhongtai Securities and Donghyun Park from Asian Development Bank, the coronavirus economic impact in China is expected to be between 1.5% and 2% in terms of GDP growth, which will not change the long-term trend of China’s economy. The epidemic has a large impact on the economic growth rate in the first quarter, or negatively affects the GDP growth rate of about 2%-3%. However, as the virus continues to spread globally, there will be many more factors to include in the coronavirus economic impact on China including global demand of Chinese goods and commodities. The largest economic impact comes from the service sector, especially the catering, transportation, hotel, tourism, and accommodation industries.

Up close on the economies of Wuhan & Hubei

The huge outbreak in Hubei province contributed a lot to coronavirus economic impact in China, as it is the most developed province in the central region of China with 3.9 trillion RMB GDP in 2018. Hubei has a large number of industrial clusters in R&D and manufacturing, such as automobile and electronics.

According to government work report of Wuhan in 2019, electronic information, bio-technology and new medical and medical appliance, and the automobile industry are the three pillars of the manufacturing industry. 

Hubei province is an important part of the global supply chain. It accounts for 9% of total Chinese auto production. German engineering firm Bosch, the world’s largest auto component manufacturer, has dozens of factories in China 2 of them are in Wuhan. Hubei also plays a significant role in the global supply chain of critical electronics components. The province is the production base of Taiwan’s PCB factories, including Taiwan Optoelectronics, Xinxing, Jianding, Nanzi Electric, and Dingying.  Industry insiders pointed out that PCB is the “mother of the electronics industry” and is an indispensable key component of all electronic products. If the PCB factory in Taiwan and the Hubei factory are obstructed, it will affect the global electronics industry.  

Hubei contributes much to the progress of the chemical industry. It is the largest province of chemical fertilizer in China, its output has reached to 596.56 tons in the first three quarters of 2019, which increased 19% compared to last year. Hubei has a high production capacity of sub industries including the phosphorus chemical industry, pesticide industry, and the vitamin industry.

COVID-19 affects industries in Hubei

Coronavirus impact on supply chain in China can be also seen in some industries in Hubei.

Electronics industry

After Wuhan postponed production of electronics, China’s supply chain of critical electronics components is facing a catastrophic disruption. About 70% of the world’s smartphones has been affected. According to Strategy Analytics, overall shipments of phones will reduce by 2% in 2020, some consultants believe that COVID-19 will cause demand side decrease. Besides, the first quarter is normally off-season of China‘s semiconductor industry, COVID-19 may further dampen the sales of semiconductors.

Automotive industry

China auto sales fell 2.8% in 2019 amidst global trade tensions, the first decline in nearly two decades, which also affect Hubei auto sales because Hubei province account for 9% of total Chinese auto production. Global automakers forecasted further sales decline in 2020, prior to knowledge of the coronavirus outbreak.

COVID-19 China economic impact: online industry growing

Due to the coronavirus epidemic, Chinese daily life goes online. For example, gaming industry experienced an unprecedented growth. While the Chinese mobile gaming industry is stimulated by the coronavirus, the development of 5G is expected to accentuate the trend and support the growth of the industry.

Coronavirus economic impact in China is also observed in short video platforms sphere. Between January 20 and February 2, 574 accounts on the short video platforms Douyin and Kuaishou each gained between 100k-500k new followers. The Coronavirus is accelerating the shift towards live-streaming, which already exploded in 2018, with a 745% growth year on year, thanks to improved connectivity and video maturity. The short video sector recorded 569 million daily active users in the post-holiday period, far exceeding 492 million on a regular daily basis.

E-commerce purchases during the Coronavirus outbreak in China

During the Chinese New Year in 2020, people were likely to purchase medical products, hygiene products and food online. To support the new growing online demand, more than 35,000 jobs were created across China from the following online retailers: Hema, Suning Xiaodian, Meicai, JD Logistics, JD daojia, and Dada.

Studying and working go online during coronavirus outbreak

Most companies have set-up remote work policies to avoid contamination at work. Hence, Enterprise Collaboration Apps facilitated remote working for 200 million Chinese workers after the Chinese New Year. To keep in touch, they use apps produced by two China’s online-giants: Alibaba and Tencent. During the outbreak, Alibaba’s Ding Talk skyrocketed to the very top of the App Store in a few days while Tencent Meeting and WeChat Work are in the second and fifth position, respectively.

The Coronavirus outbreak does not stop Chinese students from studying. Universities across the country organize online lectures to ensure the safety of their students. They rely on QQ, a Tencent streaming platform to carry out online teaching. The downloads of some education apps such as Tencent Classroom, and China University Mooc experience a significant increase. However, unlike fitness and co-working apps, the online education peak during the coronavirus may not last after the epidemic, with the return of students back to school.

Coronavirus impact on tourism in China

The damage to the Chinese tourism industry because of outbreak is equivalent to a loss of 1 trillion RMB GDP. Many travel enterprises estimated the ongoing shutdown costs the industry about ¥17.8 billion every day.

Only 2% Chinese tourism related companies felt that they had not been significantly affected after the COVID-19 outbreak. Coronavirus impact on tourism in China especially visible among travel agents, hotels, and retailers (related to tourism), as they badly need sales revenue during the epidemic. 

Chinese tourists contribute to the tourism industry in many countries. For instance, in 2018, Chinese tourists represent more than 70% total tourism in Hong Kong and Macao, similarly, more than 25% total tourism in Thailand, Japan, Vietnam and Korea. The impact on the economies of these countries will be catastrophic, if the coronavirus outbreak lasts for three to six months.

Coronavirus impact on tourism in China opened the opportunities for new online approach in this sphere. During the COVID-19 outbreak, many scenic areas and museums used live-stream to increase exposure and attract tourists, which attracted a lot of traffic. Even after the outbreak, the live-stream still can be watched by elderly and people with disabilities, it also can be used as a preview before travel.

Short-term and long-term coronavirus impact on tourism in China

Coronavirus impact on the food and beverages industry

Although many restaurants in China strengthened their delivery safety during the outbreak in China, food delivery alone is not enough to keep their profits in the positive. The Chinese New Year is usually a hot season for the F&B industry, the total revenue of Chinese restaurants in 2019 CNY has reached 724.1 billion RMB (occupied 15.5% of the whole revenue in 2019). Because of the Coronavirus outbreak, large catering brands have to reduce expense to balance their finance, such as permanently shut down some offline stores and redundancies. Many small restaurants are facing with the risk of bankrupt, since they have very fragile anti-risk capability. Many Chinese restaurants (around 62%) could not get rent reduction and they still need purchase epidemic prevention products, such as protective facemasks and thermometers.

Currently, many restaurants try to focus on delivery to get some profits, but actually revenue of online food delivery business is much less their normal business.

In order to manage the losses, some restaurants sell food materials to consumers and communities at low price and provide free food to medical staff and government units in epidemic areas. From 1^st February 2020, many restaurants temporarily lend employees to Hema (盒马鲜生) which relieved their labor costs. At the same time, KFC launched a contactless delivery service on food ordering platforms, such as Meituan (美团). Because of a lack of funds, some restaurants tried to seek investments and loans. For instance, Pudong bank offered 120 million RMB loans to Xibei (西贝) restaurant. The large food ordering platform Meituan (美团) worked with banks to finance some restaurants.

Coronavirus impact on supply chain in China: what businesses can expect

How Coronavirus will impact the Global Supply Chain by Mid-March

Most Chinese manufacturing slowly started resuming operations at the end of February, but the delays could have a devastating impact on the global supply chain.  For most companies, the inventory in stock will is enough to keep up with demand for two to five weeks. Shipping by sea to either the U.S. or Europe can take around 30 days. This implies that if Chinese plants stopped manufacturing prior to the beginning of the Chinese holiday on January 25, the last of their shipments arrived the last week of February. If lead time from China is shorter than 30 days, the disruption occurs earlier. This is already the case with Hyundai which announced on February 14^th the suspension of its production lines from its plants in Korea.

Assessing the coronavirus impact on supply chain in China, the electronics industry seems to be more affected. Intermediate products, which produced in China, are deeply integrated in the global technology supply chain.

Operations are concentrated near the affected areas (~290 of about 800 plants named in Apple’s global supplier list are located in regions that have delayed returning to work). Overall, 84% of manufacturers are concerned about delays related to the outbreak.  As the components are often heavily customized, it is challenging for factories to relocate outside of China in the short term.  

COVID-19 economic impact on Chinese manufacturing

As Chinese government shut down Wuhan and delayed the returning to work, many factories have to face the huge losses, limited supply chain and insufficient raw materials. Labor-intensive manufacturers (such as textile, clothing and plastic products) are significantly impacted, small and medium-size factories are worst-hit areas.

According to Morgan Stanley’s report in mid-February, Chinese production had only reached 30% to 50% percent of the usual levels. However, health and medicine related products have a huge demand during the COVID-19 outbreak.

Mask manufacturing demand

After the COVID-19 outbreak, the demand of masks has risen rapidly. Although many companies have started cross-border production, the shortage of raw materials could not be resolved in the short term. China contributes 50% of global mask production. Mask related manufacturers will benefit during the period, however most believe that it is a short-term demand. Expanding production would result in oversupply after the outbreak recession.

China is getting back to work

The week after 9^th February is the time for migrant workers to return to work, small and medium-sized enterprises need to resume production to boost cash flow.

Manufacturing learning points from COVID-19

Although epidemic outbreak is a black swan event in the manufacturing industry, it is likely that COVID-19 China economic impact will be positive. For example, it will promote manufacturing enterprises to strengthen the management of employees’ health and safety. The leaders of manufacturing companies will pay more attention to intelligent manufacturing. Due to online working, manufacturing enterprises will demand software such as task management, project management, and workflow management for remote collaboration. The Coronavirus economic impact in China will also be seen in science industry and smart technologies industry.

Coronavirus economic impact in China: what should exporters to China know

COVID-19 to impact China’s trading partners

After a slowdown in 2016, China’s imports and exports grew despite the trade war. Due to manufacturing and supply chain shortages during the epidemic, this growth rate is expected to slow down. A rebound in export activities may take place in April, while import activities would slow down until July. China’s top trading partners will suffer from the impact of the coronavirus on the main Chinese export products such as computers, broadcasting equipment, integrated circuits, and smartphones.

Coronavirus impact on supply chain in China is expressed in slowing shipments across the country, making transport routes congested. Currently, overall trucking supply resumed operation at around 60% and is a bit higher in the Southern areas of China. Overall intercontinental rail capacity has recovered to 60%.

How to improve supply chain during the epidemic

Government response to soften the Coronavirus economic impact in China

Policy support from the Chinese government

Production stop, isolation of staff and transportation restriction were a consequence of coronavirus China economic impact. Policy support and costs reduction are desperately needed. The Chinese local governments released some polices to relieve this situation, such as financial support of small businesses, flexible employment policies, social insurance, rent subsidy and tax concessions.

Long-term economic impact of the Coronavirus in China

The epidemic further boosted digitalization

During the epidemic, both the number of users and the time spent online had a dramatic increase. The total mobile Internet traffic increased by 36.4% compared with 2019 CNY. The number of daily active mobile shoppers grew by 14.6% during the 2020 CNY compared with 2019 CNY. In the meantime, some traditionally offline industries have turned to e-commerce to relieve losses.

Coronavirus China economic impact on the luxury market

COVID-19 is a downturn to the global luxury market. In Shanghai, Beijing, Shenzhen, Guangzhou and Wuhan, the passenger flow in large shopping malls and luxury brands stores declined more than 80% during the 2020 CNY. Also, due to the COVID-19, most Chinese consumers are more focus on healthy and rational consumption, many luxury products buyers plan to spend less on luxury goods, more on medical products and necessities. When COVID-19 is under control, this trend may still continue so long as the economy is impacted and until consumer confidence returns.

Coronavirus economic impact in China: big data innovation

During the epidemic, more than 20 provinces’ governments worked with technology companies to build “epidemic prevention system”.  The reports helped to see related data, epidemic feedback, quickly find and isolate suspected cases. The cooperation between government and big data platforms is promoting the practical application of big data in public crisis management and driving more technology innovation. Along with the development of the epidemic, more Chinese people are getting used to using big data tools in their daily lives, which speed up the process of digital life. 

Coronavirus economic impact in China: AI developments

The epidemic promoted the actual use of artificial intelligence products in medical and public safety areas. For example, in order to improve the efficiency of the diagnosis for COVID-19, Beijing Haidian hospital is using an AI assisted diagnosis system that can process 300 chest X-ray in 10 seconds. Many consumers fear the coronavirus cast a shadow over the food delivery industry. Therefore, JD launched autonomous delivery robots to reduce human-to-human contact during the Coronavirus outbreak. Besides, AI medical robots have started to work in Wuhan’s hospitals, they help doctors and nurses with disinfection, cleaning and delivering medicine.

Coronavirus China economic impact: financial assets may surpass fixed assets

Due to the COVID-19 outbreak, most Chinese people have to stay at home, real estate transactions are almost completely frozen. However, financial assets are not limited by places, the bond market has been very active since the Chinese New Year. The Chinese people have more time to invest bank financing products and bonds. Besides, growing savings may increase the demand for investments with stable income, such as bank financing and bond funds.

View our Coronavirus China economic impact report on slideshare:

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Market research is important in helping organizations to make informed business decision by collecting insights and using data. Through market research, a company could identify the potential growth possibilities and risk factors by learning about the consumer market, the local cultural and the unique challenges of the industry. 

Market research follows a systematic methodology which can be categorized into the six steps below:

Defining an objective and problem is the first step to make a focused and relevant research, while sampling and analyzing data could help the researchers to identify the following:

• General market and industry knowledge
• Competition analysis
• Pricing strategies
• Search and evaluation of merchants/suppliersConsumer segmentation
• Consumer perception, satisfaction and loyalty

China and the west often see different purposes in market research

First and foremost, although growing rapidly, most Chinese markets are still maturing and a portion of market research projects are for new entrants. In contrast to the west where market research often focuses on consumer loyalty, branding and consumer satisfaction. The aim of market research in China is often geared towards market entry and making an initial strategy. Meaning that there is more emphasis on pricing strategies, naming strategy, market sizing, feasibility analysis and other market assessment strategies.

Why it is necessary to adjust your approach when doing market research in China

It’s crucial for business operators and market researchers to consider the distinct features of a particular country or region. The distinct features of China are a rapidly growing economy, increasing competition, vast regional and socio-economic differences, and the ever-present government regulations.

According to the Ministry of Commerce, foreign direct investment (FDI) into the Chinese mainland increased 7.3 percent year-on-year to 533.14 billion yuan in the January-July period of 2019. China has a growing economy structure and a promising trade market. Thus, the Chinese market is very competitive. Utilizing market research in China to obtain a clear understanding of Chinese consumers and the Chinese way of purchase is vital to any consumer-facing companies to decide the market strategies and practices.

“Market research in China is a lot about getting the most updated data and market intelligence, as things are moving so fast. For instance, getting 2018 data about e-commerce, mobile payment or any digital landscape will prove to be already extremely obsolete on the Chinese market. That is the kind of requirements (always have month- or week-old data) that we need to give to ourselves when conducting research in China”, say Thibaud Andre, research director for Daxue Consulting.

However, collecting information in China’s market could also meet some problems, from the diverse groups of potential consumers in China to different business customs between China and the west. When entering the Chinese market, adjusting the approach when doing market research in China is necessary because of the difference between Chinese and western markets.

Understanding the demographically complex consumer base in China

The Chinese market is bigger and more dispersed, bringing unique challenges to market sizing in China

First, China is the world’s most populous country. China has a population twice as large as the combined developed world and is comprised both developed and poor regions, both affluent and destitute cities, and is home to entirely 56 different ethnic groups.

“As not only market researcher but strategic consultant, we often have to remind our client that the segmentation in the West is not applicable to China. In our research, we will often distribute the consumer insights, but also the market sizing and the competition data, between city-tiers for instance. The level of urbanization is often a more relevant aspect to consider than the geographical areas, as Shanghai and Beijing might be closer in term of consumer behavior than Shanghai and Nantong (a tier-3/4 city few kilometers aways from Shanghai) for various markets”.

A demographically diverse consumer structure

 As the third or fourth-largest country by total area, China’s economic and social development status is different from region to region. Consumption habits and income levels vary between tier 1 cities like Shanghai and Beijing and lower-tier cities. Similarly, there are also huge difference in regional patterns between eastern regions and inland regions. While someone is Beijing is more likely to purchase craft beer on Tmall.com, their counterpart in Weihai would opp to drink local Tsingtao beer and purchase through Pinduoduo. Thus, insight gained from market research conducted in a tier-1 city might be applicable to a tier-3 city.

The difference of the economic and sub-cultural factors from region to region in China leads to the different regional consumer preferences. Tier-1 cities are more economically developed and international because of the disparity in opening-up policy in China. However, inland regions and low tier cities are becoming increasingly important markets for foreign brands in China as their consumption power strengthens.

Thus, regional consumer segmentation is important in designing China’s market research plan for companies entering in Chinese market.

Business customs in the Chinese market

Bureaucracy: Barriers of data collection for Chinese market

In the process of conducting market research in China, the step of sampling and data collection is challenging because of the shortage of reliable information the lack of accuracy of the information. Chinese data agencies are less likely to be impartial. For example, while American data agencies are staffed by members who are independent from politics, Chinese data agencies are under the direct control of the Party and State Council.

Data related to traffic on social media or e-commerce may be fake, and like tech-savvy Chinese consumers, researchers also must observe qualitative data, like authenticity of reviews, to validate quantitative data like the amounts of likes or traffic on a product. Additionally, alternative data can be used to provide insight where direct data might not be easily found.

Be-aware of other cultural differences between China and the west

A good example of the cultural difference is guanxi. Compared with the western society, in China Guanxi refers one set of social connections that can be used for personal or professional purposes. At the same time, western countries are more focused on individualism while China is an interdependent society.

Guanxi could be occasionally needed in conducting market research in China. In China’s society, trustworthy and credible are two important traits for people to gather information from his/her sources. Guanxi creates the possibility of establishing a trusted relationship with your business partner in China. That being said, if a westerner wants to do a primary market research in China, they need to contact an intermediary as a mutual connection to engage a conversation with the third person. Without social connections, it would be hard for you to gain any first-handed information.

Navigating an unfamiliar APP and online ecosystem

Comparison: Taobao vs Amazon

Chinese consumers are huge fans of online shopping. According to the National Bureau of Statistics in China, a government agency, online retail sales in China has reached 1.33 trillion dollars in 2018, an increase of 23.9 percent from year 2017. E-commerce in China is a part you should not ignore when you want to enter the Chinese market and do your market research about Chinese market. While 35.3 percent of China’s retail sales occur online, the United State’s E-commerce sector only represent 10.9 of its total sales. Due to the important place of e-commerce and digital activity in China, market research in China must take it into account.

Taobao, one of the leading consumer to consumer (C2C) marketplaces in China, is not China’s amazon. Compared to Amazon in America, Taobao is featured for these traits:

1. Low costs for sellers and buyers.
2. Competing through customer service, including rapid fast deliver and immediate messages replies from sellers.
3. Business strategies are catered to different consumer groups

Entering the Chinese market,  western companies have a lot to learn about Taobao and other Chinese e-commerce platforms.

 In the last 6 months, Taobao has 612.7M visitors per month, way outscoring the number of visits to amazon.cn.

Xiaohongshu: Chinese online ecommerce APP shaping consumer purchase decisions

The idea of combining social media with ecommerce, now known as social commerce, has been popular since 2012; 2016, 52% of marketers predicting that it would be one of the biggest trends of the year. Xiaohongshu, as a mobile app, is a lifestyle sharing platform and a hybrid of social media and in commerce. Compared with Instagram, Xiaohongshu is more focused on driving direct sales and localized to the Chinese market.

xiaohongshu.com attracts 35.64M visitors in the past six months. In late 2018, Xiaohongshu also opened a platform to connect brand with influencers or KOLs to create paid content. Foreign brands use Xiaohongshu to improve brand exposure and interact with some potential consumers as one of the strategies entering the Chinese market. When conducting market research in China, foreign companies should not underestimate the effect that how social media leads consumers to make a decision. Hence, the emphasis on a strong KOL strategy may surprise a new China market entrant.

China’s APP ecosystem and high tech savviness can be used as a research tool

Because of openness to technology and high digital fluency, even among older generations, this opens up doors to use research tools. For example, diary research in China, also known as in-vivo research, can be done through apps to quickly collect authentic qualitative data without burdening the research participants. Additionally, consumer surveys can also be integrated into China’s digital ecosystem, specifically WeChat mini programs. In combination with AI technology, the distribution of surveys can be automated based off relevant purchasing decisions.

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Chinese middle class Overview

Urbanization of Chinese society

According to China’s National Bureau of Statistics, at the end of 2018, the permanent population of urban areas in China reached 83.137 million, an increase of 17.9 million from the end of 2017. The resident population of rural areas was 56.41 million, a decrease of 12.6 million from 2017. The urbanization rate of China (the proportion of the people living in urban areas) is 59.58%, which is 1.06 percentage points higher than that at the end of 2017. With the growth of the Chinese economy, urbanization has been expanding rapidly.

The purchasing power of Chinese middle class continues to rise

According to the 2018 Global Wealth Report, China’s contribution to global middle-class growth is the largest in the world. In terms of the absolute growth of personal assets, the United States still surpasses China and ranks first in the world. In 2017, the United States accounted for 44% of the total growth in global household financial assets, compared with 25% in China. As the world’s second-largest economy, the Chinese middle class already accounts for half of the global middle class. In 2000, only 500 million people in the world were middle-class and half lived in Japan, North America, and Western Europe. However, by the end of 2017, the number of the middle class in these industrialized countries has fallen to 1/4, while the middle class in China is half of the world. The “rich middle class” defined by Allianz is the net financial assets held by individuals between 7600 euros (about 61,200 yuan) and 45,600 euros (about 367,100 yuan). In the Allianz report, the “middle class” is defined as a personal wealth of between 7,600 euros (60,000 yuan) and 45,600 euros.

Chinese middle class behavior overview

In the inland areas and low-tier cities, the residents are relatively more conservative when making purchasing decisions compared to those who live in big cities. Whereas a common principle shared by these middle-income consumers is that they usually prioritize the quality above all other standards even when they are known to be quite brand-oriented. Since the Chinese middle class is growing across the whole nation, foreign companies will more and more be able to target inland provinces. Since the four first-tier cities are approaching a saturation phase, the growing middle class in low-tier cities are becoming more promising target consumers. The purchasing power of Chinese middle-class in first-tier and second-tier cities are considerable but on the other hand, the consumers are more sophisticated and more loyal to brands. In comparison, in lower-tier cities that are seeing rapid growth, there will be more market opportunities and untapped consumption power. At the same time, brands will face more difficulties in the distribution and logistics.  

Chinese middle class lifestyle changes

The brand trend of Chinese middle class

The Chinese middle class has a demonstrated preference for western brands. More than 70% of middle-income consumers are buying well-known international brands. But in recent years, since consumers have gained more insight into the markets, Chinese middle class lifestyle is no longer merely brand-oriented. Quality now becomes their first standard. Daxue classifies middle-income consumers into four types: progressive affluent spenders (18% of respondents), trendy-aspirers (28%), value-led buyers (26%) and conservative spenders (28%). The first two types are more likely to buy western brands, but more than 80% of the respondents claimed that quality was their first consideration. The conservative spenders even regarded well-known brands or luxuries as a waste of money for they weighed durability and quality over brand names; as a result, in certain situations, they are more inclined to buy domestic brands.

Chinese consumers contribute to around 30% of the global luxury consumption, and domestically, the middle-class consumers account for 70% of the luxury market. The top listed items they have been purchasing are handbags, clothing, jewelry, shoes, and cosmetics. The high luxury spending by those Chinese middle class consumers is mainly to indicate their social status. Yet, surprisingly, these consumers are relatively younger than those in western countries, with an age range of 18 to 35 years old. In high-tier cities, luxury consumers are less likely to stay loyal to one brand and they tend to shift their taste from one to another, following the current trend. If foreign luxury brands want to maintain the loyalty of Chinese consumers, they can not only rely on their brand names; instead, it is more important that they appeal to the consumers’ changing tastes and the current fashion. One positive note is that there are far fewer domestic luxury brands to compete with; therefore, foreign luxury brands enjoy a higher reputation among the consumers. Moreover, driven by the growth of the middle class in low-tier cities, foreign luxury brands are expected to gain a considerable number of new consumers in the following years.

Chinese middle class leisure spending

Most of the Chinese middle class will spend their leisure time on entertainment, dining out and traveling. As Chinese middle-income consumers are quite family-oriented, they spend lots of time with their family and close friends. This also means they usually prefer dining out in groups, especially for family and friend’s gathering. After dinner, they normally won’t go directly home but go somewhere else to prolong the reunion, such as seeing a movie, singing karaoke, or playing cards. This is one major reason why the catering industry and the entertainment industry are seeing great increases in total consumption. In the higher-tier cities, Chinese middle class consumers nowadays do not consume for simple entertainment; instead, Chinese middle class lifestyle often centered on the pursuit of health and balance. New forms of entertainment such as yoga, tea ceremonies, art, etc. are increasingly popular among Chinese middle class.

Traveling is another prominent leisure consumption among the Chinese middle class. The top three destinations in 2019 are Thailand, Hong Kong, and Japan. Although Asia still occupies more than half of the destination locations, the Americas and Europe have been enjoying a swelling expansion in the market share. To most middle-income consumers, traveling has become a light luxury recreation product.

The inclination to a healthier lifestyle

With high work pressure and the occurrence of sub-health problems, the middle class is keenly aware of the importance of a healthy lifestyle and most of them have already adapted to healthier life habits, including their purchasing choices. Concepts of food consumption are putting more emphasis on healthy diets so brands concerned with green food are more likely to be trusted and adopted by consumers. Although Chinese citizens are more concerned with their healthcare than ever before, the healthcare market in China is still under-served. The aging population and rising rates of chronic disease are calling for a more developed Chinese healthcare system. Therefore, the current situation leaves many opportunities for foreign companies to fill this market gap.

E-commerce and Social Media

The high adoption rate of computers and smartphones among the Chinese middle class has accelerated the growth of E-commerce and M-commerce.

During the “shopping carnival” on Nov.11th (China’s Single Day)  Alibaba witnessed the rise of the new Chinese middle class (the generation after the 80s and 90s). “2018 China Mobile Internet Spring Report” shows that as of March 2018, Taobao’s monthly per capita usage reached 93.4 times, and the usage time was more than 290 minutes, which was significantly higher than the same period of last year, and the user’s stickiness was further enhanced.

Although members from first to third-tier cities account for most of the online consumption, the consumption power underlying the lower-tier cities cannot be neglected. With careful management of the great market opportunities on Taobao, Uniqlo, and other companies successfully expanded their business in many low-tier cities. And this was not the only case. With Jingdong, Mogujie, Dianping, and many other emerging online retailers or mobile applications entering the E-commerce and M-commerce, the overall online consumption has been rising at an exponential rate. While shopping online, the middle-income consumers still prioritize quality over price and brand but imported products account for 25% of their total online consumption.

Social media has an overwhelming influence on Chinese netizens. Companies are recommended to use social media in China to promote on a large scale. But online promotion has advantages and disadvantages. More than 60% of the middle class are viewing comments and recommendations on Weibo, WeChat, and other popular platforms. Most of them are women with high consumption motives and are susceptible to other people’s opinions on the products they are not acquainted with. Once you capitalize on social media to promote your products, the high exposure and miscellaneous feedback will, on one hand, bring you more potential customers, but on the other hand, these comments may form a biased image of your products. Knowing what appeals to your potential customers and knowing what caters to the trend, the online promotion will be a powerful tool.

Case study: Mobile Application – Xiaohongshu

Xiaohongshu – the social commerce application based off recommendations 

Xiaohongshu, an online shopping and social commerce platform in mainland China, was established in June 2013, which claims to have 200 million users as of January 2019. In the Xiaohongshu community, users and celebrities can share product reviews and travel destinations.

The success of Xiaohongshu and its influence on the influence the consumption of Chinese middle class

In January 2019, the number of registered users of Xiaohongshu exceeded 200 million, and the daily activity exceeded 10 million. It is the largest community e-commerce platform in the world.

Most of Xiaohongshu users are under 30 years old, 40% are users under 24 years old, and 30% are  24-30.

In terms of the distribution of purchasing power of Chinese Xiaohongshu users, the middle and middle-high consumers accounted for a large proportion, but the proportion of low-middle consumers increased rapidly.

Xiaohongshu, was originally a platform for Haitao and Haitao experience sharing, and has since accumulated many high-income and older Haitao target users. It can be seen from the distribution of provinces that the users of Xiaohongshu are mostly concentrated in the more developed coastal provinces. Compared with the second and third-tier cities, the number of Xiaohongshu users in the first-tier cities is the highest, accounting for 40.94%.

Above all, the Chinese middle class is has great consumption power which is an opportunity for foreign companies to consider into their China market strategy. China’s middle class is sophisticated and value-oriented. Additionally more and more of the inland Chinese population are joining the middle class, which creates opportunity for foreign brands to expand deeper into China.

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The One Child Policy: Conflict between policy and tradition

China’s One Child Policy was Implemented in 1979 by Deng Xiaoping to curb China’s massive population. This was the beginning of decades of bias against girls, as female babies were often aborted and left in orphanages or public places, such as trains and in the streets. Chinese society has long been patriarchal, and to this day, many Chinese families believe a male is better for the family because they are stronger and more capable. China also has a tradition of “多子多福” which translates to “many children many happiness.” Having long been an agricultural society, the Chinese were accustomed to having big families to work in the fields, and to take care of elderly parents in their old age. The introduction of the One Child Policy changed this, and families not only panicked over having one child but feared the idea of having that one child be a girl. By estimate, around 37 million Chinese girls were lost in since the policy was enacted.

Low class, low education, and low income making up a majority of leftover men

The One Child Policy was reversed in 2016 in light of a large aging population and a declining workforce. Yet birth rates continue to drop. Decades of the policy has made a lasting impact on the Chinese society, where people have weaned off of the desire for marriage and children as exemplified by “leftover women.” But leftover men in China, especially those in rural areas, are a much different concept. While leftover women willingly hold off marriage to focus on their career and education, leftover men in China are eager to get married. In an age where those living in cities are less focused on getting married, many of those being women, Chinese men are more desperate for marriage than ever.

Unmarried Chinese men facing unhopeful prospects: Bachelor Villages

But it is not just traditional values that are perpetuating this phenomenon. Marriage in China is complicated; many wealth-related factors are taken into account, such as ownership of cars and estate. However, gender imbalances are the most severe in poor rural areas, where patriarchal perceptions are most prominently manifest. In these places, Chinese women often leave the villages in hopes of finding a husband in the city, leaving an even sharper gender imbalance.

Such villages have taken on the name of “Bachelor Villages.” Men in these positions do not have enough money to provide for wives or potential families. In this sense, Chinese men are faced with strong economic pressures in addition to traditional family values. As a result, Bachelor Villages have formed where there exists an overwhelming excess of unmarried Chinese men facing unhopeful prospects for their future of marriage.

Migrant workers and an epidemic of loneliness in a modern China

Troubles continue to arise for this excess of men, who are now also faced with an epidemic of loneliness. A large percentage of leftover men in China are migrant workers who come from rural areas to work in cities mainly in construction. A series of state-conducted surveys revealed loneliness to be “the defining aspect of the migrant experience” primarily due to the lack of romantic prospects. Another survey discovered more than 70% of construction workers reporting emotional loneliness as the most painful aspect of their lives.

Migrant workers (largely men) face many societal challenges in a rapidly modernizing China. Migrant workers leave home at a very early age to pursue employment opportunities in the city. Yet these jobs are typically very hard working with low pay and minimal benefits. Without advanced education, these unmarried men are not qualified for more secure, higher paying jobs – which makes dating incredibly difficult. Not do long hours make it hard to date, their poor economic status doesn’t make for an attractive option in the eyes of women, and their low education makes it nearly impossible to ever reach a status deemed “worthy” for females.

This phenomenon takes a toll on the mindset of migrant workers as well, who don’t have enough money to feel confident. They also feel a sense of let-down towards their parents, who remain worried for their children’s welling until they get start a family. Chinese children have a strong sense of filial piety. Marrying off and having children is seen as repayment for their parents’ years of sacrifices to raise them.

We can see that marriage is an issue just of personal desire and physiological needs, but also a deep-rooted sense of cultural, and traditional obligation.

Applying a marketing perspective towards China’s gender gap

It seems that not many marketing efforts are aimed at leftover men in China. Rather, companies are more interested in leftover women since these women have a higher socio-economic status, and live in urban, high-consumption areas. Females also make up a slightly larger percentage of consumers in China. There are over 711 million men in China, many of them unmarried in both urban and rural areas. While the mens’ beauty and clothing market are two industries among the fastest growth, marketing to men, in general, is an area that is not yet saturated, even towards the segment of urban men. It is interesting that despite the much larger ratio of men to women, marketing efforts are aimed more towards women than men. By 2025, China will add 350 million more people to its urban population, and 240 million of those will be migrants. As China’s urban population continues to grow, marketers should be aware of the leftover men segment and the implications of China’s gender gap for the years to come.

Leftover men during COVID-19 outbreak

According to a study published by Baihe Jiayuan Network Group in Beijing from March 2020, 50% of single men felt lonely at home while only 33% of single women did during the coronavirus outbreak. Most notably, the lower the educational level, the less happy one was. In other words, those who felt the loneliest during the pandemic were the “leftover men” with low income, low education, and are in the lower class. Furthermore, during Chinese New Year, men’s search rates for topics related to dating was a high 69%, whereas it was only 31% for women. As Chinese New Year is a festive time for family gatherings, a commonly discussed topic is marriage. With the unforeseen coronavirus outbreak clashing with Chinese New Year, those born just after 1985 feel the pressure of getting married due to aging: 68% of men felt more pressured versus only 46% of women did. In a country where the male population far exceeds females due to the One Child Policy, men are more anxious and hurried than women in getting married than ever in China. The global pandemic brings barriers to offline dating including blind dates and the traditional Chinese way of parents introducing their friends’ sons and daughters. As a result, many have resorted to online dating, and there are more “leftover men” on online dating apps than ever in order to cure their feelings of solitude.

Author: Julia Qi

Daxue Consulting helps you get the best of the Chinese market

Do not hesitate to reach out to our project managers at dx@daxueconsulting.com to get all answers to your questions.

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China, since 2013, has been working on implementing the concept of Smart Cities and creating ecosystems aiming at position the domestic high-tech industries as world leaders. Smart city is using advanced digital solutions and IoT (Internet of Things) to implement data-driven urban strategies. For the Chinese authorities, this strong focus and incentives on the development of smart city in China has 2 key objectives:

• Allow the emergence of high-tech driven domestic markets and companies
• Make the targeted city more energy-efficient and livable, and therefore answer numerous key challenges posed by the urbanization in China (traffic, energy-supply, air quality, etc).

The concept of smart city has been introduced by IBM in 2010. Almost every country in the world are developing their smart cities now, including New York, Boston, Turin, Moscow, Seoul, Shanghai and Buenos Aires. The first version of Smart Cities in China has focused on building the infrastructure, implementing technology and collecting data from users and gaining insights. The evolution of Smart Cities 2.0 has now led the focus on strong digitization of urban equipment, 3Ds, data processing and user-centered designs. This Smart Cities 2.0 evolution has leveraged the joint effort from government and corporations to considerably upgrade and accelerate the smart city development in China.

China has created the foundation for a world-leading smart city development program

China Academy of Information and Communication Technology has released data showing that, until 2016, China had 542 pilot cities under smart city development. The actual number of smart cities in China is 386, containing all the provincial and sub-provincial cities, prefecture-level cities and county-level cities.

74% of prefecture-level cities and 32% of the county-level cities are categorized as Smart Cities in China. Most of the Smart Cities are located near the coastal areas, especially eastern side. The reason behind this geographical difference is the economy. With better economy, the government has more investment funds, and businesses have more access and economic power to create technology advancement. The population in eastern areas is also more confronted to new models of consumption and lifestyle and the market acceptance is therefore higher, including the acceptance for Smart City.

(The general development situation of Smart Cities in China, Graph and data gathered from International Telecommunications Union.)

According to Forbes’s World’s Smart Cities ranking report, New York tops the chart, follows by London and Paris. Tokyo ranks at 4^th and was the highest-ranking city of Asia, followed by Singapore which ranks at 6^th. Shanghai, on the other hand, ranks only 57^th in the chart. Indeed, China is still in the early development phase comparing to the West’s Smart Cities, but the government investments are increasing each year and the smart city pilots have outnumbered the West.

Therefore, in spite of lower current performance, China has now reached a leadership role in developing smart cities due to having a more supportive environment, comprehensive digital connections, massive data collections and better user design.

How does China maintain a supportive environment for building Smart City programs

China has a better environment for building smart cities thanks to its

• solid economic growth,
• government policy support and
• advanced technology development.

In terms of economic growth, China has achieved GDP growth of more than 5% for over a decade, while the West has suffered from economy failure including the financial crisis in 2008. Thus, the economic development in the west cannot aid in the vast and rapid development of smart cities. While China, with massive amount of economy growth, has the ability to invest in different areas simultaneously.

Over the years, China has issued several policies to emphasize the importance of building Smart Cities. The Ministry of Housing and Urban-Rural Development has announced China’s first list of pilot Smart Cities in 2013. Later, the government has also released several announcements to oversee the development of Smart cities, including speeding up the implementation, promoting the sustainable development and setting new urbanization plan for 2014-2020. The issue of these policies has testified China’s ambition and determination to implement Smart Cities strategy and work on urbanization programs tackling all the current issues of Chinese top-tier cities. Also, China will increase its investment on Smart City project every year, forecasting number from 375.2 billion yuan in 2017 to 1234.1 billion yuan in 2021.

(The smart city investment forecast in China, Graph made by Daxue Consulting, data gathered from Zhiyan Consulting Group)

Also, China has launched multi-dimensional technology development plans including the Internet Plus (互联网+). Internet Plus (互联网+) is a new development category of Smart City 2.0 It imply to integrate Internet-based technology with traditional industries to drive the economy growth into different forms. Industries vary from government to real estate, from finance to entertainment. The government supervises the technology movement and policy implementation from top down and aims to provide more choices for citizens. For the recent 7 years, the number of China’s internet users has been increasing from 0.564 billion in 2012 to 0.727 billion in 2018. With this sizable increase, China has huge potential in fastening the development of Smart Cities.

China’s comprehensive IoT applications connects citizens’ lives

China now has built comprehensive digital ecosystems in the targeted cities and collected massive data from users in every second. The digital constructions in the cities will include the implementation of RFID (Radio Frequency Identification) sensors, complete wireless connectivity, full-scale electronic payments, and cloud-based software services.

With the help of the booming e-commerce and overall smartphone penetration, China’s smart city has been developing faster than ever. The application of RFID sensors is everywhere, from scanning the QR code to enjoy bicycle sharing, taking the subway to making an order by scanning the code provided on the table in a restaurant, from personal usage, business usage to social usage. It is almost inevitable for citizens to scan numerous codes and digitizing their daily activities. While on the other hand, it is not the case in the West, the RFID sensors mainly apply to security system, business supply chain management, technology development studies and so on.

(Citizens can use smartphone’s Alipay, WeChat Pay and Apple pay to take the subway by scanning the QR code. Photo from Shanghai Metro (上海地铁). Photo Credit: Daxue Consulting.)

Chinese ecosystems are nurturing and maturing smart wireless applications in urbanized areas

The widespread use and implementation of wireless connectivity is especially significant, including Wireless Local Area Network (WLAN), providing connection to high-speed internet and Bluetooth technology for content sharing and streaming. The state of development of wireless connectivity in China and the West are similar, but the application of this technology varies with huge difference.

For instance, benefiting from the high-speed wireless connectivity and popularity of smartphone usage, China has achieved a full-scale electronic payment system. Apart from using the traditional banking services or cash, people use Alipay, WeChat, Apple pay or online banking system to pay their bills or purchase products.

(Alipay and WeChat QR code on the dining table, order food and pay by scanning the QR code. Photo from Laoma Rice-Flour Noodles (老妈米线). A Chinese noodles restaurant located in Shanghai. Photo Credit: Daxue Consulting.)

When you ask a random person on street, there are huge probabilities that he or she will not have any cash or credit cards on hand, since what he or she uses is only a smartphone. According to Analysys.cn, China’s third party mobile payment transaction volume has been increasing to 37727.45 billion yuan in the 2017’s fourth quarter, the sequential growth rate has reached to 27.91%. The huge amount of transaction volume shows the popularity of mobile payment, and the rapid development of smart cities in China.

(The third party mobile payment transaction volume of 2016 Quarter 4 to 2017 Quarter 4 in China, Graph made by Daxue Consulting and data gathered from Analysys.cn.)

However, in the West, the mobile payment development is not as advanced as China’s, the transaction volume is smaller and people still mainly use traditional banking system and cash to make day-to-day payments.

Another element significantly involved in the Smart City development is the cloud-based software services. Alibaba recently has teamed up with the city Macau to transform the idea of Smart City by using cloud services. The cloud-based software will be used to collect user data in areas such as healthcare, security, institutional operations, transportations and more. Along with Alibaba, other Chinese business conglomerates have been strategizing to take over the new market by using cloud computing. Huawei and Ping an Insurance launched strategic cooperation agreement in February 2018 to promote resources and complementary advantages integrations. Ping an Insurance can use Huawei’s technology and its cloud system to implement its Smart City application, to install user information and to collect user data. The usage of cloud-based software services is also widely accepting in the West, as for instance Apple provides iCloud platform and services for personal and business usage.

By using these latest technologies, China’s growing IoT software pool collected massive data to depict personal profiles and make prototypes to achieve better user satisfaction.

China aim to achieve collective intelligence by using City-as-a-platform

“City-as-a-platform” is a new partnership platform provided to citizens, business and government to share information. Using the data collected by digital applications, the new Smart City has put citizens in the center of everything. It is said to have led China to make significant progress in smart transportation, smart healthcare and smart governance.

For example, in smart transportation, users have various options for methods of transportation and payment methods. The key players include Didi (滴滴出行), Shengzhou (神舟专车) for cars, OFO and Mobike for shared-bikes and Metro services, bus services for public transportation. Citizens can choose their own preferences and create own partnerships with businesses and governments. By tracking the transportation traffic every day, the transportation department can allocate their resources, arrange subway and bus shifts according to traffic. People will have more subway shifts when there are massive traffic jams on the ground, in the night, the shifts can be reduced when there are less people using the public transportation. This smart transportation can benefit not only citizens but also the government, citizens can have more time and less loss in experiencing traffic jams, the government can also have an efficient transportation system and a more stable city environment.

Smart city also includes smart healthcare, as appointments can be online, or overall with less and less human services. Doctors can access patient profile and prescript medications information on the hospital cloud system. Patients can go straight to the pharmacy to get his medicine, which has already been prepared at the moment when doctor prescript medications. In the end, the patients can make payments using the card, Alipay or WeChat pay. This smart healthcare also provides new ways for doctors to engage with patients through websites. A Beijing patient can get treatment from a Shanghai doctor in one minute online. Also, the enormous patient profiles in the cloud system can be a quicker way for doctors to access data to cross-reference diseases, thus helping medical development.

China’s Smart City market is booming with the constituent help from government, businesses and citizens

Smart City has been only a concept in the earlier 2000s, but with the help of advancing technology, the concept began to be transferred into reality. China, over the years, has built a supportive environment for the development of the Smart City by using the Top-down approach. With the government’s leading, businesses and citizens joined the evolution to offer constituent effort. Now, China has maintained a comprehensive digital construction and collected massive data from the users. Those data in turn has given users better Smart City experience and more choices. China now has outnumbered the rest of the world in smart cities pilots, it will continue using the “city-as-a-platform” to shift the role of the government from doing by itself to enable citizens participate in making decisions, to align business with smart city goals to innovate and create more IoT software to increase the market size, to offer citizens opportunities as designers of the future.

Daxue Consulting can provide data report and strategic positioning for international brands aiming at integrating solution in Chinese smart ecosystems

Daxue Consulting has developed an extensive experience and network among the Chinese smart city ecosystems and related industries, including projects in data processing systems, connectivity offer monetization, and smart lighting and urbanization models. Our team can answer your need of information and leverage our knowledge of the market to provide key strategic insights on your implementation in China. Contact us for more information and set up a call with one of our senior research directors.

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Provence business in China

Prosperity of tourism and wine in Provence France

Provence region, located in southeast France and depicted by many of the most famous painters like Vincent van Gogh, Pablo Picasso, Claude Monet in the 19th and 20th centuries, has been thriving for its tourism and wine industry thanks to the fact that it is the favorite tourist destination for Chinese in France. The image of vast fields of sunflowers and lavenders, magnificent castles, abundant sunshine and rosé wine better presents romance, luxury and cultural and historical heritage that Chinese people especially young generations dream and desire. Not only does Provence attract Chinese tourists to visit and shop, but also it appeals wealthy Chinese buyers to spend huge amount of money for the ownership of vineyards and Chateau just for the sake of good weather, pleasant view and wine tasting with their business partners or clients.

Provence business entering into China

While Provence business effect in China just gets started. Provence economy is extremely boosted by affluent Chinese visitors in terms of tourism, body care cosmetics and wine industry thanks to pleasant and refreshing Mediterranean climate, mistral wind, purple lavenders and Mourvèdre grapes, which are grown under demanding conditions: hot weather and affluent sunshine. And French companies have been fully taking advantage of these God given gifts as well as consumers’ origin sensibility to produce skin care cosmetics, red wine and exported worldwide. China, as one of the emerging and fast-growing markets in the world and its prominent performance in skin care cosmetics and red wine , inevitably caught Provence’s eye and push French entrepreneurs to develop more business  opportunities in China. Boom attributed to new urban affluence, nature appreciation and to Chinese fondness of lucky color, together with consideration of healthy aspect in comparison to excessive consumption of rice wines, Chinese appear to have beaten French at one of their favorite pastimes-quaffing red wine. China’s drinkers knocked back 1.8 bn bottles of vin rouge in 2013, an increase of 136% over the past five years, making the country the leading market for red wine.

As the third biggest market for cosmetics in the world, the cosmetics sector on the Chinese mainland has been growing at a fast pace in tandem with the rapid development of the Chinese economy in recent years. Data from Euromonitor reveals that total retail sales of skin care products and make-up products in China reached Rmb131.4 billion and Rmb18.8 billion respectively in 2013, achieving year-on-year growth of 9.1% and 7.3% respectively. People are increasingly aware of the safety issues of cosmetic products. Consumers, manufacturers and regulatory authorities have been alarmed by a series of problems arising from unsafe products. It is believed that the promulgation of the Hygienic Standard for Cosmetics and the Hygienic Standard for Cosmetics Production Enterprises can help regulate the behavior of cosmetics manufacturers and protect the rights of consumers. Although there has been negative news about the quality of cosmetic products from world-renowned brands, mainland consumers are still fond of international brands. They believe that these well-known enterprises have been producing cosmetics for years, and so even though problems have been reportedly spotted in individual products, the overall quality is still reliable. Besides, some young women consider it trendy to use cosmetic products of famous brands.

Business mode of Provence companies in skin care and wine industry

What is interesting for Chinese customers and investors in Provence is skin care and Wine. There are not yet a considerable number of Provence-based companies competing in Chinese market. French cosmetics maker L’Occitane International SA is one of the like, and Pré de Provenc, European Soap LLC is another.

Founded by Oliver Baussan over 25 years ago in the Provence region of France, now it has been expanded up to 1500 stores including business presence in mainland China. All L’Occitane products for bath, body, skin care and home are passionately created to preserve the authentic ingredients and tradition of Mediterranean land and its people. L’Occitane shares the colors, scents and traditions of south of France with the world using only the highest quality natural ingredients, and remains committed to its core values and strives to inspire a lifestyle of natural beauty. L’Occitane was listed in Honkong in 2010 with independent stores in mainland China, intending to use the proceeds of IPO to accelerate its international expansion in high-growth emerging market such as China and Brazil.

As for French wine business, Ravoire & Fils is a typical family-run company established in 1987 in Provence region. They set up a Chinese website page with product profile, news, events and updates about their wine products and local programs they participate in in China to promote and stay relevant in China’s wine business. Most commonly, Provence wine will be exported to China through intermediary trading company, and if possible, to advertise their products through China’s exhibition before entering into local market.

Source:

1. http://www.forbes.com/forbes/2011/0411/features-billionaire-behind-loccitane-asian-expansion.html
2. http://bookshop.theguardian.com/revolution-7.html
3. http://www.reuters.com/article/2010/04/30/us-loccitane-idUSTRE63T27J20100430
4. http://www.ft.com/intl/cms/s/0/df4053dc-5411-11df-aba0-00144feab49a.html
5. Daxue Consulting

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Daxue Consulting provides valuable market research and market potential data to assist you in your entry in China. Our team aims to provide the best consulting service among every market research firm.

When it comes to enter China market, find the good place to start your activity is crucial. It is a question of choosing the place, the city, the region the most relevant to your business, in term of consumer needs, consumption patterns, cultural specificities or local regulation.

Daxue Consulting regularly conducts specific research to help you to find where to invest in China.

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For coffee shop customers in Shanghai, Beijing and Guangzhou, different expectation toward coffee consumption places

Through focus group of professionnels on China market, our expert designed a report about main attitude from citizens of those three cities. The data shows that 65.8% of Beijing citizens believed that it’s necessary to have a well designed coffee room with beautiful decorations. The atmosphere of the coffee shop is very important as well. Then, 65.8% of them do not pay strong attention to price. In Shanghai, people are giving more attention to the price. Also, they are rather more willing to pay for foreign brands than local ones. In Guangzhou, people often spent time in coffee shops in the afternoon to having some afternoon tea. They are, unlike Beijing and Shanghai’s consumers, more caring about the convenience of thge place. 67.8% of them care about if vacant parking spaces are available before they pick which coffee shop to enter, and 56.3% thought it’s not worth to spend much money on drinking coffee.

Coffee Shop Retail localization in Beijing, Shanghai and Guangzhou

So far to now, main customers of Costa coffee shops in Beijing are still people from foreign countries, and local people prefer products which are localized. They do not like to try things that they aren’t familiar with. Hence the location of new-opened coffee shop is generally localized in some streets where the flow of people is high. In Shanghai, the location must be picked at some places that are very quiet and elegant, far away from the noise area. Indeed, Shanghai’s consumer are expecting a more sophisticated consumption. In Guangzhou, first thing to considerate is the traffic. If the traffic is very convenient and the quantity is high, people would like to come all the time.

Different Tastes in China

Consumers in Beijing and Shanghai would rather try some sweet food than people in Guangzhou. Since the tea culture is so important in China, coffee shop retail managers can consider about combine two drinks. When Starbucks first entered Guangzhou, it release a new kind of drink—— Green tea coffee, and it get huge success.

See also: http://philippinesmarketresearch.com/

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Volume of production in 2011 in China
In the year 2011, 66,919,974 microwave ovens were produced and presented 1.56% growth compared with the one last year. Tianjin (天津), Shanghai (上海), Anhui (安徽) province, Guangdong (广东) province, Shandong (山东) province and Fujian (福建) province are the main producing areas of microwave oven. Guangdong (广东) province is the largest producing area, for around 80% of the production was generated there.

The largest microwave oven producer： Galanz (格兰仕)
Galanz positions itself as a global company. Founded in Guangdong (广东) province, Galanz have leading technique in Shunde (顺德) and Zhongshan (中山) in terms of producing microwave oven, air conditioner and other household appliances. There are 13 branches all over the country and more than 60 distributions and sales centers. In the development path of Galanz, the main theme is “price war” which turns into their strategy. It created a unique way of marketing by educating the market, initiate the market and occupy the market.

Leading companies in microwave oven market：LG, Midea (美的) and Panasonics
LG, Midea and Panasonics are some other leading companies in microwave oven industry. LG is a Korean company, Midea is a Chinese leading enterprise in major appliances and Panasonics is a Japanese company. Though they are very competitive, Galanz takes absolute advantage in the market, both in China and overseas. These companies tend to implement multifunctional strategy; however, most Chinese customers merely use basic functions.

Written for Daxue China Consulting  and Mystery Shoppers China

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Under the impetus of the Expo Fair last year, the investment efforts of the province continue to increase and the investment form as well as the area of investment continue to expand. Last year, the province’s newly approved 62 foreign-funded enterprises, an increase of 19.2%, comprised a total investment of $ 2.92 billion, an increase of 120.9%, contracted foreign capital of $ 1.56 billion, an increase of 55.2 %, and foreign investment in place of $ 2.07 billion, an increase of 37.3%.

Rationale for foreign companies to move to Shanxi:

1. Location

Shanxi Province is located in the middle of China in the middle reaches of the Yellow River and to the west of Taihang Mountains. It has 11 main cities, 119 counties or districts and the capital city is Taiyuan City. These cities are rich in natural resources used in production and give foreign companies access to all reaches of China.

2. Resources

Shanxi Province possesses abundant mineral resources. There are 120 kinds of ascertained minerals throughout the province. Four traditional pillar industries, coal, electricity, metallurgy and coke, have formed in Shanxi due to its rich resources. Shanxi has therefore become an important resource base in China.

3. Transportation infrastructure

The roads that have been opened to traffic in Shanxi Province have reached 66,000 kilometers, with highways making up about 1,686 kilometers. The length of railways has reached 2,512 kilo meters and it only takes three hours to get to Beijing from Taiyuan by train. Additionally, there are more than 40 air routes from the Taiyuan Airport, which is a first-rate port and the region has three other airports in operations: Changzhi Airport, Yuncheng Airport and Datong Airport.

4. Telecommunication

The network of fixed and mobile communication has reached nearly all the urban and rural areas in the province. Telephone companies have established their services in 85% of the province and internet & broadband companies have reached 65%. In addition, the province’s international direct dialing can reach 260 countries and regions.

5. Finance

Shanxi has 21 financial organizations, including Bank of China and Industrial and Commercial Bank of China. Most of these financial institutions provide international settlement services, international finance services and cross-border banking services.

6. Tourism

Shanxi is one of the birthplaces of the Chinese nation with a long history and culture. An old Chinese saying goes “Look at Shanxi and you can find thousands of years of civilization”. Many beautiful legends such as “sky-patching by the Goddess”,“ flood control by Da Yu” and“ mountain movement by Yu Gong” all took place in Shanxi. Wutai Mountain ranks first among the four famous Buddhism mountains. The Datong Yungang Grottoes and the ancient city of Pingyao have been listed in the “World Cultural Heritage Directory”. The wooden tower in Ying County is the tallest and oldest wooden structure in the world. The natural reservation areas such as Heng Mountain, the ancient garden in Jin Temple, Guan Di Temple in Yuncheng, Pangquan Channel, Luya Mountain, Li Mountain and Mang River, offer unique natural, historical and cultural landscape with a variety of scenic views. With the influx of tourism in recent years, businesses see an opportunity to broaden their market size in the province by targeting both locals and tourists.

7. Development Zones

There are 23 development zones above provincial level. Relying on local leading industries, superior energy resources, advantageous technology and markets, these development zones have hatched a batch of major industries, including the pharmaceutical industry, the new material industry, the machine-manufacturing and electronic industry, and many others. In recent years, the development zones in Shanxi have been devoted to promotion of conformity with WTO international practices and the certification of ISO1400 international management system to create a facilitating environment for all kinds of investors.

Written by Tom Chen

More on China Market Entry and Daxue China Consultants & Consulting

Sources:

• Shanxi Market Profile PDF
• China Daily 1
• China Daily 2
• Asia Times

Picture: Taiyuan

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