(Yicai Global) Jan. 13 -- China’s consumption is expected to increase 10 percent this year as the home appliances, sports and healthcare sectors rebound in the first half after suffering at the hands of the coronavirus pandemic last year, according to the China consumer department head at Swiss investment bank UBS.
High-end liquor and luxury goods consumption will also continue to grow at a high rate, Christine Peng said in an interview with the media today on the sidelines of the UBS annual conference in Shanghai.
Home appliance makers’ revenues fell about 25 percent in the first six months of 2020, but sales and prices rose in the second half, Peng said, adding that Chinese manufacturers have the advantage of leading the world in product innovation, supply chain efficiency and omni-channel operations. Exports accounted for more than half of the industry’s total sales in November.
Many housing builds finished in the second half of 2019, and many appliances more than 10 years old need replacing, so sales of air conditioners and kitchen extractor fans will increase the fastest among electrical appliances, while smaller items face greater competitive pressure.
The sportswear sector has rebounded quickly after the pandemic. Consumer demand for sports and fitness is expected to climb 21 percent this year, the fastest of all industries, according to a survey by UBS Evidence Lab. A colder winter and a late Spring Festival, starting on Feb. 12, will extend winter sales, Peng said. The Beijing Winter Olympic Games and the Hangzhou Asian Games next year will boost the development of the sector, she added.
The high-end liquor sector has prospered amid the pandemic. The top six baijiu distillers reported higher profit growth than the industry average in the first three quarters of last year. As high-end liquor makes up less than 2 percent of all baijiu consumed, the market has a considerable room for growth, and the average price of liquor is rising, Peng said.
The expansion of duty-free shopping in China’s southern Hainan province has freed up spending power and prompted Chinese to buy foreign luxury goods at home, Chen Xin, a leisure industry analyst, told the media at the same conference today.
The Chinese government hiked the duty-free shopping limit for Hainan on June 30, increasing the annual quota for travelers to the province to CNY100,000 (USD15,430) from CNY30,000 (USD4,630). The new policy also increased the number of duty-free categories from 38 to 45, adding added natural honey, tea, tablets, electronic consumer products, mobile phones, game consoles and alcohol.
Total sales at Hainan’s four offshore duty-free stores was CNY32.22 billion (USD5 billion) last year, a 128 percent increase on 2019, according to official data. The number of shoppers rose 30 percent to 5.2 million, and the number of products bought jumped 69 percent to about 30.9 million.
The Chinese mainland’s luxury market is expected to grow 48 percent to CNY346 billion this year, per data from the US consulting firm Bain & Company. Domestic consumption accounted for 70 percent to 75 percent of global luxury spending by Chinese consumers last year, a record high.
Editor: Peter Thomas