While GDP growth has fallen by around two percentage points to 7% to 8% in China, consumer demand continues to grow, driven in large part by rising wages. It has been suggested that companies which are able to take advantage of this are likely to thrive going forward, especially as the emerging middle class continues to expand.
Consumer demand is also being driven by increased brand awareness, something which is evident in all areas. Not only is the number of people with money to spend increasing, but demand is increasing for more luxury products and services as people develop higher aspirations.
Robert Horrocks, CIO at Asia Matthews, said: “While once there would have been simply piles of food in the supermarkets, we are now seeing spaces on the shelves in between different brands of food products.”
He explains this is a good thing because there is differentiation between own-brand and luxury-brand goods and increased awareness from the consumer about what is considered to be premium.
Horrocks was also quick to quash the idea that growing wages were bad news for the economy, stating that rises in wages were mirrored by increases in productivity. Despite the increases, labour costs per unit were not affected.
While painting a rosy outlook for potential investors in the region, there are some issues they need to be aware of if they are to take full advantage of the opportunities on offer.
Investors need to ensure that they have a thorough understanding of the market and the culture, even when it comes to standard products and services such as social media networks.
Distribution networks should also be considered. As the middle class continues to expand, second and third tier cities outside of the traditional hubs are being established, and companies need to ensure that they can access these markets. A strong network of distributors is needed, even if this means pairing with a traditional competitor from markets in the west, Horrocks concluded.
