BEIJING – China’s consumption recovery from zero-Covid is getting off to a solid start after a disappointing fourth quarter.
When Michelin-Starred Restaurant Dreaming Edward Suen, chief operating officer of the Guangzhou venue, said it was fully booked when it reopened on Thursday from the Lunar New Year break. Reservations for the next three days were nearing capacity, he said.
He hopes business improves this year — and allows Rêver to recoup the roughly 35% of revenue it lost last year. The city of Guangzhou was among the worst-hit by China’s Covid containment in late 2022, before Beijing abruptly ended most of the measures in early December and a wave of infections hit the country.
“Last Christmas, it was the first time in three years that we didn’t run a full house because a lot of people made reservations but then they got infected,” Suen said. He co-founded Rêver in June 2020.
In a down-to-earth Chinese city known worldwide for its Cantonese cuisine, Rêver is finding a new market by serving modern French cuisine with multi-course dinners priced at 1,280 yuan ($183) or 1,680 yuan Is.
For the coming year, “we try to be a little conservative on how things go,” Suen said. “Because everything has changed so fast and so suddenly these days.”
China caught a glimpse of it in 2022 Slowest years of economic growth in decades. Within 43.97 trillion yuan ($6.28 trillion), with retail sales down 0.2%, catering sales fell a whopping 6.3%.
Recent data shows that Chinese consumers are starting to open their wallets again, especially for travel.
During the seven-day Lunar New Year holiday that ended on Friday, national tourism revenue rose 30% from the previous year to 375.84 billion yuan, According to official figures. But that was still less than 2019’s spending.
“Consumer sentiment is better. Spending power is kind of behind,” Ashley Dudrenok, founder of China digital consultancy Chosen, said Friday. “But I don’t think that all of a sudden from one month to the next… doubles from 2019 or 2019.”
Dudarenok said that heading into 2023 and the Lunar New Year, some smaller brands have become more conservative on China and halved their marketing budgets for the country.
“Consumer sentiment was really down, nobody knew exactly what was coming, and a lot of marketing budget and dollars went into 11.11 [Singles Day] And that wasn’t successful either, so brands didn’t earn much beyond 11.11” and another shopping festival in December, he said. “Then all of a sudden China opened up. a lot of people didn’t expect it [and were] Quite surprised by this rapid growth.”
Dudrenok expects overall consumer trends to continue, whether it’s people in big cities spending more to “feel better” or people in smaller towns paying for higher quality products.
Many analysts expect higher levels of savings among Chinese consumers during the pandemic to translate into higher spending this year.
At the policymaker level, Chinese officials say they are prioritizing consumption. Premier Li Keqiang led the first post-holiday executive meeting of the State Council on Saturday, and called for efforts to “accelerate consumption recovery and stabilize foreign trade and investment,” according to a readout. The meeting said policies promoting the consumption of cars and other big-ticket items would be “fully implemented”.
However, unlike the US, China has not distributed cash to consumers nationwide in the wake of the pandemic. Lee told reporters in 2022 that policymakers would instead focus on supporting businesses and jobs.
“We believe the most important factor affecting consumption is the future income outlook, which is linked to a number of factors,” Hao Zhou, chief economist at Guotai Junyan International, said in a note. “That being said, less policy and virus uncertainty will certainly help improve sentiment.”
They expect 7% year-over-year growth in retail sales.
Hainan’s recovery plan
Hainan, a tropical province that aims to become a duty-free shopping destination, announced a target of 10% growth in retail sales this year. After this, its retail sales declined by 9.2% last year.
Gross sales from the island’s 12 duty-free stores totaled 2.57 billion yuan during the Lunar New Year holiday week. According to the local commerce department.
Holiday sales were up more than four times compared to 2019, reflecting the area’s growth and new mall openings over the past few years, the release said.
Both LVMH and Coach-parent Tapestry signed agreements with local authorities to expand their business in Hainan, including the establishment of Tapestry’s China travel retail headquarters in 2022, according to government announcements. Both companies did not immediately respond to CNBC’s request for comment.
Ruslan Tuleynov, global media officer at the Hainan Bureau of International Economic Development, said top executives from US and European brands, among others, plan to visit Hainan this year as Covid restrictions are eased. He declined to say how many and when.
“Earlier I personally had some discussions with some of the top companies last year or two, but at that time [there were] Some Kovid restrictions, difficulties in coming to China.
new trend, changing fast
Brands in China will have to keep pace with changes not only in the COVID situation but also in the market.
Dudarenok said companies are spending more marketing dollars away from ByteDance’s local version of TikTok, Douyin, and Weibo.
While those brands had been on Douyin for years, they weren’t part of the social conversation on the highly popular app, she said. For brands, she said the thinking now is that “China has changed, most importantly China has opened up, and we need to be part of that conversation to get into that business.”