Luxury sales in China up 48% in 2020, market to become the world’s largest
Jan-19-2021 By : fcccadmin
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.
Alibaba Founder Jack Ma ordered to break up the company
Jan-05-2021 By : fcccadmin
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.
China’s leaders discuss economic plan for 2021
Dec-22-2020 By : fcccadmin
China has laid out economic priorities for next year, pledging to maintain the consistency, stability and sustainability of its macro policies, expand domestic demand, strengthen anti-monopoly efforts and step up all-round opening-up. The annual Central Economic Work Conference, held last week, outlined eight key tasks, including efforts to strengthen China’s competitiveness in strategic science and technology and to make industry and supply chains more independent. President Xi Jinping reviewed the country’s economic work in 2020, analyzed the current situation and mapped out plans for 2021 at the conference. China will continue to adopt a proactive fiscal policy and prudent monetary policy while maintaining necessary support for the economic recovery next year, said a statement released after the meeting. The proactive fiscal policy must be implemented to bolster financial support for the nation’s major strategic tasks, promote innovation in science and technology, expedite the adjustment of the economic structure, readjust income distribution, and defuse the risks arising from the hidden debts of local governments. The prudent monetary policy includes replenishing the capital of banks via multiple channels, according to the statement. Market reform of interest rates and exchange rates will be deepened, while the exchange rate of the yuan will be kept stable at a reasonable level. Policymakers at the meeting re-emphasized the dual circulation strategy. They also reiterated the importance of pursuing supply-side structural reform.
Meeting participants recounted what was “an extraordinary year” in the history of the People’s Republic of China, during which the nation was faced with a challenging and complicated international landscape, arduous tasks of pursuing domestic reform, development and stability and, especially, severe shocks from Covid-19, the China Daily reports. China is set to become the only major economy securing economic growth this year. In boosting domestic demand, policymakers pledged to take more steps to create jobs, refine social security, improve income equality, and expand middle-income groups to bolster consumption. The growth of the digital economy and investment in new types of infrastructure will be promoted.
The meeting reiterated pledges to widen market access, promote fair competition, protect intellectual property rights (IPRs) and build a unified domestic market, adding that China will actively consider joining the Comprehensive and Progressive Agreement for Trans-Pacific Partnership. To ensure China’s food security, policymakers pledged to bolster the growth of the seed industry. Antitrust efforts will be strengthened focussing on internet companies and the protection of consumer rights. Innovation in the financial sector must be conducted under the premise of prudent regulatory measures, they added. While reiterating the policy stance that houses are for living in, not for speculation, policymakers pledged to place strong emphasis on the development of public rental housing programs, refine policies for long-term tenancy housing and standardize development of the rental market.
With China already committing to peak carbon dioxide emissions before 2030 and achieve carbon neutrality before 2060, the conference urged quicker steps to come up with an action plan that enables the peaking of emissions. It called for accelerated efforts to improve the industry and energy structures and enable the peaking of coal consumption at an early date while bolstering the development of new energy, the China Daily reports.
China’s key economic indicators for November showed strengthening recovery. Retail sales of consumer goods went up 5% year-on-year in November, up from the 4.3% surge in October, sustaining upward momentum. Auto sales saw 11.8% growth and sales of household appliances grew 5.1% in November. Communications equipment sales jumped 43.6%. Fixed-asset investment (FAI) edged up 2.6% year-on-year in the
first 11 months of the year. Investment by the private sector, which accounts for 60% of total investment, rose 0.2%, the first growth registered this year. The surveyed urban unemployment rate stood at 5.2% in November, now back to pre-virus levels. Industrial output growth quickened to 7% from a year earlier, the fastest pace in 20 months. The services sector also saw further recovery, expanding 8% from a year earlier. China’s economy expanded 0.7% in the first nine months, following a 1.6% contraction in the first half and a 6.8% contraction in the first quarter. China’s exports soared 21.1% year-on-year in November in U.S. dollar terms, the fastest growth since February 2018.
China leading the development of the industrial internet
Dec-01-2020 By : fcccadmin
China’s industrial internet sector is fast becoming a focus for innovation. More than 1,100 5G-plus industrial internet projects have been set up in the country due to the rapid advances in the 5G sector. In addition, there are now industrial internet projects in more than 30 key sectors like energy, transportation and medical services, said Liu Liehong, Vice Minister of Industry and Information Technology, adding that a lot needs to be done to integrate digitalization, networking and intelligent development. “To achieve these targets, it is necessary to strengthen innovation, boost infrastructure capabilities and accelerate the integration and application of technologies with steady opening-up,” said Liu. “We welcome global enterprises and organizations to actively participate in China’s industrial internet development. We are currently drafting the plans for the next stage of industrial internet innovation and we believe that our collaborations will foster global industrial internet innovation and development,” he said.
Surveys conducted on the industrial internet applications of more than 1,200 enterprises have shown that 71.44% of the respondents have switched to at least one new model, which effectively promotes industrial transition, upgrade and integrated development, said Vice Minister Liu. Zhao Zeliang, Vice Minister of the Cyberspace Administration of China, the nation’s top internet regulator, said that due to the coronavirus epidemic, sectors like online education, work from home, and cross-border e-commerce have seen steady growth and this has laid the foundations for the sound development and application of the industrial internet sector. The integration of industrial internet with research and development (R&D), design, manufacturing, operations, management, examination and maintenance, and product related services will maximize efficiency and minimize resource consumption in various industries, and further promote the modernization of related industrial chains, said Zhao.
Various other officials and industrial experts also shared their views during the Innovations and Breakthroughs for Industrial Internet sub-forum at the World Internet Conference – Internet Development Forum in Wuzhen, Zhejiang province. Nan Cunhui, Chairman of the Board of Chint Group, an electrical components manufacturer, believes that digitalization will be the new engine for future development in the country. “Industrial internet will enable manufacturers to adopt new technologies, new models to become intelligent, and the digitalization process will develop a brand-new ecosystem ready for higher quality development,” he said. Nan said that the global supply chain is currently restructuring and Chinese manufacturers should seize the opportunity for their development.
Thomas Donato, Senior Vice President of Rockwell Automation, a U.S.-based provider of industrial automation power, control and information solutions for manufacturers, said that digital transformation has improved the annual production efficiency of Chinese manufacturers by more than 5% over the past decade. Although China has taken great strides in digital transformation, its development has been hampered by the shortage of talents and insufficient coordination, said Donato.
Stephen Mellor, Chief Technical Officer (CTO) of the Industrial Internet Consortium, said cross-industry deployment of industrial internet in manufacturing, energy, automotive and healthcare sectors will help its integration with 5G, AI and digital technologies, the China Daily reports.
Chinese Vice Premier Li He stresses technological self-reliance
Nov-24-2020 By : fcccadmin
Vice Premier Liu He, the top economic adviser of Chinese President Xi Jinping, has stressed that China’s pursuit of self-reliance in key technologies is “imperative” to its new economic strategy, which places an increased emphasis on domestic consumption. “This is a critical juncture for the development of a big country’s economy,” Liu wrote in an official guide to Beijing’s new development plan, and he promised that the capital markets would support the drive for technological innovation. Liu’s responsibilities as Vice Premier include science and technology, a critical area in the contest with the United States. In a speech in Shanghai earlier this month, President Xi told the city’s officials that “science and technology have never had such a deep influence over the country’s future and fate as they do today” and concluded that China “needs to strengthen innovation as its No 1 growth driver more than ever”.
Last month the Communist Party leadership approved a new five-year plan which put scientific and technological innovation at the heart of China’s modernization program to become one of the world’s most advanced countries by 2035. The plan also cemented the role of the so-called “dual circulation” strategy, which places greater emphasis on domestic markets as a driver of growth while also seeking to move beyond cheap manufacturing for exports. Vice Premier Liu acknowledged that geopolitics and the Covid-19 pandemic have had a profound impact on global production and value chains. The key to transforming China’s growth model into a “new development pattern” is to clear any obstruction to economic activity and that, in turn, calls for an improved capacity for innovation, Liu argued. “That requires deepening reforms, expanding the open-door policy, fostering scientific and technological innovations, and upgrading the industrial structure,” he wrote. “Accelerating the push for self-reliance in science and technology is imperative in both promoting domestic market circulation and projecting China to a dominant position in the global economy.” Liu also said it was important that the financial services sector helped to support the real economy and foster innovation.
He also argued that the development model that had fueled China’s phenomenal growth since the 1980s also exposed the country’s vulnerability and dependency on imported resources and export markets. A shift to innovation-driven development would help to overcome these problems, as well as others caused by changes to domestic supply and demand, such as the disconnect between production and consumption and a foreign stranglehold over critical technology.
To achieve its goal of self-reliance, Liu said China would strengthen its R&D capacity, boost international collaboration, and give corporations a greater role in driving innovation. He also discussed other strategies, including a focus on core cities and urban clusters, improving income distribution, expanding the middle class and “quality” development under the Belt and Road Initiative. Li Xuesong, Deputy Director of the Institute of Industrial Economics under the Chinese Academy of Social Sciences, told a briefing in Beijing that China’s current innovation capacity was not yet able to meet the demand for high-quality economic growth, and that market forces could help accelerate the innovation drive, the South China Morning Post reports.
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