BEIJING — China’s consumer recovery from zero on Covid is off to a solid start – after a dismal fourth quarter.
When Michelin-starred Restaurant Rêver When it reopened on Thursday after the Lunar New Year holiday, it was fully booked, said Edward Suen, managing director of the Guangzhou location. He said reservations for the next three days are almost full.
He expects the business to improve this year — and allow Rêver to recoup about 35% of the revenue it lost last year. The city of Guangzhou was one of the hardest hit by China’s Covid control measures in late 2022, before Beijing abruptly ended most of the measures in early December and a wave of The wave of infection hit the whole country.
“Last Christmas, it was the first time in three years that we didn’t hold a full seat because there were quite a few people who made reservations but then they got sick,” said Suen. He co-founded Rêver in June 2020.
In a de facto Chinese city known worldwide for its Cantonese cuisine, Rêver is exploring a new market by serving up modern French fare, with a multi-course dinner priced at 1,280 yuan. yuan ($183) or 1,680 yuan.
Over the next year, “we try to be a little bit cautious about how things go,” says Suen. “Because things change so quickly and so suddenly these days.”
In 2022, China sees one of the the slowest year of economic growth in decades. Amid a 0.2% drop in retail sales to 43.97 trillion yuan ($6.28 trillion), food and beverage sales fell more than 6.3%.
More recent data shows that Chinese consumers are starting to open their wallets again, especially when traveling.
During the seven-day Lunar New Year holiday ending on Friday, national tourism revenue jumped 30% year-on-year to 375.84 billion yuan. according to official data. But that’s still short compared to 2019 spending.
“Consumer sentiment is better. Spending has fallen again,” said Ashley Dudarenok, founder of Chinese digital consulting firm ChoZan. “But I don’t think all of a sudden from month to month, everything goes back… to 2019 or double 2019.”
Dudarenok said that entering 2023 and the Lunar New Year, some smaller brands have become more cautious towards China and cut marketing budgets for the country in half.
“Consumer sentiment really went down, nobody knew what was really going to happen, and a lot of marketing budgets and dollars poured into 11.11. [Singles Day] and it didn’t work out either, so brands didn’t make a lot of money on 11/11” and another shopping festival in December, she said. “Then suddenly China opened up. Many people do not expect that [and were] quite startled by this rapid development.”
Dudarenok expects the overall consumption trend to continue, whether it’s people in big cities spending more to “feel better” or people in smaller cities paying for products. higher quality.
Many analysts expect high savings among Chinese consumers during the pandemic to lead to more spending this year.
At the policy-making level, the Chinese authorities say they are prioritizing consumption. Premier Li Keqiang chaired the first executive meeting after the State Council holiday on Saturday, and “called for efforts to accelerate the recovery of consumption and keep trade and investment stable.” abroad”, according to an article. The meeting said policies to promote the consumption of cars and other high-value items would be “fully implemented”.
However, unlike the US, China has not distributed cash to consumers nationwide after the pandemic. Li told reporters in 2022 that policymakers will instead focus on supporting businesses and jobs.
“We believe the most important factor influencing consumption is the outlook for future earnings, which is related to many factors,” Hao Zhou, chief economist at Guotai Junan International, said in a note. report. “That being said, easing policy and virus uncertainty will certainly help improve sentiment.”
He expects retail sales to grow 7% annually.
Hainan’s Recovery Plan
Hainan, a tropical province aiming to become a duty-free shopping destination, has announced a target of 10% growth in retail sales this year. That’s after its retail sales fell 9.2% last year.
The island’s 12 duty-free shops grossed 2.57 billion yuan in sales during the week of the Lunar New Year, according to the local department of commerce.
The release said sales during that holiday season were more than four times higher than in 2019, reflecting growth in the area and new shopping malls opening over the past few years.
LVMH and Coach-parent Tapestry have both signed agreements in 2022 with local governments to expand their business in Hainan, including the establishment of Tapestry’s travel retail headquarters in China, according to government announcement. The two companies did not immediately respond to CNBC’s request for comment.
The top executives of US and European brands, among others, plan to come, said Ruslan Tulenov, global communications officer for Hainan International Economic Development Bureau. visited Hainan this year as Covid restrictions were eased. He declined to say how many or when.
“In the past, I personally had a few discussions with some of the top companies last year or two years ago, but at that time [there were] some of the restrictions of Covid, the difficulties of coming to China,” he said. “Some companies, they even wanted to use private planes to fly directly to Hainan, but at that time there were some restrictions. of Covid.”
New trends, fast changes
Brands in China must adjust to the changes not only in the Covid situation but also in the market.
Companies are shifting more marketing dollars to ByteDance’s Douyin, the local version of TikTok, and away from Weibo, Dudarenok said.
While those brands have been on Douyin for years, she said, they are not part of the social conversation on the very popular app. As for brands, she said the thinking now is “China has changed, most importantly China has opened up, and to get into that business we need to get into the conversation.” that.”
