In this episode of Think Tank podcast, we talk about the boom of new brands from China over the last years and the rise of a new generation of consumers who have re-shaped the consumption landscape and fuelled the ascent of the Chinese brands. Our moderator and former BBC World News presenter, Nisha Pillai, talks to Jen-Ai Chua, Singapore-based Investment Analyst at Julius Baer, and Esteban Polidura, Head of Advisory and Products for the Americas at Julius Baer.
“Made in China” has evolved into “Made by China”, driven by the country’s shift towards a consumption-driven economy, policy support for home-grown champions, changing inter-generational preferences, and the one-off boost to domestic consumption from the Covid-19 pandemic. Chinese companies are also giving foreign brands a run for their money with insightful marketing, clever use of digital tools, superior supply chain management and quality product offerings.
Why have the Chinese brands been rising so quickly recently? Are Chinese buyers embracing home-grown brands? And what about the rest of the world? Is there a similar revolution going on? Our Think Tank Podcast explains.
Listen to the podcast
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Powerful economic, social and demographic drivers at work
Chinese brands have traditionally been well known in hardware-related sectors like computers and mobile phones – think Lenovo and Huawei, for instance. But in recent years, we have seen the emergence of exciting new brands in a diverse range of sectors previously dominated by foreign brands. Heytea and Nayuki, for example, are giving Starbucks a run for their money in the beverages segment in China. Li Ning and Anta are catching up on Nike and Adidas in sportswear. And Perfect Diary, Herborist and Proya are making big market share gains in the domestic cosmetics and skincare segments.
“At the macroeconomic level, China is undergoing a tectonic shift from an export-oriented growth model to one that is consumption driven. Separately, a long period of economic growth has created a sizeable middle class with deep pockets for discretionary spending”, says Jen-Ai Chua, Julius Baer’s Investment Analyst, during this conversation.
In terms of demography, the profile of the consumer is changing. Millennials and Gen Z are taking over as mainstream consumers. They tend to be spenders rather than savers, and are more open to exploring young upstart Chinese brands with a strong Chinese identity. “They are also digital natives. To this end, technology has been a great enabler of the rise in Chinese brands”, adds Chua. China is the global leader in online shopping, with the highest penetration rate of 79%, and Chinese brands have harnessed the power of the internet to great effect.
Opportunities for investors
Consumption is becoming a dominant driver of China’s economic growth as we are heading towards a bi-polar world. And the healthcare sector, among others, might offer opportunities for investors.
Healthcare demand is naturally increasing given demographics first of all. The elderly population will reach 300m for the first time. On the other hand, new-born registrations were 10m in 2020, which is 15% lower than 2019. Second, health awareness is also increasing. Consumers are more willing to purchase commercial health insurance and perform independent diagnostics and health checks. And third, more Chinese are suffering from chronic diseases, unfortunately.
“Policies have arguably impacted the sector economics, but they should accelerate consolidation and benefit national champions”, says Esteban Polidura, Julius Baer’s Head of Advisory & Products for the Americas. “We should keep track especially of digital healthcare, which includes online diagnosis, health and wellness management, as well as sales and marketing services. It is estimated that the total addressable internet healthcare market may reach RMB 2trn in 2025”, he completes.
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