Work resumes across the majority of China, the auto industry shows early recovery signs, empty cinemas result in miniscule box office but urban transit systems see traffic numbers grow.
Whilst China faces an ongoing challenge with imported cases, border controls and mandatory quarantine are creating a sense of security, and almost zero local infections being recorded at present. Although the majority of schools are yet to reopen, many businesses and factories are returning to almost the same levels as before the crisis began.
As China continues its recovery, what has our PHD China Insights team uncovered this week?
Business
Retail consumption in January and February declined by RMB 1.5 trillion. According to China’s National Bureau of Statistics, consumer spending on accommodation, transportation, travel and entertainment declined by RMB 1 trillion compared to the same period last year.
6% decline in sales is expected by offline technical goods retailers. According to a GfK survey, small offline technical goods retailers expect a sales decline that is likely to average 24%. Chain store retailers (with more than six shops) in the same category are a bit more optimistic and expect the decline to be significantly lower – 6%. The same survey claims that 50% of consumers plan to continue with their purchases immediately after the epidemic.
507 cinemas across the country resumed their operations as of 21 Mar, but with limited success: the revenues on Saturday were only RMB 31,000 out of which RMB 25,000 came from China’s western province Xinjiang. In some provinces like Guangdong and Henan, the theatres failed to see even one visitor.
Resumption of work across China is visible through purchases of office supplies. For example, according to eCommerce platform JD.com, the office supplies sales in Hangzhou in March have increased by 94% compared to February, while in Suzhou and Nanjing they rose by 50% and 70% respectively. The Pearl River Delta region has also seen office supplies increasing by 50%.
Automobile sales declined 44% YOY in the second week of March, compared with 50% decline in the first week of March and 61% decline in the last week of February, showing that the market is slowly recovering which is expected accelerate with the government stimulus package to the industry that is supposed to be rolled out in April.
55% of restaurants across China have reopened. According to Meituan, 30% of them have recorded higher numbers of takeaway orders as dine-in services are yet to see recovery due to the ongoing epidemic concern.
Brands
Tencent launched VooV Meeting in over 100 markets. Learning from their China experience about the sharp increase of people working from home during the epidemic, the tech giant launched the international version of their Tencent Meetings service.
Baidu launched a free “Ask a doctor” platform for the Chinese users currently abroad. The platform provides free online medical and psychological consultations, expert live broadcast, and the epidemic prevention content.
JD Health expanded their Chinese-only health consultation service to English. 20 Western and traditional Chinese medicine (TCM) doctors now are offering advice on the platform. International users can also use the platform’s Skype hotline to reach them.
JD rolled out RMB 1.5 billion worth of coupons in several waves in order to encourage consumption. This promotion has partnered with consumer electronics and FMCG brands, with the first one starting on 26 Mar.
Jianghan Agricultural eCommerce Mall partnered with JD to provide 475,000 kg of fresh products to residents in Jianghan oilfield area in Hubei province. JD.com provided infrastructure (cloud, AI) support for the online retailer, which now has more than 18,000 registered users.
China’s largest online travel agency Ctrip reported a loss of RMB 1.75 billion to 1.85 billion in 2020 Q1, with sales declining between 45% and 55%.
Culture
Shanghai fashion (from 24 Mar to 30 Mar) week is digital this year, with the broadcast rights being given to Alibaba’s eCommerce platform T-mall. Some of the big designer names will be presenting their collections, including Diane von Furstenberg, along with homegrown indie designers, like Yirantian, Shushu/Tong and Angel Chen.
8.74 million universities 2020 graduates are likely to face a challenging job prospect environment. According to China’s Ministry of Education, 3.41million of them have decided to pursue master’s degree already. That said, some industries have surprised the analysis: China’s gaming companies are now offering better entry-level renumeration packages than the financial industry, averaging RMB 12,158.
Consumers
Most consumers show confidence to resume the same or even higher level of consumption in months. According to a McKinsey report, most (88%) Chinese consumers are optimistic about the economic recovery in the following months, with tier 1 cities leading (98%). 70% of consumers in tier 1 and 2 cities plan to consume or spend more after the crisis. However, consumers in Hubei are more pessimistic – over 50% of them stated they would spend less after the epidemic is over.
Consumers feel safe by going out less and paying more attention on health product. McKinsey reported that 33% of upper-tier consumers will reduce trips to the shopping mall and the number surges to 53% in lower-tier cities. Over 70% of consumers will be willing to understand food safety and improve personal health condition by diet and exercise in the near future.
Both traffic congestion and subway passenger load reduced significantly as people spend more time indoors and not commuting. Compared to March 2019, total traffic congestion in March 2020 reduced by more than 10% and daily volume of subway passenger was cut by 43% in 6 major cities (Beijing, Shanghai, Guangzhou, Shenzhen, Chengdu and Chongqing) in China. However, as return to work ramps up, some larger cities are now seeing passenger loads rise to almost 80% of pre-Chinese New Year levels.
Thanks to our PHD China Insights team for their contributions.
Visit our WeChat to view last week’s advice and detail on the recommendations for managing communications during this period.
We are providing a weekly update on the impact and implications for this current health crisis.
If you have questions or suggestions, please feel free to email us at:
Mark Bowling – CSO PHD China mark.bowling@phdmedia.com or Vladimir Prostran – Group Director Strategic Insights PHD China vladimir.prostran@phdmedia.com
