WEBVTT - China Consumers Are Back, Just in a Different Way 0:00:01.080 --> 0:00:04.200 China's consumers are a force to be reckoned with. It's 0:00:04.240 --> 0:00:07.000 the second largest market in the world after the US. 0:00:07.680 --> 0:00:11.399 Last year alone, Chinese shopp has spent about forty nine 0:00:11.480 --> 0:00:15.800 trillion yuan or about six point eight trillion US dollars. Now, 0:00:15.880 --> 0:00:19.119 policymakers want to harness that and grow the nation into 0:00:19.120 --> 0:00:22.520 a mega sized consumer powerhouse, as officials call it. 0:00:23.200 --> 0:00:26.680 But they have promised us for two decades now, and today, 0:00:26.880 --> 0:00:30.920 after rounds of stimulus measures, consumption in China still makes 0:00:31.000 --> 0:00:34.720 up only about thirty nine percent of GDP. That's far 0:00:34.760 --> 0:00:38.800 below the OECD average of fifty four percent. It's exports 0:00:38.800 --> 0:00:41.440 and industrial production that's still drive growth. 0:00:41.760 --> 0:00:45.440 So what's keeping consumers from spending? Should we even be 0:00:45.520 --> 0:00:49.199 waiting for a comeback or if things structurally changed? And 0:00:49.280 --> 0:00:52.280 how should we read into recent consumption trends that have 0:00:52.360 --> 0:00:55.520 skyrocketed stocks from bubble tea to gold and toys. 0:00:57.480 --> 0:01:01.400 You're listening to Asia Centric from Blooeberg Intelligence. I'm Katademitreva 0:01:01.440 --> 0:01:01.960 in Hong Kong. 0:01:02.560 --> 0:01:05.800 I'm John Lee, also in Hong Kong, and this week. 0:01:05.600 --> 0:01:09.040 We're taking a deep dive into the China consumer, how 0:01:09.080 --> 0:01:12.200 their shopping habits are changing and trends to watch. We'll 0:01:12.200 --> 0:01:15.800 sit down first with Katherine Limb, Senior analyst for Consumer 0:01:15.840 --> 0:01:19.720 and Technology at Bloomberg Intelligence, to unpack spending trends and 0:01:19.800 --> 0:01:23.240 how investors can pivot. Then we bring in ants And Bailey, 0:01:23.560 --> 0:01:27.600 head of Asia Pacific Consumer and Retail a KPMG for more. 0:01:28.240 --> 0:01:31.120 Catherine really pleased you could join us just to start. 0:01:31.600 --> 0:01:34.480 Where is the China consumer at today? Give us kind 0:01:34.480 --> 0:01:36.600 of the lay of the land, you. 0:01:36.560 --> 0:01:38.800 Know, I think we do have to be realistic that 0:01:39.160 --> 0:01:43.960 post COVID there has been changes in spending behaviors of 0:01:44.200 --> 0:01:50.440 Chinese consumers, not just within China but also abroad. Abroad, 0:01:50.520 --> 0:01:55.160 we've heard from so many different companies, including LVMH as 0:01:55.200 --> 0:02:00.000 well as Kiiren talk about tourists, particularly the traditional high 0:02:00.200 --> 0:02:04.240 spenders like those from the mainland, cutting back down on 0:02:04.280 --> 0:02:07.840 their spending when they are traveling and instead they are 0:02:07.880 --> 0:02:12.399 spending more on the experiences on some of the services 0:02:12.840 --> 0:02:17.799 rather than luxury goods. Coming back to China, we are 0:02:17.919 --> 0:02:22.760 seeing a repaturation of what I've just highlighted that instead 0:02:22.760 --> 0:02:26.960 of actually spending on the big luxury goods abroad, we 0:02:27.080 --> 0:02:31.119 are seeing them translate that into some of the premium 0:02:31.160 --> 0:02:34.840 tickets spending. You know, they don't mind spending a little 0:02:34.880 --> 0:02:40.399 bit more on premium toys, new gadgets, even on concerts, 0:02:40.680 --> 0:02:43.760 as well as domestic travel within the country. 0:02:44.720 --> 0:02:50.040 Yeah, Chinese mainland travelers and consumers were really big purchases 0:02:50.120 --> 0:02:54.200 of luxury items. What's the outlook for the luxury segment? 0:02:54.320 --> 0:02:58.760 Because these European luxury companies, they spent so much money 0:02:59.000 --> 0:03:03.079 positioning themselves for Chinese consumption, this is not. 0:03:03.120 --> 0:03:06.040 The first time they've actually seen the cycles come through. 0:03:06.639 --> 0:03:10.079 It is a structural change in the way the Chinese 0:03:10.080 --> 0:03:13.239 shoppers are spending. But let's not forget that for the 0:03:13.320 --> 0:03:17.600 luxury firms like LVMH Curring. The good news for these 0:03:17.639 --> 0:03:22.240 firms are that they have a very extensive array of 0:03:22.520 --> 0:03:27.320 luxury goods at different price points to which they will 0:03:27.360 --> 0:03:31.960 be able to actually capture the different demands and evolving 0:03:32.080 --> 0:03:36.600 changes and preferences of the shoppers, which they have done 0:03:37.040 --> 0:03:41.800 historically quite well in the last decade or so. And 0:03:42.120 --> 0:03:44.880 it is a cycle that I do believe they will 0:03:44.920 --> 0:03:48.640 come out of. It. Will we go back to the 0:03:48.680 --> 0:03:54.000 same kind of impulsive buying behavior that we have seen 0:03:54.200 --> 0:03:59.080 from the Chinese consumers prior to COVID. I doubt and 0:03:59.160 --> 0:04:01.880 I do think that the changes that we are seeing 0:04:02.000 --> 0:04:06.440 is structural and will stay for the next couple of years. 0:04:06.560 --> 0:04:11.480 Even as consumer confidence returns, we're not going to actually 0:04:11.520 --> 0:04:16.240 again see the impulsive buying and the splurging on very 0:04:16.240 --> 0:04:17.520 big ticket items. 0:04:19.360 --> 0:04:22.800 So, like you just said, if the consumer's not coming back, 0:04:22.839 --> 0:04:26.360 what is the consumer the China consumer look like, you know, 0:04:26.480 --> 0:04:30.200 five ten years from now versus pre pandemic, because I 0:04:30.200 --> 0:04:34.120 would think that analysts markets generally expect China's consumption to 0:04:34.160 --> 0:04:35.240 come back at some point. 0:04:36.080 --> 0:04:39.960 Yeah, good question, Katya, and I think that the easy 0:04:40.120 --> 0:04:46.320 way of selling to the Chinese consumer is over and 0:04:46.560 --> 0:04:51.800 retailers and brand owners need to be more thoughtful in 0:04:51.880 --> 0:04:57.000 their marketing campaign to be in a position to seize 0:04:57.279 --> 0:05:02.400 the wallet of these increasingly sophists dedicated consumer group who 0:05:02.520 --> 0:05:07.560 are going to social media to look at reviews and 0:05:07.839 --> 0:05:14.320 to share thoughts about their experiences. And the retail marketing 0:05:14.600 --> 0:05:18.360 campaign will now needs to shift to be more proactive 0:05:18.440 --> 0:05:23.760 in communicating a story which was what had actually bagged 0:05:24.040 --> 0:05:27.920 what we see for La Boubou, right, the toy had 0:05:27.920 --> 0:05:32.400 a story backed by a celebrity and then they were 0:05:32.440 --> 0:05:35.600 able to actually match it up with the scarcity demand, 0:05:36.120 --> 0:05:41.760 making certain collections exclusive, etc. Same thing for Laupugo, the 0:05:41.920 --> 0:05:47.799 heritage of the Chinese cultures being embedded into their pieces. 0:05:48.200 --> 0:05:52.240 This is not something that you see in Bulgari or Katier, 0:05:52.960 --> 0:05:56.120 but it is something that is coming through very strongly 0:05:56.320 --> 0:06:00.880 for the Chinese jewers. And this feeds into the nationalism 0:06:01.400 --> 0:06:05.320 that we have actually seen coming and getting stronger among 0:06:05.440 --> 0:06:06.360 the Chinese. 0:06:06.960 --> 0:06:10.320 Do you see that trend continuing, this nationalism as maybe 0:06:10.360 --> 0:06:12.799 a pushback as well to what's happening globally. 0:06:14.080 --> 0:06:17.680 Oh yeah, absolutely. We have heard Nike and our deaders 0:06:18.240 --> 0:06:23.000 setting up China only design centers, whereby they are now 0:06:23.120 --> 0:06:28.960 pushing for China only dedicated products and merchandise with features 0:06:28.960 --> 0:06:32.760 that resonate again with the Chinese consumers, which they will 0:06:32.839 --> 0:06:35.719 roll out in a bigger scale as we go into 0:06:35.839 --> 0:06:38.960 the end of the year. I think we are definitely 0:06:39.080 --> 0:06:42.680 seeing a lot more of the global retailers coming up 0:06:42.800 --> 0:06:47.560 with customized merchandise and services for the crowd. Look again, 0:06:47.680 --> 0:06:52.080 just to take a step back, young China, KFC Pizzahat, 0:06:52.080 --> 0:06:55.680 they have long started this. They have customized their menu 0:06:55.839 --> 0:06:57.240 for the Chinese taste. 0:06:57.440 --> 0:07:00.560 Do you know how just for our internationalists, how did 0:07:00.560 --> 0:07:03.200 they do that? Like what does a KFC meal in 0:07:03.279 --> 0:07:04.039 China look like? 0:07:04.880 --> 0:07:07.359 So do you know you get congy and porridged on 0:07:07.560 --> 0:07:12.720 damn menus? Right, Definitely McDonald's heads that as well. They 0:07:12.760 --> 0:07:15.640 have also had their version of bubble tea like just 0:07:15.920 --> 0:07:19.000 iced tea. It's a bigger thing than iced coffee. And 0:07:19.160 --> 0:07:22.880 they have a selection of coffee mixed with juice, which 0:07:22.920 --> 0:07:27.680 is a big thing in China, whether it's Fright Dolls, 0:07:27.880 --> 0:07:30.920 et cetera. Breakfast their breakfast selection is amazing. 0:07:31.880 --> 0:07:33.960 So on one hand, you've got a lot of global 0:07:34.040 --> 0:07:37.400 brands or a lot of global consumer companies catering to 0:07:37.440 --> 0:07:39.800 the Chinese taste. Then on the other hand as well, 0:07:39.840 --> 0:07:43.120 you're going to get a lot more homegrown companies that 0:07:43.200 --> 0:07:45.720 are going to go be successful at home and also 0:07:45.920 --> 0:07:47.600 potentially export overseas. 0:07:48.080 --> 0:07:52.480 Yes, talking about exporting overseas. Being here in Singapore as 0:07:52.480 --> 0:07:58.080 well as Malaysia, we've seen how Chagi Lucking coffee is 0:07:58.160 --> 0:08:02.160 now like within at least three kilometer in certain places, 0:08:02.240 --> 0:08:05.720 you'll find a Lucky point of sale somewhere, and they 0:08:05.800 --> 0:08:10.560 are now more prominent and more accessible than Starbucks. 0:08:11.360 --> 0:08:15.800 Catherine look consumption overall has been quite subdued that there's 0:08:15.800 --> 0:08:18.280 been some pockets that have done really well, and some 0:08:18.320 --> 0:08:21.560 of these companies' share prices have done really well. Like 0:08:21.800 --> 0:08:24.600 Lapool Gold, they sell a lot of jury that's done 0:08:24.600 --> 0:08:27.600 extremely well. That's obviously a high end. But on the 0:08:27.640 --> 0:08:29.760 other side of the spectrum, you've got I would say, 0:08:29.800 --> 0:08:32.760 like cheaper end goods like Laboubo dolls, although that become 0:08:32.800 --> 0:08:37.200 a bit more expensive recently, Bubble Tea as well. How 0:08:37.240 --> 0:08:40.520 should we read into these diverging signals. 0:08:41.240 --> 0:08:44.880 Firstly, I guess for the discretionary goods side, from jeury 0:08:45.040 --> 0:08:49.560 to toys, Lapool Goal has writ or not just increased 0:08:49.600 --> 0:08:53.640 demond for safe haven assets like Goal, they have also 0:08:53.840 --> 0:08:59.120 incorporated a lot of the heritage cultural features into their items. 0:08:59.600 --> 0:09:04.400 That's stood doubt. Definitely. It is a smaller scale dura 0:09:04.720 --> 0:09:07.600 in terms of the number of stores that they have 0:09:07.800 --> 0:09:11.040 in China relative to Chow Tay folk, which we are 0:09:11.160 --> 0:09:14.320 more familiar with in Hong Kong as well as in 0:09:14.360 --> 0:09:19.199 the southern part of China. As they gain popularity, Laupoo's 0:09:19.280 --> 0:09:24.040 growth trajectory definitely looks better than Chow Tai folk for 0:09:24.160 --> 0:09:26.520 reasons that you know, they're starting from a lower base 0:09:26.960 --> 0:09:29.839 now when it comes to the toys per se, the 0:09:29.960 --> 0:09:33.920 frenzy for La Boobuo continues. And I was just having 0:09:33.960 --> 0:09:37.079 a very interesting discussion with someone about like they do 0:09:37.160 --> 0:09:41.920 have friends who are bidding for more exclusive La Boo 0:09:41.920 --> 0:09:45.439 Boo series online, even though it has been marked up 0:09:45.720 --> 0:09:49.400 at least three or four times in some cases ten folds. 0:09:49.800 --> 0:09:54.600 But because they are exclusive, and ultimately the incremental amount 0:09:54.640 --> 0:09:57.240 that you are paying some start to less than two 0:09:57.360 --> 0:10:01.040 hundred R and B for instance, so it is not 0:10:01.160 --> 0:10:04.160 going to take a big hit on the wallet. It 0:10:04.240 --> 0:10:08.320 is still something that very affordable now to Bubble Tea. 0:10:08.760 --> 0:10:12.880 And when it comes to food services, that is evolving 0:10:13.360 --> 0:10:17.040 as we continue to see more e commerce platforms like 0:10:17.320 --> 0:10:22.520 JD dot com Mate one throwing in perks to drive 0:10:22.960 --> 0:10:29.200 online orders and then somewhat stimulating the consumption of these 0:10:29.320 --> 0:10:34.040 food services out there. So we are seeing different ways 0:10:34.440 --> 0:10:39.040 to which China consumption is being stimulated. In part, I 0:10:39.160 --> 0:10:43.120 do believe that, you know, through December, we will continue 0:10:43.160 --> 0:10:46.520 to see the e commerce platforms playing a very important 0:10:46.600 --> 0:10:48.880 role in this. So if we. 0:10:48.880 --> 0:10:52.760 Can dive into those dynamics a bit more, what is 0:10:52.840 --> 0:10:55.520 going on there is it sort of the same consumer 0:10:56.080 --> 0:10:59.720 who's purchasing the cheapla boo boo and the bubble tea 0:10:59.720 --> 0:11:02.200 and sort of what we call like small treats to 0:11:02.360 --> 0:11:07.040 keep people going and also purchasing higher end items like 0:11:07.120 --> 0:11:12.120 gold chains or jewelry. Or are these different demographics or 0:11:12.200 --> 0:11:15.240 is it sort of younger gen z who are driving 0:11:15.240 --> 0:11:19.079 the cheap trend and then maybe older people, older women 0:11:19.200 --> 0:11:21.760 driving the jewelry and other high end sales. Like, what's 0:11:21.840 --> 0:11:23.160 kind of really going on here? 0:11:23.920 --> 0:11:26.800 I love how you've actually put it that these are 0:11:26.920 --> 0:11:32.040 your sweet treats, but that the consumers are spending on. 0:11:32.600 --> 0:11:36.720 And particularly if you look at the population group between 0:11:36.760 --> 0:11:40.200 twenty to thirty five years old, which are the younger, 0:11:40.760 --> 0:11:46.320 more digital savvy population who are educated, being able to 0:11:46.400 --> 0:11:50.480 actually communicate to them through the digital platforms like social 0:11:50.559 --> 0:11:54.520 media and making it very convenient for them to spend 0:11:54.600 --> 0:11:58.560 via platforms and apps on their mobiles. When it comes 0:11:58.559 --> 0:12:03.319 to foot deliveries a set, it definitely resonates with this group. 0:12:03.760 --> 0:12:07.760 I would attribute denotable consumption trends to the gen Z 0:12:08.160 --> 0:12:10.480 from the millennials to the gen Z. I would say 0:12:10.880 --> 0:12:16.480 in that under forties bucket itself particularly against stressing that 0:12:16.520 --> 0:12:20.280 these are your tech savvy group that has actually right 0:12:20.480 --> 0:12:24.440 on the e commerce and digital weight in China over 0:12:24.480 --> 0:12:25.520 the last two. 0:12:25.320 --> 0:12:29.080 Decades, Catherine, A lot of investors are waiting for a 0:12:29.120 --> 0:12:34.600 big stimulus package to you know, restart China consumption. What's 0:12:34.640 --> 0:12:36.920 the outlook there, That's. 0:12:36.679 --> 0:12:40.040 A that's the million dollar question, John. What the Chinese 0:12:40.120 --> 0:12:43.600 government has already put into the market and will continue 0:12:43.640 --> 0:12:47.080 to invest based on what they have raised from the 0:12:47.120 --> 0:12:50.880 government bonds itself. It is pretty huge, and really the 0:12:50.960 --> 0:12:54.520 question right now is how much more can we expect 0:12:55.000 --> 0:12:58.120 in twenty twenty six, on top of what they have 0:12:58.200 --> 0:13:02.560 already put in for twenty two to continue to lift 0:13:02.679 --> 0:13:07.679 consumption or simply retail sales by another five percent in 0:13:07.720 --> 0:13:10.960 the next year to come. I do think that this 0:13:11.240 --> 0:13:14.640 is an unanswered question at this point in time, because 0:13:14.640 --> 0:13:17.320 it does mean that in order to get people to 0:13:17.400 --> 0:13:23.240 buy more washing machines or whether it's Huawei smartphones, the 0:13:23.800 --> 0:13:28.320 placement cycle has already been shortened to try and get 0:13:28.640 --> 0:13:32.240 consumers to buy a new handphone every month. I don't 0:13:32.280 --> 0:13:35.320 think that's going to be realistic right let alone like 0:13:35.320 --> 0:13:39.840 the bigger ticket home appliances, So I don't think that 0:13:40.360 --> 0:13:43.560 it is about the incremental money that they're pumping in 0:13:43.640 --> 0:13:48.120 to subsidize these purchases, but rather they have to find 0:13:48.200 --> 0:13:52.760 new means to stimulate the confidence for the consumers to 0:13:53.000 --> 0:13:55.400 naturally be inclined to spend. 0:13:56.040 --> 0:13:58.320 Do you have a theory for what the silver bullet is? 0:13:59.760 --> 0:14:03.760 I think the overall confidence level, and it starts really 0:14:03.840 --> 0:14:07.559 from not just concerns about the undercurrents when it comes 0:14:07.600 --> 0:14:12.880 to property market, but job security. These days, the confidence 0:14:12.960 --> 0:14:16.680 levels still remains very low. I think we are still 0:14:17.080 --> 0:14:20.920 seeing the aftermath of some of the downsizing that we 0:14:21.040 --> 0:14:24.920 have seen across the board in the Tierwan cities. For 0:14:25.200 --> 0:14:29.080 whether it is the financial sector where a lot of 0:14:29.240 --> 0:14:33.800 the more affluent Chinese population tends to be exposed to, 0:14:34.560 --> 0:14:37.600 that will likely reach a tail end sometime in the 0:14:37.640 --> 0:14:41.400 beginning of next year from what I'm gathering, and hopefully 0:14:41.680 --> 0:14:45.680 as it stabilizes, we're going to get the confidence built 0:14:45.760 --> 0:14:51.040 up into twenty twenty six, barring any unforeseen circumstances or 0:14:51.160 --> 0:14:54.000 changes to the macro environment globally. 0:14:55.200 --> 0:14:58.320 So, Catherine, We've discussed quite a lot of different products 0:14:58.320 --> 0:15:00.600 and services, but I wanted to say to get your 0:15:00.720 --> 0:15:03.680 ranking of where you think the strongest growth is going 0:15:03.760 --> 0:15:07.280 to come. We've talked about white goods, you talked about smartphones. 0:15:07.560 --> 0:15:10.440 There's obviously, like you know, big ticket items like cars, 0:15:10.720 --> 0:15:13.880 also like clothing, sports goods, like where do you think 0:15:14.280 --> 0:15:17.000 will be the sort of the star or best areas 0:15:17.080 --> 0:15:18.440 to look at in the second half. 0:15:19.200 --> 0:15:24.240 Sportswear is definitely one sector because there is still increasing 0:15:24.440 --> 0:15:29.400 awareness when it comes to health and fitness within the country, 0:15:30.000 --> 0:15:36.280 and we are seeing more outdoor activities and consumers themselves 0:15:36.320 --> 0:15:41.000 willing to pay more for more functional sportswear items, whether 0:15:41.080 --> 0:15:44.400 it's the clothing or shoes. So it is going to 0:15:44.480 --> 0:15:49.680 stay resilient, more resilient in my view than purchases of 0:15:50.080 --> 0:15:54.920 goal or jewelry as that could be influenced by some 0:15:55.000 --> 0:15:59.480 of the fluctuations that we see in goal prices. And 0:15:59.640 --> 0:16:01.760 I think that is a big question mark when we 0:16:01.840 --> 0:16:03.240 go into twenty twenty six. 0:16:04.120 --> 0:16:06.320 So does that mean that some of these companies might 0:16:06.320 --> 0:16:09.960 be in bubble territory. I mean, we've had more than 0:16:10.000 --> 0:16:13.080 two thousand percent stock rise in the Gold company we're 0:16:13.120 --> 0:16:16.280 just talking about. PopMart has been another big one. But 0:16:16.360 --> 0:16:20.640 if they're kind of driven by only one demographic and 0:16:21.120 --> 0:16:23.200 they're not sustainable. I mean, there's only so many gold 0:16:23.240 --> 0:16:25.600 chains you can buy or does that kind of imply 0:16:25.800 --> 0:16:28.680 that people should be rethinking some of these valuations. 0:16:30.080 --> 0:16:33.440 Yeah, so, Katia, I guess as we look to find 0:16:33.480 --> 0:16:37.080 out more from the companies on their strategies into twenty 0:16:37.160 --> 0:16:41.160 twenty six, if they stay put focusing on just La 0:16:41.200 --> 0:16:45.760 Booboo alone, without new ips to roll out in the 0:16:45.760 --> 0:16:51.280 next couple of years, without more innovative ways of selling themselves, 0:16:51.320 --> 0:16:56.160 whether it is true digital media, whether it is true movies, 0:16:56.680 --> 0:17:00.480 to actually strengthen their presence, Yes, you are right that 0:17:00.520 --> 0:17:05.560 these companies could actually stagnate in terms of growth, and 0:17:05.800 --> 0:17:10.880 if consumers find an alternative, we might actually see revenues 0:17:11.040 --> 0:17:14.720 or profits actually declining. In a case of jewelry, we've 0:17:14.760 --> 0:17:19.240 been focusing on goal as Laupu's official name has that 0:17:19.400 --> 0:17:22.520 goal element in it, but let's not rule out the 0:17:22.560 --> 0:17:27.040 possibility that they may go into non goal items as well, 0:17:27.359 --> 0:17:29.600 and it is really up to the company to decide 0:17:29.640 --> 0:17:32.560 how they want to actually expand their merchandise. Mix. 0:17:33.600 --> 0:17:36.920 Asia Centric is produced by Bloomberg Intelligence. We're more than 0:17:36.960 --> 0:17:40.800 five hundred experienced analysts and strategists work around the clock 0:17:40.880 --> 0:17:44.359 to bring you timely world class research. Our coverage spans 0:17:44.400 --> 0:17:48.679 two hundred market industries, currencies, commodities, and industries, as well 0:17:48.720 --> 0:17:51.760 as over two thousand equities and credits. To learn more 0:17:51.760 --> 0:17:55.960 about Bloomberg Intelligence, visit BI go on the Bloomberg terminal. 0:17:56.520 --> 0:17:59.040 If you like what you hear, don't forget to subscribe 0:17:59.040 --> 0:17:59.359 and share. 0:18:01.160 --> 0:18:04.680 And we'rebec with Anson Bailey, head of Consumer and Retail 0:18:04.720 --> 0:18:07.800 in Asia Pacific for KPMG, and. 0:18:07.760 --> 0:18:10.440 We should tell the audience that Anson has brought something to. 0:18:10.400 --> 0:18:13.119 The studio, has a very special item. 0:18:13.280 --> 0:18:15.680 And Anson, for the listeners, what do you have there 0:18:15.720 --> 0:18:16.560 on the table. 0:18:16.760 --> 0:18:21.119 John, We have got la booboo a la booboo. We 0:18:21.920 --> 0:18:24.359 a white laboo boo. I did want to bring it 0:18:24.400 --> 0:18:27.720 into the studio just to point out that the Chinese innovation, 0:18:27.880 --> 0:18:32.080 the Chinese design is not always about the Chinese tech, 0:18:32.720 --> 0:18:37.400 but we're really seeing some big steps forward in that 0:18:37.800 --> 0:18:41.720 China consumption space but also the Chinese brands. 0:18:42.280 --> 0:18:45.400 And it's also an incredible example of consumer spending right now. 0:18:45.440 --> 0:18:49.320 Because Anson, we've heard these two stories and perhaps they're 0:18:49.359 --> 0:18:52.359 not mutually exclusive. So we spoke with Catherine about this 0:18:52.400 --> 0:18:55.040 idea that on the one hand, the China consumer is 0:18:55.080 --> 0:18:59.200 still not spending, still worried about the property market. Property 0:18:59.200 --> 0:19:02.919 market hasn't come. And then on the other you have PopMart, 0:19:03.200 --> 0:19:07.520 some jewelry companies and others really outperforming. So what's your take? 0:19:07.560 --> 0:19:08.359 How do you explain this? 0:19:09.600 --> 0:19:13.280 I think the general outlook is cautiously optimistic. 0:19:13.880 --> 0:19:15.639 Is it more cashas or is it more optimistic? 0:19:16.760 --> 0:19:19.760 Well, I think it is is perhaps a little bit 0:19:19.800 --> 0:19:23.600 more optimistic if you look at those retail sales. I 0:19:23.640 --> 0:19:27.760 think annual consumptions expected to rise by about two point 0:19:27.840 --> 0:19:32.240 three percent in twenty twenty five. But at the same time, 0:19:32.840 --> 0:19:35.600 it's not just about the consumption levels. It's also about 0:19:35.600 --> 0:19:38.600 the savings levels as well, because I think one of 0:19:38.600 --> 0:19:41.280 the things we should always look at and we always compare, 0:19:41.560 --> 0:19:44.280 you know, the US consumers with everybody else and the 0:19:44.359 --> 0:19:50.239 Chinese consumers. Those savings levels are much much higher in 0:19:50.359 --> 0:19:54.600 China than they are compared with the US. In China, 0:19:54.720 --> 0:19:59.320 now we're looking at four hundred and fifty million middle 0:19:59.359 --> 0:20:03.960 class consumers. Now I think that probably makes them the 0:20:04.160 --> 0:20:08.760 largest middle class groupings anywhere in the globe. 0:20:08.880 --> 0:20:11.120 But they have all of this in savings, but they're 0:20:11.160 --> 0:20:13.720 not spending the money. Is that what we're seeing now, 0:20:14.000 --> 0:20:18.040 you know, potentially not spending on those bigger items, spending 0:20:18.119 --> 0:20:20.520 on smaller items, and there's that sort of a negative 0:20:20.520 --> 0:20:22.959 sign about the economic outlook how people are feeling. 0:20:23.840 --> 0:20:26.359 It could be viewed as a negative sign, but I'd 0:20:26.359 --> 0:20:28.840 also say that, you know, let's have a look at 0:20:28.920 --> 0:20:32.359 things like automotive sales. I think if you look at 0:20:32.359 --> 0:20:35.800 the automotive sales, thirty one point four to four million 0:20:36.280 --> 0:20:39.600 vehicles that were sold last year. But then if you 0:20:39.640 --> 0:20:44.919 look at the EV share, the EV share is increasing significantly. 0:20:44.960 --> 0:20:49.520 I think it was forty one percent market share, and 0:20:49.600 --> 0:20:51.360 I think the sky's the limit. 0:20:51.240 --> 0:20:51.439 You know. 0:20:51.520 --> 0:20:54.720 I do think that if you look at the consumables, 0:20:54.760 --> 0:20:58.800 if you look at smartphones as well, you know, smartphones 0:20:59.160 --> 0:21:01.680 is actually experience and seeing a rebound. I think five 0:21:01.720 --> 0:21:06.119 point six percent of a rebound. So there are I 0:21:06.160 --> 0:21:09.680 think some things that are I would say quite positive 0:21:09.880 --> 0:21:11.440 out there in the marketplace. 0:21:11.600 --> 0:21:14.919 Yep. And so the government has launched a number of 0:21:14.960 --> 0:21:18.760 initiatives to try to get Chinese consumers to spend. They 0:21:18.800 --> 0:21:21.960 had their own version of Clash for Clunkers. They tried 0:21:21.960 --> 0:21:25.640 to get consumers to buy more white goods like refrigerators, 0:21:25.720 --> 0:21:29.000 washing machines, air conditioners. You know, what's been the impact 0:21:29.240 --> 0:21:31.720 of these government measures and does the government need to 0:21:31.720 --> 0:21:32.120 do more? 0:21:32.840 --> 0:21:37.080 I think the Chinese economy is like turning a massive tanker. 0:21:37.240 --> 0:21:41.480 You know, it takes time to turn things around. I 0:21:41.520 --> 0:21:46.160 think this stimulus has actually led to a few visible 0:21:46.200 --> 0:21:49.840 improvements in retail sales, but at the same time, there's 0:21:49.880 --> 0:21:53.280 only so much I think the government can do. I 0:21:53.320 --> 0:21:57.120 would say it goes very much down to the consumer sentiment. 0:21:57.520 --> 0:22:01.200 I mean, this whole US China trade war I think 0:22:01.240 --> 0:22:05.040 has really put a kibosh on that positivity, on that 0:22:05.160 --> 0:22:07.960 consumer sentiment. So it is going to take time. 0:22:09.359 --> 0:22:11.440 If we could talk about just going back to the consumer, 0:22:11.840 --> 0:22:13.879 You've done a lot of work in this space. If 0:22:13.920 --> 0:22:17.639 we could just drill down into the different types of 0:22:17.760 --> 0:22:20.680 China consumer that there are. You know, generally we've been 0:22:20.720 --> 0:22:25.040 hearing about a luxury a side pulling back. The Chinese 0:22:25.080 --> 0:22:27.800 consumers are becoming a lot more price conscious, a lot more. 0:22:29.320 --> 0:22:33.399 They're traveling less as well overseas, more internal travel. So 0:22:34.320 --> 0:22:36.560 could you tell us a bit about the different types 0:22:36.640 --> 0:22:39.240 of consumer or how you would maybe group them. 0:22:39.880 --> 0:22:44.240 The reality is that today we see several different personas 0:22:44.800 --> 0:22:51.560 on those Chinese consumers and equally individuality, you know, connoisseurship. 0:22:52.160 --> 0:22:55.600 These are all things that the Chinese consumers today, certainly 0:22:55.640 --> 0:23:00.560 those high end consumers, we really do see them leading 0:23:00.640 --> 0:23:04.119 the way. One thing that we have noticed in things 0:23:04.200 --> 0:23:07.159 like connoisseurship is that one of the person that's one 0:23:07.200 --> 0:23:10.480 of the personas So if we look at the connoisseurship, 0:23:11.000 --> 0:23:13.120 I think what we are going to see is that 0:23:13.520 --> 0:23:17.800 those Chinese consumers, they've literally gone to the next level. 0:23:18.160 --> 0:23:21.520 You're talking about connoisseurship in terms of like cars or 0:23:21.600 --> 0:23:24.040 watchers or wines or cigars like what. 0:23:24.520 --> 0:23:27.959 Yes, So basically, John, we're looking at you know, the 0:23:27.960 --> 0:23:33.200 fact is that those Chinese consumers today, one, they're incredibly 0:23:33.359 --> 0:23:39.520 well researched. Okay, they really really know the product inside out, 0:23:40.160 --> 0:23:43.840 probably a lot better than your sales associates. And so 0:23:43.880 --> 0:23:46.520 that's you know, one of the big challenges is as 0:23:46.600 --> 0:23:51.240 we of course try and drive the customer experience, you've 0:23:51.320 --> 0:23:54.520 really got to ensure that it's a very a deep, 0:23:55.119 --> 0:24:01.080 immersive in store experience as well for those Chinese, these consumers. 0:24:01.240 --> 0:24:03.200 So I think that's going to be a really key 0:24:03.320 --> 0:24:09.200 driver with regards to the future Chinese consumers but quite frankly, 0:24:09.880 --> 0:24:15.000 they have surpassed I think a lot of those Western 0:24:15.720 --> 0:24:19.119 consumers and the definitions. And it's interesting, John, you just 0:24:19.200 --> 0:24:23.439 mentioned about well they're not really traveling very much. I 0:24:23.440 --> 0:24:25.040 do think that there was. 0:24:25.000 --> 0:24:26.800 A COVID revenge travel. 0:24:26.960 --> 0:24:30.200 Yeah, so we did get the COVID revenge travel. Those 0:24:30.359 --> 0:24:34.520 Chinese consumers, I do believe that we are going to 0:24:34.600 --> 0:24:38.159 start to see a lot more travel. They don't forget 0:24:38.440 --> 0:24:40.800 China itself is open for business. 0:24:41.160 --> 0:24:43.480 What about the luxury makers? Do they have to start 0:24:43.760 --> 0:24:47.359 relying less on Chinese as traveling overseas and maybe just 0:24:47.440 --> 0:24:50.200 have more of their stores in mainland China. 0:24:51.119 --> 0:24:54.280 I think that's a good point, John, I think previously 0:24:55.080 --> 0:24:59.639 the Chinese consumers absolutely had to travel overseas for an 0:24:59.640 --> 0:25:04.920 amazing experience or to buy a particular bag. Today, what 0:25:04.960 --> 0:25:08.120 you do find is that there's a lot more availability 0:25:08.280 --> 0:25:13.480 in mainland China. Those Chinese high net worth individuals. I 0:25:13.520 --> 0:25:18.000 think that number is still growing. I think if you 0:25:18.040 --> 0:25:21.520 look at today and depending which reports you pick up, 0:25:21.920 --> 0:25:25.640 high networth individuals, around three point one six million holding 0:25:25.720 --> 0:25:30.159 combined one hundred and one trillion u N in investable assets. 0:25:30.600 --> 0:25:35.840 These are not insignificant numbers. It just goes to point 0:25:35.880 --> 0:25:42.159 out the maturity and how these Chinese consumers are evolving 0:25:42.320 --> 0:25:45.359 over time. And I really think that that is going 0:25:45.440 --> 0:25:48.720 to be a very key driver. We talked about four 0:25:48.800 --> 0:25:54.280 hundred and fifty million middle class consumers today. Now what 0:25:54.359 --> 0:25:57.360