The growth rate of China’s sharing economy sector is expected to be between 10% and 15% this year, and maintain an average annual growth rate of over 10% in the coming five years, thanks to an expected strong recovery in the macro-economy, according to a report by the State Information Center (SIC). In 2020, amid challenges brought by Covid-19, new business modes featuring the sharing economy demonstrated tremendous resilience and development potential. The trade volume of the sharing economy for the year surged 2.9% year-on-year to CNY3.38 trillion. The pandemic’s influence on different areas of the sharing economy varied. The market volume of the sharing healthcare sector grew rapidly, with year-on-year growth of 27.8%. In contrast, the market volume of sharing accommodation, office-space and transportation dropped by 29.8%, 26% and 15.7%. “Sharing services and new consumption modes had been playing a critical role in boosting national economic resilience and vitality. Meanwhile, sharing economy platforms were constantly innovating business strategies and marketing modes, thus demonstrating various advantages,” said the report. In 2020, one major change for the country’s sharing economy sector was that more and more enterprises, which mainly served the consumer-end, expanded their businesses to the business-end. 

Xiaozhu, a Beijing-based sharing accommodation website/app, signed a strategic partnership with Bytedance’s enterprise service platform Feishu last year, offering accommodation for business trips, corporate team-building exercises, and training conferences for registered enterprises on Feishu. Ziyouxin, a flexible employment platform under Tencent’s finance and taxation technology arm GoldenTec, actively responded to surging hiring requirements of enterprises during the pandemic. In February of last year, it launched an emergency recruitment service called “shared employees”, offering more than 10,000 workers to enterprises.

Another new feature highlighted in the report was that the sharing economy was further integrated  with internet-based marketing approaches, creating more platform-user interaction and user stickiness. For example, in July, Xiaozhu teamed up with Xiaohongshu (Little Red Book), an Instagram-like Chinese fashion and lifestyle sharing platform, inviting key opinion leaders (KOLs) and key opinion consumers (KOCs) on the platform to share their accommodation experiences. Huang Wei at Xiaozhu’s public affairs department said: “KOLs and KOCs share their living experiences on Xiaohongshu, and interact with users in the online community, encouraging them to pay a visit to the recommended accommodations. In this way, a circulation running from online to offline is formed.”

Data from Xiaozhu showed that between July and November, the transaction volume brought by Xiaohongshu’s channels surpassed CNY10 million, and the monthly growth rate of gross merchandise volume (GMV) stood at 350%. By November 25, 1,610 sharing accommodation brands were registered on Xiaohongshu. “Online marketing communities such as Xiaohongshu can reach more potential users, creating more demand for travel and accommodation. Meanwhile, content platforms are further integrating with the tourism industry, bringing new traffic and growth opportunities,” Huang said.

“When the pandemic is over, the focus of enterprise competition lies in how they realize user retention and profit mode innovation. Efforts are needed in product innovation and service quality enhancement,” said the report. Fan Jiping, Director of the WeDoctor Digital Medical Consortium, said that in the post-pandemic era, there will be increasing market demand for high-quality services integrating online and offline modes of business. How to take advantage of digital technologies to build a service system that satisfies healthcare needs of various patient groups and raises the efficiency and level of the industry – that remains a key issue for us,” Fan said, as reported by the China Daily. 

During the weeklong Spring Festival holiday, key retail and catering enterprises nationwide posted combined sales revenue of CNY821 billion, up 28.7% year-on-year, the Ministry of Commerce (MOFCOM) said. Chinese tourists showed more interest in nearby destinations. In Beijing, there was a 730% increase in the number of in-city sightseeing, at 4.91 million, Beijing municipal tourism authorities said. Parks and winter sports venues in China’s cosmopolitan cities witnessed dense crowds unseen in other years and cinemas filled up. Online sales were brisk with the Chinese express delivery sector having delivered 365 million parcels in the first five days of the weeklong holidays, up 224% over the same period last year. China’s transportation sector handled 77.24 million passengers during the first six days of the Spring Festival holidays, including 17.47 million railway trips and 54.82 million road trips.

In response to government advice to “stay put” and avoid gatherings, many people chose to celebrate the most important festival of the year in the towns and cities where they live and work instead of going back to their hometown for family reunions. Lian Ping, Director of the Zhixin Investment Research Institute, estimated that between one-quarter and one-third of migrant workers heeded the calls to stay in the cities and shun holiday travel. 

On-demand delivery platform Dada said that orders where the sender and the receiver are not in the same city doubled from last year as people sent gifts to family and friends in rural areas. Many orders came from Guangdong province where a large number of migrant workers are staying. According to online takeout platform Eleme.com, takeout orders for hot pot and milk tea increased by over 200% this year. There was also a 60% increase in the sales of gastrointestinal drugs and a 150% rise in sales of hangover remedies, Eleme data showed, as Chinese people would choose to eat rich food at dinner parties during the holidays. As consumption contributes about 65% of China’s economic growth, some believe robust holiday sales bode well for the economy in the coming months, paving the way for good first quarter and whole year figures. 

As one of the most important shopping seasons, the Spring Festival Golden Week holidays saw sales revenues topping CNY1 trillion for the retail and catering sectors in 2019, one year before the virus struck. The country also received 415 million tourists during that period. In 2020, the sudden outbreak of the virus and China’s containment measures resulted in a 20.5% year-on-year drop in retail sales in January and February. Retail sales during the festival this year rose 28.7% year-on-year to reach CNY821 billion, data from the Ministry of Commerce (MOFCOM) said. Online sales exceeded CNY122 billion, with online catering sales surging 135% from last year as more Chinese ordered ready-to-eat meals through e-commerce or online food delivery platforms. Sales of imported chocolate on Tmall Global jumped this month for Valentine’s Day. Sales of imported chocolate increased by 337% year-on-year from February 4 to 15, with candy made in the UAE, Switzerland and Japan among the hottest items.

Sales by jewelry and clothing enterprises rose respectively by 160.8% and 107.1%, communication device and digital home appliance sales rose respectively by 39% and 29.9%, and sales of fitness devices by some e-commerce platforms increased 49% from a year ago. Cinema box office revenues during the 2021 Spring Festival holiday (February 11-17) exceeded CNY7.8 billion, up 32.5% from 2019, with new records set for ticket sales and attendance during the holiday, data from the China Film Administration showed.

The Chinese economy is forecast to grow by 8.2%, its fastest rate in nine years in 2021, as other major economies will likely continue to bear the brunt of the pandemic, according to a Global Times poll of 20 economists released in December. In its latest World Economic Outlook in January, the IMF projected China’s economy will grow 8.1% in 2021 while figure for the global economy is expected to be 5.5%, the Global Times reports. Ipsos’ February index of global consumer confidence noted that China’s consumer index surged 6.5 points year-on-year to 71.8 for February 2021, the largest growth among the 24 monitored economies. In comparison, the U.S.’ consumer sentiment index decreased by 12.6 points in February from one year earlier, the largest drop among all countries. 

The blossoming stay-at-home economy is likely to break new ground in terms of growth and market size in China, as people have been encouraged to stay where they are for the Spring Festival holiday to stem the spread of Covid-19, the China Daily reports. Spring Festival, also known as Chinese Lunar New Year, is an important occasion for family reunions, with the first day of the new lunar year falling on February 12 this year. In China, consumer preferences have been shifting toward e-commerce and online entertainment and education for over a decade. The Covid-19 pandemic, however, has accelerated the trend and proven to be a boon to companies that serve the stay-at-home economy. Partly fueled by the contagion, China’s online sales surged 14.8% year-on-year to CNY9.8 trillion in 2020, making China the world’s largest online retail market for the eighth straight year.

Ahead of the Lunar New Year holiday that normally sparks the biggest mass movement of people on the planet, Chinese authorities advised migrant workers and residents to stay put, pledged to guarantee sufficient supplies of daily necessities, and asked e-commerce platforms and logistics companies to ensure normal operations during the period. “We expect to see demand for at-home consumption continue to explode this year, especially during the Lunar New Year holiday,” said Wang Nian, Associate Fellow with the Institute of Market Economy, which is part of the Development Research Center of the State Council. Online food delivery platforms, including Meituan and Ele.me, are working with popular catering brands to launch prepackaged and semi-packaged meals for the holiday so that younger generations will be able to celebrate the traditional festival with a feast that is easy to prepare. Merchants are also targeting different groups of people by providing customized take-away meal kits, such as single-person dinner packages and family reunion dinner packages for six to 10 persons, in a bid to attract more consumers. “The boom in online consumption will make up for the reduction in offline consumption,” Wang said.

Consumer spending during Spring Festival is likely to be less  than in normal years due to measures to reduce travel. However, given the low comparison base in 2020, China will still report a year-on-year consumption growth during the holiday, Wang added, as reported by the China Daily. 

The Global Times reports that jewelry shops in many cities  and on online shopping platforms are seeing a shortage in supply of pricy gold jewelry and Kweichow Moutai Baijiu, or distilled liquor, as demand surges ahead of the Chinese New Year, according to interviews with sources at several shops and companies. “There are many more customers who came to buy gold before the holiday this year than last year. Since January, sales have already doubled or tripled those of last year,” a worker at a jewelry shop in Beijing said. Gold jewelry with the Chinese character for “happiness” is particularly popular this year, as many are seeking blessings and safety. Shops across the country have seen a huge surge in demand for gold jewelry in recent weeks, with some shops even seeing shortages and factories operating at maximum capacity. “Rising demand for gold products has a positive correlation with the recovery of our country’s economy. Economic recovery in a given place would drive up wealth and result in diversified asset allocation, namely increased gold purchases,” Zhang Chen, Analyst with First Futures. Last year, China’s gold consumption fell 18.13% year-on-year to 820.98 tons, with first quarter sales plunging nearly 50%, as the Covid-19 pandemic hit sales, according to the China Gold Association.

The Ministry of Commerce (MOFCOM) reported rising sales of food, recreational and fitness equipment such as mahjong tables and jump ropes. Pre-sales of cinema tickets are also soaring, reaching CNY400 million, with single-day box office sales for New Year’s Day on February 12 reaching CNY350 million, despite strict anti-epidemic rules. Retail sales could see a 10% increase during the holidays, compared to a 20.5% plunge during the same period last year, according to Hong Tao, Director of the Institute of Business Economics at Beijing Technology and Business University. Robust sales during the Chinese New Year will help lift consumption and in turn overall economic growth, analysts said, with some predicting a record high GDP growth rate of over 20% for the first quarter of 2021. However, much of that is due to the low base in the first quarter of 2020 and would not erase the continued struggle in some sectors, analysts added.

Bucking the global downward trend amid the fallout from the Covid-19 pandemic, China’s luxury sales last year rose by 48% to around CNY350 billion, buoyed by a consumption comeback as travelers were unable to shop overseas, a boost in online sales, and duty-free policies in Hainan province, observers and industry reports said. Riding on a wave of heightened consumption, the country’s luxury market is on course to become the world’s largest within the next few years, analysts said. A long list of luxury brands announced price hikes at the beginning of 2021, particularly for handbags. Starting from January 8, Gucci has raised the price of handbags by up to 20%. Louis Vuitton raised prices by 5% to 9% in May, while Chanel also increased prices of some handbags and small leather goods globally in May, followed by Prada in July. While price hikes could be an effective measure to recover losses, it is clear that more luxury brands are placing their bets on China, where demand is high and luxury consumption is still growing. China’s share of the world luxury goods market nearly doubled last year, growing from about 11% in 2019 to 20% in 2020, while the global luxury market declined at an expected rate of 23% in 2020.

Over the New Year’s holiday, duty free stores across Hainan were crowded with wealthy Chinese buyers. A sales manager at the Sanya duty free store told the Global Times that some hot luxury items, such as Lancôme eye cream, Burberry scarves, and Fendi boots have sold out due to rising demand, and it is not clear when new stock will come in. 

“Traffic at duty-free stores has bounced back from the second half of 2020,” the Sales Manager named Sun said, noting that overseas travel restrictions and attractive shopping policies in Hainan have fueled the business boom. In 2020, duty-free sales in Hainan exceeded CNY32 billion and a further rise is expected this year, Wang Lei, a Hainan government official, said. Starting from July 1, Hainan increased the duty-free quota per person to CNY100,000 from CNY30,000. Further favorable policies will be launched this year, including a duty-free delivery service, according to Hainan officials.

“The pandemic shows no sign of abating in other countries, so it is impossible to travel in the short term to international markets where luxury products can be cheaper. Spending in the domestic market is the only way I can release my pent-up demand,” a Beijing-based white-collar worker surnamed Li told the Global Times. Li had a vacation in Hainan in December and spent more than CNY30,000 on luxury purchases. Li said she is also worried about cross-border e-commerce shopping, as there is the risk of coronavirus on the outer packaging of goods sent to China.

Chinese consumers’ demand for luxury goods was also on display during Beijing SKP shopping mall’s annual shopping festival. “We expect the ‘comeback’ to last until the end of this year,” an SKP salesperson told the Global Times. As such, she has tried to develop more long-term customers, acquiring the contact numbers of some regular luxury consumers who used to buy goods in Milan or Paris. “Once new items arrive, I will inform them,” she noted.
The robust demand in China is a source of hope for global luxury brands that have seen sales tumble amid the Covid-19 pandemic. Mainstream luxury brands are now doubling down in the Chinese market and are embracing e-commerce, an area they used to shun due to concerns that moving online could erode their high-end brand image.

According to a Bain & Co report, China’s annual luxury online penetration increased from about 13% in 2019 to 23% in 2020. So far, luxury brands including Prada, MiuMiu, Bvlgari, Louis Vuitton, Hermès and Gucci have opened stores on Tmall, Alibaba Group’s B2C online marketplace. From January to November, the online luxury sales of Tmall International soared 72% year-on-year, the Global Times reports.

Some brands have also scaled up their presence on China’s social media platforms such as short video website Douyin, the Chinese version of TikTok, as well as shopping platforms Xiaohongshu and Bilibili to cater to young Chinese consumers who are becoming a major force in luxury consumption. Wang Xinmiao, a Beijing-based industry observer, predicted that China’s luxury market will grow by more than 40% in 2021. “More luxury brands will choose China as the first market to launch new products,” Wang told the Global Times.

Authorities in Beijing, who had on Christmas Eve ordered an investigation into allegations of “monopolistic practices” by Alibaba, have ordered the financial technology arm Ant Group to scale back its operations. Alibaba also stands accused of using the so-called “choosing one from two” practice, which requires merchants to sign exclusive cooperation agreements preventing them from offering products on rival platforms. In a lawsuit last year, home appliance manufacturer Galanz accused Alibaba of penalizing it for refusing to stop selling goods on rival platform Pinduoduo. JD.com has also accused Alibaba’s Tmall of restricting vendors from trading with it by signing exclusive deals. 

Pan Gongsheng, Vice Governor of the People’s Bank of China (PBOC), said Ant’s corporate governance was “not sound” and ordered it to “return to its origins” as a payment services provider. Pan, who had summoned Ant representatives to a meeting with regulators in Beijing, said Ant must “strictly rectify illegal credit, insurance and wealth management financial activities”. Ant divisions offering those services are its fastest-growing and most profitable operations, analysts said. In a statement, Ant Group said it would establish a “rectification working group” and “fully implement requirements” sought by the regulator. Jack Ma was once feted as China’s greatest modern-day entrepreneur, but after he accused China’s financial regulators and state-owned banks of having a “pawnshop” mentality, is now facing scrutiny from the authorities. 

In November, Ant Group was preparing for what would have been the world’s largest initial public offering (IPO) when it was suddenly canceled by Beijing, 48 hours before trading would have begun in Shanghai and Hong Kong. Before the suspension, investors had valued Ant at USD316 billion, more than the valuations of China’s biggest banks and those of the U.S. and the UK. The crackdown on Ma’s business activities has wiped more than USD10 billion from his fortune, and knocked him into second place on the list of China’s richest people with an estimated USD49 billion, according to the Bloomberg billionaires index. The wealthiest person in China is now Pony Ma (no relation), Chairman and CEO of rival tech firm Tencent. 

Zhang Zihua, Chief Investment Officer of asset manager Beijing Yunyi Asset, said investors were concerned that Beijing’s campaign against Ma’s companies could continue even if they implemented all the changes required. “The antitrust investigation into Alibaba has yet to specify the penalties, which is worrying investors a lot,” he said. Beijing-based technology analyst Li Chengdong said the action against Ant was also weighing heavily on other Chinese tech companies. “The new regulations are hurting big internet platforms, so Tencent and other tech companies are also seeing their share prices going down,” Li said in late December. An editorial in the People’s Daily said efforts to prevent monopoly and anti-competitive practices were “requirements for improving the socialist market economy system and promoting high-quality development,” but added that the official policy still is to support the  platform economy. 

For Alibaba, the probe could mean deep reform and a shift in its business operations and could subject it to an antitrust fine of up to tens of billions of yuan, according to legal experts and market observers, the Global Times commented. The recently held Central Economic Work Conference stressed that strengthening anti-monopoly regulation and preventing disorderly expansion of capital will be the top priorities for the coming year. Alibaba might be fined as much as 10% of its sales revenues for the past year. According to Alibaba’s annual fiscal disclosure in May, in the 12 months that ended on March 31, 2020, it earned CNY509.71 billion in revenues, up 35% year-on-year, implying that the fine could reach up to CNY50 billion, in addition to confiscation of illegal gains from monopolistic behavior. 

In related news, the State Administration for Market Regulation (SAMR) fined e-commerce firm JD, Alibaba Group’s business-to-customer platform Tmall, and discount e-retailer Vip.com CNY500,000 each for irregular pricing. The Administration had received complaints that the companies raised the price first and then offered discounts, made false promotions and induced consumers to make purchases during the November 11 Singles Day online shopping event. Meituan, China’s largest on-demand service platform handling online food deliveries and restaurant orders, is facing a lawsuit in the Beijing Intellectual Property Court for alleged abuse of market power. Meituan stand accused of temporarily removing Alipay, the payment platform of Alibaba, as a payment option from its main app, which is considered to be an abuse of its dominant market position.