August 27, 2025 • 26 mins
China's consumers are a powerful force – the world's second-biggest spenders after the US. Officials want to harness this to transform the nation into a "mega-sized consumer powerhouse," and there are some initial signs of success with increased spending on home appliances, toys and jewelry.
But how sustainable is this uptick in conspicuous consumption, and how much should investors worry about the Chinese consumer being fundamentally changed by the pandemic and real estate crash? Despite policymakers efforts to create a consumer-based economy, it still only accounts for about 39% of GDP, significantly below the OECD average of 54%.
This week we take a deep dive into the Chinese consumer with Catherine Lim, senior analyst for consumer and technology at Bloomberg Intelligence, and Anson Bailey, head of Asia Pacific consumer and retail at KPMG. They speak with John and Katia.
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Speaker 1 (00:01):
China's consumers are a force to be reckoned with. It's
the second largest market in the world after the US.
Last year alone, Chinese shopp has spent about forty nine
trillion yuan or about six point eight trillion US dollars. Now,
policymakers want to harness that and grow the nation into
a mega sized consumer powerhouse, as officials call it.
Speaker 2 (00:23):
But they have promised us for two decades now, and today,
after rounds of stimulus measures, consumption in China still makes
up only about thirty nine percent of GDP. That's far
below the OECD average of fifty four percent. It's exports
and industrial production that's still drive growth.
Speaker 1 (00:41):
So what's keeping consumers from spending? Should we even be
waiting for a comeback or if things structurally changed? And
how should we read into recent consumption trends that have
skyrocketed stocks from bubble tea to gold and toys.
Speaker 2 (00:57):
You're listening to Asia Centric from Blooeberg Intelligence. I'm Katademitreva
in Hong Kong.
Speaker 1 (01:02):
I'm John Lee, also in Hong Kong, and this week.
Speaker 2 (01:05):
We're taking a deep dive into the China consumer, how
their shopping habits are changing and trends to watch. We'll
sit down first with Katherine Limb, Senior analyst for Consumer
and Technology at Bloomberg Intelligence, to unpack spending trends and
how investors can pivot. Then we bring in ants And Bailey,
head of Asia Pacific Consumer and Retail a KPMG for more.
(01:28):
Catherine really pleased you could join us just to start.
Where is the China consumer at today? Give us kind
of the lay of the land, you.
Speaker 3 (01:36):
Know, I think we do have to be realistic that
post COVID there has been changes in spending behaviors of
Chinese consumers, not just within China but also abroad. Abroad,
we've heard from so many different companies, including LVMH as
well as Kiiren talk about tourists, particularly the traditional high
(02:00):
spenders like those from the mainland, cutting back down on
their spending when they are traveling and instead they are
spending more on the experiences on some of the services
rather than luxury goods. Coming back to China, we are
seeing a repaturation of what I've just highlighted that instead
(02:22):
of actually spending on the big luxury goods abroad, we
are seeing them translate that into some of the premium
tickets spending. You know, they don't mind spending a little
bit more on premium toys, new gadgets, even on concerts,
as well as domestic travel within the country.
Speaker 1 (02:44):
Yeah, Chinese mainland travelers and consumers were really big purchases
of luxury items. What's the outlook for the luxury segment?
Because these European luxury companies, they spent so much money
positioning themselves for Chinese consumption, this is not.
Speaker 3 (03:03):
The first time they've actually seen the cycles come through.
It is a structural change in the way the Chinese
shoppers are spending. But let's not forget that for the
luxury firms like LVMH Curring. The good news for these
firms are that they have a very extensive array of
luxury goods at different price points to which they will
(03:27):
be able to actually capture the different demands and evolving
changes and preferences of the shoppers, which they have done
historically quite well in the last decade or so. And
it is a cycle that I do believe they will
come out of. It. Will we go back to the
(03:48):
same kind of impulsive buying behavior that we have seen
from the Chinese consumers prior to COVID. I doubt and
I do think that the changes that we are seeing
is structural and will stay for the next couple of years.
Even as consumer confidence returns, we're not going to actually
(04:11):
again see the impulsive buying and the splurging on very
big ticket items.
Speaker 2 (04:19):
So, like you just said, if the consumer's not coming back,
what is the consumer the China consumer look like, you know,
five ten years from now versus pre pandemic, because I
would think that analysts markets generally expect China's consumption to
come back at some point.
Speaker 3 (04:36):
Yeah, good question, Katya, and I think that the easy
way of selling to the Chinese consumer is over and
retailers and brand owners need to be more thoughtful in
their marketing campaign to be in a position to seize
(04:57):
the wallet of these increasingly sophists dedicated consumer group who
are going to social media to look at reviews and
to share thoughts about their experiences. And the retail marketing
campaign will now needs to shift to be more proactive
(05:18):
in communicating a story which was what had actually bagged
what we see for La Boubou, right, the toy had
a story backed by a celebrity and then they were
able to actually match it up with the scarcity demand,
making certain collections exclusive, etc. Same thing for Laupugo, the
(05:41):
heritage of the Chinese cultures being embedded into their pieces.
This is not something that you see in Bulgari or Katier,
but it is something that is coming through very strongly
for the Chinese jewers. And this feeds into the nationalism
that we have actually seen coming and getting stronger among
(06:05):
the Chinese.
Speaker 2 (06:06):
Do you see that trend continuing, this nationalism as maybe
a pushback as well to what's happening globally.
Speaker 3 (06:14):
Oh yeah, absolutely. We have heard Nike and our deaders
setting up China only design centers, whereby they are now
pushing for China only dedicated products and merchandise with features
that resonate again with the Chinese consumers, which they will
roll out in a bigger scale as we go into
(06:35):
the end of the year. I think we are definitely
seeing a lot more of the global retailers coming up
with customized merchandise and services for the crowd. Look again,
just to take a step back, young China, KFC Pizzahat,
they have long started this. They have customized their menu
for the Chinese taste.
Speaker 2 (06:57):
Do you know how just for our internationalists, how did
they do that? Like what does a KFC meal in
China look like?
Speaker 3 (07:04):
So do you know you get congy and porridged on
damn menus? Right, Definitely McDonald's heads that as well. They
have also had their version of bubble tea like just
iced tea. It's a bigger thing than iced coffee. And
they have a selection of coffee mixed with juice, which
is a big thing in China, whether it's Fright Dolls,
(07:27):
et cetera. Breakfast their breakfast selection is amazing.
Speaker 1 (07:31):
So on one hand, you've got a lot of global
brands or a lot of global consumer companies catering to
the Chinese taste. Then on the other hand as well,
you're going to get a lot more homegrown companies that
are going to go be successful at home and also
potentially export overseas.
Speaker 3 (07:48):
Yes, talking about exporting overseas. Being here in Singapore as
well as Malaysia, we've seen how Chagi Lucking coffee is
now like within at least three kilometer in certain places,
you'll find a Lucky point of sale somewhere, and they
are now more prominent and more accessible than Starbucks.
Speaker 1 (08:11):
Catherine look consumption overall has been quite subdued that there's
been some pockets that have done really well, and some
of these companies' share prices have done really well. Like
Lapool Gold, they sell a lot of jury that's done
extremely well. That's obviously a high end. But on the
other side of the spectrum, you've got I would say,
like cheaper end goods like Laboubo dolls, although that become
(08:32):
a bit more expensive recently, Bubble Tea as well. How
should we read into these diverging signals.
Speaker 3 (08:41):
Firstly, I guess for the discretionary goods side, from jeury
to toys, Lapool Goal has writ or not just increased
demond for safe haven assets like Goal, they have also
incorporated a lot of the heritage cultural features into their items.
That's stood doubt. Definitely. It is a smaller scale dura
(09:04):
in terms of the number of stores that they have
in China relative to Chow Tay folk, which we are
more familiar with in Hong Kong as well as in
the southern part of China. As they gain popularity, Laupoo's
growth trajectory definitely looks better than Chow Tai folk for
reasons that you know, they're starting from a lower base
(09:26):
now when it comes to the toys per se, the
frenzy for La Boobuo continues. And I was just having
a very interesting discussion with someone about like they do
have friends who are bidding for more exclusive La Boo
Boo series online, even though it has been marked up
at least three or four times in some cases ten folds.
(09:49):
But because they are exclusive, and ultimately the incremental amount
that you are paying some start to less than two
hundred R and B for instance, so it is not
going to take a big hit on the wallet. It
is still something that very affordable now to Bubble Tea.
And when it comes to food services, that is evolving
(10:13):
as we continue to see more e commerce platforms like
JD dot com Mate one throwing in perks to drive
online orders and then somewhat stimulating the consumption of these
food services out there. So we are seeing different ways
(10:34):
to which China consumption is being stimulated. In part, I
do believe that, you know, through December, we will continue
to see the e commerce platforms playing a very important
role in this. So if we.
Speaker 2 (10:48):
Can dive into those dynamics a bit more, what is
going on there is it sort of the same consumer
who's purchasing the cheapla boo boo and the bubble tea
and sort of what we call like small treats to
keep people going and also purchasing higher end items like
gold chains or jewelry. Or are these different demographics or
(11:12):
is it sort of younger gen z who are driving
the cheap trend and then maybe older people, older women
driving the jewelry and other high end sales. Like, what's
kind of really going on here?
Speaker 3 (11:23):
I love how you've actually put it that these are
your sweet treats, but that the consumers are spending on.
And particularly if you look at the population group between
twenty to thirty five years old, which are the younger,
more digital savvy population who are educated, being able to
(11:46):
actually communicate to them through the digital platforms like social
media and making it very convenient for them to spend
via platforms and apps on their mobiles. When it comes
to foot deliveries a set, it definitely resonates with this group.
I would attribute denotable consumption trends to the gen Z
(12:08):
from the millennials to the gen Z. I would say
in that under forties bucket itself particularly against stressing that
these are your tech savvy group that has actually right
on the e commerce and digital weight in China over
the last two.
Speaker 1 (12:25):
Decades, Catherine, A lot of investors are waiting for a
big stimulus package to you know, restart China consumption. What's
the outlook there, That's.
Speaker 3 (12:36):
A that's the million dollar question, John. What the Chinese
government has already put into the market and will continue
to invest based on what they have raised from the
government bonds itself. It is pretty huge, and really the
question right now is how much more can we expect
in twenty twenty six, on top of what they have
(12:58):
already put in for twenty two to continue to lift
consumption or simply retail sales by another five percent in
the next year to come. I do think that this
is an unanswered question at this point in time, because
it does mean that in order to get people to
buy more washing machines or whether it's Huawei smartphones, the
(13:23):
placement cycle has already been shortened to try and get
consumers to buy a new handphone every month. I don't
think that's going to be realistic right let alone like
the bigger ticket home appliances, So I don't think that
it is about the incremental money that they're pumping in
to subsidize these purchases, but rather they have to find
(13:48):
new means to stimulate the confidence for the consumers to
naturally be inclined to spend.
Speaker 2 (13:56):
Do you have a theory for what the silver bullet is?
Speaker 3 (13:59):
I think the overall confidence level, and it starts really
from not just concerns about the undercurrents when it comes
to property market, but job security. These days, the confidence
levels still remains very low. I think we are still
seeing the aftermath of some of the downsizing that we
(14:21):
have seen across the board in the Tierwan cities. For
whether it is the financial sector where a lot of
the more affluent Chinese population tends to be exposed to,
that will likely reach a tail end sometime in the
beginning of next year from what I'm gathering, and hopefully
(14:41):
as it stabilizes, we're going to get the confidence built
up into twenty twenty six, barring any unforeseen circumstances or
changes to the macro environment globally.
Speaker 1 (14:55):
So, Catherine, We've discussed quite a lot of different products
and services, but I wanted to say to get your
ranking of where you think the strongest growth is going
to come. We've talked about white goods, you talked about smartphones.
There's obviously, like you know, big ticket items like cars,
also like clothing, sports goods, like where do you think
will be the sort of the star or best areas
(15:17):
to look at in the second half.
Speaker 3 (15:19):
Sportswear is definitely one sector because there is still increasing
awareness when it comes to health and fitness within the country,
and we are seeing more outdoor activities and consumers themselves
willing to pay more for more functional sportswear items, whether
(15:41):
it's the clothing or shoes. So it is going to
stay resilient, more resilient in my view than purchases of
goal or jewelry as that could be influenced by some
of the fluctuations that we see in goal prices. And
I think that is a big question mark when we
(16:01):
go into twenty twenty six.
Speaker 2 (16:04):
So does that mean that some of these companies might
be in bubble territory. I mean, we've had more than
two thousand percent stock rise in the Gold company we're
just talking about. PopMart has been another big one. But
if they're kind of driven by only one demographic and
they're not sustainable. I mean, there's only so many gold
chains you can buy or does that kind of imply
(16:25):
that people should be rethinking some of these valuations.
Speaker 3 (16:30):
Yeah, so, Katia, I guess as we look to find
out more from the companies on their strategies into twenty
twenty six, if they stay put focusing on just La
Booboo alone, without new ips to roll out in the
next couple of years, without more innovative ways of selling themselves,
(16:51):
whether it is true digital media, whether it is true movies,
to actually strengthen their presence, Yes, you are right that
these companies could actually stagnate in terms of growth, and
if consumers find an alternative, we might actually see revenues
or profits actually declining. In a case of jewelry, we've
(17:14):
been focusing on goal as Laupu's official name has that
goal element in it, but let's not rule out the
possibility that they may go into non goal items as well,
and it is really up to the company to decide
how they want to actually expand their merchandise. Mix.
Speaker 1 (17:33):
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(17:56):
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Speaker 2 (18:01):
And we'rebec with Anson Bailey, head of Consumer and Retail
in Asia Pacific for KPMG, and.
Speaker 1 (18:07):
We should tell the audience that Anson has brought something to.
Speaker 2 (18:10):
The studio, has a very special item.
Speaker 1 (18:13):
And Anson, for the listeners, what do you have there
on the table.
Speaker 4 (18:16):
John, We have got la booboo a la booboo. We
a white laboo boo. I did want to bring it
into the studio just to point out that the Chinese innovation,
the Chinese design is not always about the Chinese tech,
but we're really seeing some big steps forward in that
(18:37):
China consumption space but also the Chinese brands.
Speaker 2 (18:42):
And it's also an incredible example of consumer spending right now.
Because Anson, we've heard these two stories and perhaps they're
not mutually exclusive. So we spoke with Catherine about this
idea that on the one hand, the China consumer is
still not spending, still worried about the property market. Property
market hasn't come. And then on the other you have PopMart,
(19:03):
some jewelry companies and others really outperforming. So what's your take?
How do you explain this?
Speaker 4 (19:09):
I think the general outlook is cautiously optimistic.
Speaker 2 (19:13):
Is it more cashas or is it more optimistic?
Speaker 4 (19:16):
Well, I think it is is perhaps a little bit
more optimistic if you look at those retail sales. I
think annual consumptions expected to rise by about two point
three percent in twenty twenty five. But at the same time,
it's not just about the consumption levels. It's also about
the savings levels as well, because I think one of
(19:38):
the things we should always look at and we always compare,
you know, the US consumers with everybody else and the
Chinese consumers. Those savings levels are much much higher in
China than they are compared with the US. In China,
now we're looking at four hundred and fifty million middle
(19:59):
class consumers. Now I think that probably makes them the
largest middle class groupings anywhere in the globe.
Speaker 2 (20:08):
But they have all of this in savings, but they're
not spending the money. Is that what we're seeing now,
you know, potentially not spending on those bigger items, spending
on smaller items, and there's that sort of a negative
sign about the economic outlook how people are feeling.
Speaker 4 (20:23):
It could be viewed as a negative sign, but I'd
also say that, you know, let's have a look at
things like automotive sales. I think if you look at
the automotive sales, thirty one point four to four million
vehicles that were sold last year. But then if you
look at the EV share, the EV share is increasing significantly.
(20:44):
I think it was forty one percent market share, and
I think the sky's the limit.
Speaker 3 (20:51):
You know.
Speaker 4 (20:51):
I do think that if you look at the consumables,
if you look at smartphones as well, you know, smartphones
is actually experience and seeing a rebound. I think five
point six percent of a rebound. So there are I
think some things that are I would say quite positive
out there in the marketplace.
Speaker 1 (21:11):
Yep. And so the government has launched a number of
initiatives to try to get Chinese consumers to spend. They
had their own version of Clash for Clunkers. They tried
to get consumers to buy more white goods like refrigerators,
washing machines, air conditioners. You know, what's been the impact
of these government measures and does the government need to
(21:31):
do more?
Speaker 4 (21:32):
I think the Chinese economy is like turning a massive tanker.
You know, it takes time to turn things around. I
think this stimulus has actually led to a few visible
improvements in retail sales, but at the same time, there's
only so much I think the government can do. I
(21:53):
would say it goes very much down to the consumer sentiment.
I mean, this whole US China trade war I think
has really put a kibosh on that positivity, on that
consumer sentiment. So it is going to take time.
Speaker 2 (22:09):
If we could talk about just going back to the consumer,
You've done a lot of work in this space. If
we could just drill down into the different types of
China consumer that there are. You know, generally we've been
hearing about a luxury a side pulling back. The Chinese
consumers are becoming a lot more price conscious, a lot more.
They're traveling less as well overseas, more internal travel. So
(22:34):
could you tell us a bit about the different types
of consumer or how you would maybe group them.
Speaker 4 (22:39):
The reality is that today we see several different personas
on those Chinese consumers and equally individuality, you know, connoisseurship.
These are all things that the Chinese consumers today, certainly
those high end consumers, we really do see them leading
(23:00):
the way. One thing that we have noticed in things
like connoisseurship is that one of the person that's one
of the personas So if we look at the connoisseurship,
I think what we are going to see is that
those Chinese consumers, they've literally gone to the next level.
Speaker 1 (23:18):
You're talking about connoisseurship in terms of like cars or
watchers or wines or cigars like what.
Speaker 4 (23:24):
Yes, So basically, John, we're looking at you know, the
fact is that those Chinese consumers today, one, they're incredibly
well researched. Okay, they really really know the product inside out,
probably a lot better than your sales associates. And so
that's you know, one of the big challenges is as
(23:46):
we of course try and drive the customer experience, you've
really got to ensure that it's a very a deep,
immersive in store experience as well for those Chinese, these consumers.
So I think that's going to be a really key
driver with regards to the future Chinese consumers but quite frankly,
(24:09):
they have surpassed I think a lot of those Western
consumers and the definitions. And it's interesting, John, you just
mentioned about well they're not really traveling very much. I
do think that there was.
Speaker 1 (24:25):
A COVID revenge travel.
Speaker 4 (24:26):
Yeah, so we did get the COVID revenge travel. Those
Chinese consumers, I do believe that we are going to
start to see a lot more travel. They don't forget
China itself is open for business.
Speaker 1 (24:41):
What about the luxury makers? Do they have to start
relying less on Chinese as traveling overseas and maybe just
have more of their stores in mainland China.
Speaker 4 (24:51):
I think that's a good point, John, I think previously
the Chinese consumers absolutely had to travel overseas for an
amazing experience or to buy a particular bag. Today, what
you do find is that there's a lot more availability
in mainland China. Those Chinese high net worth individuals. I
(25:13):
think that number is still growing. I think if you
look at today and depending which reports you pick up,
high networth individuals, around three point one six million holding
combined one hundred and one trillion u N in investable assets.
These are not insignificant numbers. It just goes to point
(25:35):
out the maturity and how these Chinese consumers are evolving
over time. And I really think that that is going
to be a very key driver. We talked about four
hundred and fifty million middle class consumers today. Now what
should side all of us is what about in ten
(25:57):
years from now? And I'm not just talking about the headwinds.
And we've seen some significant headwinds in twenty twenty four
and twenty twenty five, but let's say from ten years
from now, perhaps that number the middle classes potentially it's
going to grow to seven hundred eight hundred million. So again,
you know, I would say to everybody here, of course
(26:19):
we have to be concerned about today, but let's not
lose sight of the big picture. Let's not lose sight
of China in twenty thirty five.
Speaker 2 (26:32):
And that is a wrap on our China Consumer episode.
You've been listening to Asia Centric from Bluebering Intelligence. I'm
Katjudmetriva in Hong Kong.
Speaker 1 (26:41):
I'm John Lee, also in Hong Kong. This podcast was
produced and edited by Clara Chin and you can find
all our episodes on Apple Podcasts, Spotify or review Listen.
Thanks for listening,
China's consumers are a force to be reckoned with. It's
the second largest market in the world after the US.
Last year alone, Chinese shopp has spent about forty nine
trillion yuan or about six point eight trillion US dollars. Now,
policymakers want to harness that and grow the nation into
a mega sized consumer powerhouse, as officials call it.
Speaker 2 (00:23):
But they have promised us for two decades now, and today,
after rounds of stimulus measures, consumption in China still makes
up only about thirty nine percent of GDP. That's far
below the OECD average of fifty four percent. It's exports
and industrial production that's still drive growth.
Speaker 1 (00:41):
So what's keeping consumers from spending? Should we even be
waiting for a comeback or if things structurally changed? And
how should we read into recent consumption trends that have
skyrocketed stocks from bubble tea to gold and toys.
Speaker 2 (00:57):
You're listening to Asia Centric from Blooeberg Intelligence. I'm Katademitreva
in Hong Kong.
Speaker 1 (01:02):
I'm John Lee, also in Hong Kong, and this week.
Speaker 2 (01:05):
We're taking a deep dive into the China consumer, how
their shopping habits are changing and trends to watch. We'll
sit down first with Katherine Limb, Senior analyst for Consumer
and Technology at Bloomberg Intelligence, to unpack spending trends and
how investors can pivot. Then we bring in ants And Bailey,
head of Asia Pacific Consumer and Retail a KPMG for more.
(01:28):
Catherine really pleased you could join us just to start.
Where is the China consumer at today? Give us kind
of the lay of the land, you.
Speaker 3 (01:36):
Know, I think we do have to be realistic that
post COVID there has been changes in spending behaviors of
Chinese consumers, not just within China but also abroad. Abroad,
we've heard from so many different companies, including LVMH as
well as Kiiren talk about tourists, particularly the traditional high
(02:00):
spenders like those from the mainland, cutting back down on
their spending when they are traveling and instead they are
spending more on the experiences on some of the services
rather than luxury goods. Coming back to China, we are
seeing a repaturation of what I've just highlighted that instead
(02:22):
of actually spending on the big luxury goods abroad, we
are seeing them translate that into some of the premium
tickets spending. You know, they don't mind spending a little
bit more on premium toys, new gadgets, even on concerts,
as well as domestic travel within the country.
Speaker 1 (02:44):
Yeah, Chinese mainland travelers and consumers were really big purchases
of luxury items. What's the outlook for the luxury segment?
Because these European luxury companies, they spent so much money
positioning themselves for Chinese consumption, this is not.
Speaker 3 (03:03):
The first time they've actually seen the cycles come through.
It is a structural change in the way the Chinese
shoppers are spending. But let's not forget that for the
luxury firms like LVMH Curring. The good news for these
firms are that they have a very extensive array of
luxury goods at different price points to which they will
(03:27):
be able to actually capture the different demands and evolving
changes and preferences of the shoppers, which they have done
historically quite well in the last decade or so. And
it is a cycle that I do believe they will
come out of. It. Will we go back to the
(03:48):
same kind of impulsive buying behavior that we have seen
from the Chinese consumers prior to COVID. I doubt and
I do think that the changes that we are seeing
is structural and will stay for the next couple of years.
Even as consumer confidence returns, we're not going to actually
(04:11):
again see the impulsive buying and the splurging on very
big ticket items.
Speaker 2 (04:19):
So, like you just said, if the consumer's not coming back,
what is the consumer the China consumer look like, you know,
five ten years from now versus pre pandemic, because I
would think that analysts markets generally expect China's consumption to
come back at some point.
Speaker 3 (04:36):
Yeah, good question, Katya, and I think that the easy
way of selling to the Chinese consumer is over and
retailers and brand owners need to be more thoughtful in
their marketing campaign to be in a position to seize
(04:57):
the wallet of these increasingly sophists dedicated consumer group who
are going to social media to look at reviews and
to share thoughts about their experiences. And the retail marketing
campaign will now needs to shift to be more proactive
(05:18):
in communicating a story which was what had actually bagged
what we see for La Boubou, right, the toy had
a story backed by a celebrity and then they were
able to actually match it up with the scarcity demand,
making certain collections exclusive, etc. Same thing for Laupugo, the
(05:41):
heritage of the Chinese cultures being embedded into their pieces.
This is not something that you see in Bulgari or Katier,
but it is something that is coming through very strongly
for the Chinese jewers. And this feeds into the nationalism
that we have actually seen coming and getting stronger among
(06:05):
the Chinese.
Speaker 2 (06:06):
Do you see that trend continuing, this nationalism as maybe
a pushback as well to what's happening globally.
Speaker 3 (06:14):
Oh yeah, absolutely. We have heard Nike and our deaders
setting up China only design centers, whereby they are now
pushing for China only dedicated products and merchandise with features
that resonate again with the Chinese consumers, which they will
roll out in a bigger scale as we go into
(06:35):
the end of the year. I think we are definitely
seeing a lot more of the global retailers coming up
with customized merchandise and services for the crowd. Look again,
just to take a step back, young China, KFC Pizzahat,
they have long started this. They have customized their menu
for the Chinese taste.
Speaker 2 (06:57):
Do you know how just for our internationalists, how did
they do that? Like what does a KFC meal in
China look like?
Speaker 3 (07:04):
So do you know you get congy and porridged on
damn menus? Right, Definitely McDonald's heads that as well. They
have also had their version of bubble tea like just
iced tea. It's a bigger thing than iced coffee. And
they have a selection of coffee mixed with juice, which
is a big thing in China, whether it's Fright Dolls,
(07:27):
et cetera. Breakfast their breakfast selection is amazing.
Speaker 1 (07:31):
So on one hand, you've got a lot of global
brands or a lot of global consumer companies catering to
the Chinese taste. Then on the other hand as well,
you're going to get a lot more homegrown companies that
are going to go be successful at home and also
potentially export overseas.
Speaker 3 (07:48):
Yes, talking about exporting overseas. Being here in Singapore as
well as Malaysia, we've seen how Chagi Lucking coffee is
now like within at least three kilometer in certain places,
you'll find a Lucky point of sale somewhere, and they
are now more prominent and more accessible than Starbucks.
Speaker 1 (08:11):
Catherine look consumption overall has been quite subdued that there's
been some pockets that have done really well, and some
of these companies' share prices have done really well. Like
Lapool Gold, they sell a lot of jury that's done
extremely well. That's obviously a high end. But on the
other side of the spectrum, you've got I would say,
like cheaper end goods like Laboubo dolls, although that become
(08:32):
a bit more expensive recently, Bubble Tea as well. How
should we read into these diverging signals.
Speaker 3 (08:41):
Firstly, I guess for the discretionary goods side, from jeury
to toys, Lapool Goal has writ or not just increased
demond for safe haven assets like Goal, they have also
incorporated a lot of the heritage cultural features into their items.
That's stood doubt. Definitely. It is a smaller scale dura
(09:04):
in terms of the number of stores that they have
in China relative to Chow Tay folk, which we are
more familiar with in Hong Kong as well as in
the southern part of China. As they gain popularity, Laupoo's
growth trajectory definitely looks better than Chow Tai folk for
reasons that you know, they're starting from a lower base
(09:26):
now when it comes to the toys per se, the
frenzy for La Boobuo continues. And I was just having
a very interesting discussion with someone about like they do
have friends who are bidding for more exclusive La Boo
Boo series online, even though it has been marked up
at least three or four times in some cases ten folds.
(09:49):
But because they are exclusive, and ultimately the incremental amount
that you are paying some start to less than two
hundred R and B for instance, so it is not
going to take a big hit on the wallet. It
is still something that very affordable now to Bubble Tea.
And when it comes to food services, that is evolving
(10:13):
as we continue to see more e commerce platforms like
JD dot com Mate one throwing in perks to drive
online orders and then somewhat stimulating the consumption of these
food services out there. So we are seeing different ways
(10:34):
to which China consumption is being stimulated. In part, I
do believe that, you know, through December, we will continue
to see the e commerce platforms playing a very important
role in this. So if we.
Speaker 2 (10:48):
Can dive into those dynamics a bit more, what is
going on there is it sort of the same consumer
who's purchasing the cheapla boo boo and the bubble tea
and sort of what we call like small treats to
keep people going and also purchasing higher end items like
gold chains or jewelry. Or are these different demographics or
(11:12):
is it sort of younger gen z who are driving
the cheap trend and then maybe older people, older women
driving the jewelry and other high end sales. Like, what's
kind of really going on here?
Speaker 3 (11:23):
I love how you've actually put it that these are
your sweet treats, but that the consumers are spending on.
And particularly if you look at the population group between
twenty to thirty five years old, which are the younger,
more digital savvy population who are educated, being able to
(11:46):
actually communicate to them through the digital platforms like social
media and making it very convenient for them to spend
via platforms and apps on their mobiles. When it comes
to foot deliveries a set, it definitely resonates with this group.
I would attribute denotable consumption trends to the gen Z
(12:08):
from the millennials to the gen Z. I would say
in that under forties bucket itself particularly against stressing that
these are your tech savvy group that has actually right
on the e commerce and digital weight in China over
the last two.
Speaker 1 (12:25):
Decades, Catherine, A lot of investors are waiting for a
big stimulus package to you know, restart China consumption. What's
the outlook there, That's.
Speaker 3 (12:36):
A that's the million dollar question, John. What the Chinese
government has already put into the market and will continue
to invest based on what they have raised from the
government bonds itself. It is pretty huge, and really the
question right now is how much more can we expect
in twenty twenty six, on top of what they have
(12:58):
already put in for twenty two to continue to lift
consumption or simply retail sales by another five percent in
the next year to come. I do think that this
is an unanswered question at this point in time, because
it does mean that in order to get people to
buy more washing machines or whether it's Huawei smartphones, the
(13:23):
placement cycle has already been shortened to try and get
consumers to buy a new handphone every month. I don't
think that's going to be realistic right let alone like
the bigger ticket home appliances, So I don't think that
it is about the incremental money that they're pumping in
to subsidize these purchases, but rather they have to find
(13:48):
new means to stimulate the confidence for the consumers to
naturally be inclined to spend.
Speaker 2 (13:56):
Do you have a theory for what the silver bullet is?
Speaker 3 (13:59):
I think the overall confidence level, and it starts really
from not just concerns about the undercurrents when it comes
to property market, but job security. These days, the confidence
levels still remains very low. I think we are still
seeing the aftermath of some of the downsizing that we
(14:21):
have seen across the board in the Tierwan cities. For
whether it is the financial sector where a lot of
the more affluent Chinese population tends to be exposed to,
that will likely reach a tail end sometime in the
beginning of next year from what I'm gathering, and hopefully
(14:41):
as it stabilizes, we're going to get the confidence built
up into twenty twenty six, barring any unforeseen circumstances or
changes to the macro environment globally.
Speaker 1 (14:55):
So, Catherine, We've discussed quite a lot of different products
and services, but I wanted to say to get your
ranking of where you think the strongest growth is going
to come. We've talked about white goods, you talked about smartphones.
There's obviously, like you know, big ticket items like cars,
also like clothing, sports goods, like where do you think
will be the sort of the star or best areas
(15:17):
to look at in the second half.
Speaker 3 (15:19):
Sportswear is definitely one sector because there is still increasing
awareness when it comes to health and fitness within the country,
and we are seeing more outdoor activities and consumers themselves
willing to pay more for more functional sportswear items, whether
(15:41):
it's the clothing or shoes. So it is going to
stay resilient, more resilient in my view than purchases of
goal or jewelry as that could be influenced by some
of the fluctuations that we see in goal prices. And
I think that is a big question mark when we
(16:01):
go into twenty twenty six.
Speaker 2 (16:04):
So does that mean that some of these companies might
be in bubble territory. I mean, we've had more than
two thousand percent stock rise in the Gold company we're
just talking about. PopMart has been another big one. But
if they're kind of driven by only one demographic and
they're not sustainable. I mean, there's only so many gold
chains you can buy or does that kind of imply
(16:25):
that people should be rethinking some of these valuations.
Speaker 3 (16:30):
Yeah, so, Katia, I guess as we look to find
out more from the companies on their strategies into twenty
twenty six, if they stay put focusing on just La
Booboo alone, without new ips to roll out in the
next couple of years, without more innovative ways of selling themselves,
(16:51):
whether it is true digital media, whether it is true movies,
to actually strengthen their presence, Yes, you are right that
these companies could actually stagnate in terms of growth, and
if consumers find an alternative, we might actually see revenues
or profits actually declining. In a case of jewelry, we've
(17:14):
been focusing on goal as Laupu's official name has that
goal element in it, but let's not rule out the
possibility that they may go into non goal items as well,
and it is really up to the company to decide
how they want to actually expand their merchandise. Mix.
Speaker 1 (17:33):
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(17:56):
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Speaker 2 (18:01):
And we'rebec with Anson Bailey, head of Consumer and Retail
in Asia Pacific for KPMG, and.
Speaker 1 (18:07):
We should tell the audience that Anson has brought something to.
Speaker 2 (18:10):
The studio, has a very special item.
Speaker 1 (18:13):
And Anson, for the listeners, what do you have there
on the table.
Speaker 4 (18:16):
John, We have got la booboo a la booboo. We
a white laboo boo. I did want to bring it
into the studio just to point out that the Chinese innovation,
the Chinese design is not always about the Chinese tech,
but we're really seeing some big steps forward in that
(18:37):
China consumption space but also the Chinese brands.
Speaker 2 (18:42):
And it's also an incredible example of consumer spending right now.
Because Anson, we've heard these two stories and perhaps they're
not mutually exclusive. So we spoke with Catherine about this
idea that on the one hand, the China consumer is
still not spending, still worried about the property market. Property
market hasn't come. And then on the other you have PopMart,
(19:03):
some jewelry companies and others really outperforming. So what's your take?
How do you explain this?
Speaker 4 (19:09):
I think the general outlook is cautiously optimistic.
Speaker 2 (19:13):
Is it more cashas or is it more optimistic?
Speaker 4 (19:16):
Well, I think it is is perhaps a little bit
more optimistic if you look at those retail sales. I
think annual consumptions expected to rise by about two point
three percent in twenty twenty five. But at the same time,
it's not just about the consumption levels. It's also about
the savings levels as well, because I think one of
(19:38):
the things we should always look at and we always compare,
you know, the US consumers with everybody else and the
Chinese consumers. Those savings levels are much much higher in
China than they are compared with the US. In China,
now we're looking at four hundred and fifty million middle
(19:59):
class consumers. Now I think that probably makes them the
largest middle class groupings anywhere in the globe.
Speaker 2 (20:08):
But they have all of this in savings, but they're
not spending the money. Is that what we're seeing now,
you know, potentially not spending on those bigger items, spending
on smaller items, and there's that sort of a negative
sign about the economic outlook how people are feeling.
Speaker 4 (20:23):
It could be viewed as a negative sign, but I'd
also say that, you know, let's have a look at
things like automotive sales. I think if you look at
the automotive sales, thirty one point four to four million
vehicles that were sold last year. But then if you
look at the EV share, the EV share is increasing significantly.
(20:44):
I think it was forty one percent market share, and
I think the sky's the limit.
Speaker 3 (20:51):
You know.
Speaker 4 (20:51):
I do think that if you look at the consumables,
if you look at smartphones as well, you know, smartphones
is actually experience and seeing a rebound. I think five
point six percent of a rebound. So there are I
think some things that are I would say quite positive
out there in the marketplace.
Speaker 1 (21:11):
Yep. And so the government has launched a number of
initiatives to try to get Chinese consumers to spend. They
had their own version of Clash for Clunkers. They tried
to get consumers to buy more white goods like refrigerators,
washing machines, air conditioners. You know, what's been the impact
of these government measures and does the government need to
(21:31):
do more?
Speaker 4 (21:32):
I think the Chinese economy is like turning a massive tanker.
You know, it takes time to turn things around. I
think this stimulus has actually led to a few visible
improvements in retail sales, but at the same time, there's
only so much I think the government can do. I
(21:53):
would say it goes very much down to the consumer sentiment.
I mean, this whole US China trade war I think
has really put a kibosh on that positivity, on that
consumer sentiment. So it is going to take time.
Speaker 2 (22:09):
If we could talk about just going back to the consumer,
You've done a lot of work in this space. If
we could just drill down into the different types of
China consumer that there are. You know, generally we've been
hearing about a luxury a side pulling back. The Chinese
consumers are becoming a lot more price conscious, a lot more.
They're traveling less as well overseas, more internal travel. So
(22:34):
could you tell us a bit about the different types
of consumer or how you would maybe group them.
Speaker 4 (22:39):
The reality is that today we see several different personas
on those Chinese consumers and equally individuality, you know, connoisseurship.
These are all things that the Chinese consumers today, certainly
those high end consumers, we really do see them leading
(23:00):
the way. One thing that we have noticed in things
like connoisseurship is that one of the person that's one
of the personas So if we look at the connoisseurship,
I think what we are going to see is that
those Chinese consumers, they've literally gone to the next level.
Speaker 1 (23:18):
You're talking about connoisseurship in terms of like cars or
watchers or wines or cigars like what.
Speaker 4 (23:24):
Yes, So basically, John, we're looking at you know, the
fact is that those Chinese consumers today, one, they're incredibly
well researched. Okay, they really really know the product inside out,
probably a lot better than your sales associates. And so
that's you know, one of the big challenges is as
(23:46):
we of course try and drive the customer experience, you've
really got to ensure that it's a very a deep,
immersive in store experience as well for those Chinese, these consumers.
So I think that's going to be a really key
driver with regards to the future Chinese consumers but quite frankly,
(24:09):
they have surpassed I think a lot of those Western
consumers and the definitions. And it's interesting, John, you just
mentioned about well they're not really traveling very much. I
do think that there was.
Speaker 1 (24:25):
A COVID revenge travel.
Speaker 4 (24:26):
Yeah, so we did get the COVID revenge travel. Those
Chinese consumers, I do believe that we are going to
start to see a lot more travel. They don't forget
China itself is open for business.
Speaker 1 (24:41):
What about the luxury makers? Do they have to start
relying less on Chinese as traveling overseas and maybe just
have more of their stores in mainland China.
Speaker 4 (24:51):
I think that's a good point, John, I think previously
the Chinese consumers absolutely had to travel overseas for an
amazing experience or to buy a particular bag. Today, what
you do find is that there's a lot more availability
in mainland China. Those Chinese high net worth individuals. I
(25:13):
think that number is still growing. I think if you
look at today and depending which reports you pick up,
high networth individuals, around three point one six million holding
combined one hundred and one trillion u N in investable assets.
These are not insignificant numbers. It just goes to point
(25:35):
out the maturity and how these Chinese consumers are evolving
over time. And I really think that that is going
to be a very key driver. We talked about four
hundred and fifty million middle class consumers today. Now what
should side all of us is what about in ten
(25:57):
years from now? And I'm not just talking about the headwinds.
And we've seen some significant headwinds in twenty twenty four
and twenty twenty five, but let's say from ten years
from now, perhaps that number the middle classes potentially it's
going to grow to seven hundred eight hundred million. So again,
you know, I would say to everybody here, of course
(26:19):
we have to be concerned about today, but let's not
lose sight of the big picture. Let's not lose sight
of China in twenty thirty five.
Speaker 2 (26:32):
And that is a wrap on our China Consumer episode.
You've been listening to Asia Centric from Bluebering Intelligence. I'm
Katjudmetriva in Hong Kong.
Speaker 1 (26:41):
I'm John Lee, also in Hong Kong. This podcast was
produced and edited by Clara Chin and you can find
all our episodes on Apple Podcasts, Spotify or review Listen.
Thanks for listening,
Hosts And Creators
John Lee
Tom Corbett
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