China Talk: What's Happening in the Chinese Consumer Market?

  • Strong recovery in high-end spending
  • Mass low-end consumption is still gaining pace
  • Recovery in consumer goods should broaden out gradually

As China continues to emerge from the pandemic, many are expecting a surge in consumer spending. Since the start of 2023, the high-end spending, leisure travel, and restaurants have been bouncing back quickly. The V shaped rebound effect has also been reflected on their share price considerably.

In the meantime, the consumption section is experiencing a nuanced recovery. The low-end consumer goods sector has been lagged behind comparatively considering that the majority of consumer's income has been hit badly due to 3-years of lockdown.

Our view

Notwithstanding the mixed outlook, BEA Union Investment maintains a sanguine view on China's vast consumer market potential, which we gauge to be valued at USD6 trillion. Our investment team holds the view that there will be an acceleration in the growth of retail sales in the forthcoming months, propelled by additional stimulus measures, capital expenditures, and private investments.

We anticipate a more widespread recovery as economic activity gradually returns to normalcy. We maintain the view that the Chinese consumer market presents a wealth of opportunities for investors, particularly within the sportswear and cosmetics industries even if the economy stays in L shape.

Thanks to the government-backed exercise boom, local sportswear companies have successfully captured market share from casual wear brands. Prominent players in this sector possess formidable brand power, extensive distribution networks, and astute branding strategies, which create significant barriers to entry for domestic competitors.

Domestic cosmetic brands are securing market share from international rivals, primarily due to their superior comprehension of the local market and commanding presence within key distribution channels.

In summary, although recovery may be gradual in certain segments, we remain confident that the immense potential of the country will persistently fuel growth and foster innovation.