CBME China 2024

17-19 July 2024 | National Exhibition and Convention Center (NECC), Shanghai, China

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Which Chinese markets can survive a recession?

By Daxue Consulting

 

COVID-19 had a great impact on the Chinese economy. Although China is already recovering from the coronavirus, economists suggest we will see a U shaped recovery in contrast to a V shaped one. This means that the economy will not bounce right back to normal as it did after SARS. Rather, we will see some months of lowered consumer confidence and a short-term recession Recession affects every business differently, however some of them have proven to be in recession-proof markets in China.

Chinese economy is bouncing back

China’s GDP contracted by 6.8% in the first three months of 2020. It is the biggest drop in nearly three decades, as the country’s factory output ground to a halt. National Bureau of Statistics of China showed that industrial output was down 8.4% from the year before.

In the beginning of April, State Council claimed 99% of manufacturing firms had begun working again. Besides, 84% of small and medium businesses had reopened. The economy’s performance in the second quarter will be crucial for the government to get the economy back on track. A quick rebound can happen because of the “countercyclical policies”, or pro-growth measures taken by Beijing. Chinese experts expect economic indicators to significantly improve in the second quarter, with growth returning to potential by the end of 2020 or early 2021.

Higher demand for healthcare services in China

The growing healthcare sector is in many aspects a byproduct of China’s recent economic rise. Now several hundred million people have higher living standards and can afford healthcare services. This increases the demand for healthcare services. Although the medical industry is growing fast in China, the demand for further healthcare services is growing even faster.

Industry experts estimated the Chinese healthcare market will grow to 90 billion yuan by 2020. The Prospective Industry Research Institute predicts that the sales revenue of China’s pharmaceutical industry will exceed 3 trillion yuan. The industry scale will exceed 5.3 trillion yuan in 2025.

Healthcare is a recession-proof market in China. After the coronavirus outbreak in China has led to an increase in the demand for medical equipment. From January to March 2020, there were 87,265 new businesses with medical devices. Besides, the performance of some medical device companies increased in January, and the medical device industry sector is trending well.

Most experts agree that the coronavirus outbreak will lead to profound changes in China’s healthcare sector. These changes could include massive investment in disease prevention infrastructure and a re-visiting of pharmaceutical companies’ pipeline strategies. Other improvements could focus on greater emphasis on the role of community healthcare centers.

Retail industry: convenience and discount stores

Convenience stores win during the epidemic

 

In 2019, the number of convenience stores in China is about 135,000, an increase of 10.3% from the previous year. The number of stores will be close to 150,000 in 2020. With the improvement of digitalization and supply chain, convenience stores will give consumers a more convenient and safe shopping experience.

Walmart and Costco – discount stores in China stay on track

 

Executives of Walmart in China claimed that sales at the company’s 430 stores had not faltered, even during the quarantine. Customers turned to the retailer to buy food and necessities. Walmart also invested in a grocery delivery venture in China that has continued to make home deliveries during the outbreak.

 

Report published by Costco showed that Costco’s sales accelerating in February 2020, increasing 11.7%year over year. Customers started shopping at the discount stores when the outbreak hit. Demand was so strong that Costco placed a limit on how much customers could purchase of certain items. This helped to increase second-quarter sales and it will influence third-quarter results. For the three months ended February, Costco reported worldwide revenue growth to $39.7 billion.

 

Healthy food and convenience food face huge demand in China

In the basic life needs food undoubtedly occupies the first place. That is why it is a recession-proof market in China. During the isolation period in China, people could not eat out, so they bought the ingredients for cooking at home. Downloads of the recipe apps more than doubled in February to 2.2 million at China’s app store. In February 2020, cooking and food-related content attracted more than 580 million views on Chinese video-streaming platform Bilibili.

 

In order to avoid contact with people, consumers choose to use food delivery in China and have the habit of hoarding food products. Healthy food and vegetables saw the growth in sales.

Hygiene industry – hand sanitizer and facemasks

Affected by the coronavirus epidemic, the demand for hand sanitizers surged. After the outbreak, the sales of hand sanitizers increased sharply by 231%. Hand sanitizer sales on Taobao has soared to 31 million, about 11 times more from the previous year. From January 20 to February 13, 2020, JD Supermarket provided around 6 million bottles of hand sanitizer for consumers nationwide.

Affected by the coronavirus outbreak, the growth rate of sanitizer output value will increase. The initial estimated growth rate can reach 13.7%. The annual disinfectant output value will exceed 11.5 billion yuan.

With the need for epidemic prevention and control, the demand for 75% medical alcohol has greatly increased. In 2020 it will exceed 80,000 tons.  China Chamber of Commerce estimates that the annual output of hand disinfectant will exceed 50,000 tons in 2020.

 

Distance learning and remote work tools as recession-proof markets in China

After the government announcing to postpone the starting day of school, online learning APPs achieved dramatic growth. Statistics show that the scale of China’s online education market exceeded 300 billion yuan in 2019. It will reach nearly 500 billion yuan in 2022. The epidemic brought to online education an outstanding traffic performance. During the epidemic, the daily active users of Xueersi (学而思) online education platform exceeded 10 million.

 

According to the data of the “Statistical Report on the Development of China’s Internet” China’s E-educationusers reached 232 million in 2019. It increased on 31 million from the end of 2018, accounting for 27% of the total Internet users.  As many schools still have an online teaching, China’s online education users can reach 305 million in 2020.

 

During the coronavirus outbreak, the demand for online office software has risen sharply. According to the government reports, nearly 70% of the employees believe that the company needs to provide tools for employees to work online.

 

In 2017, the scale of China’s remote office market was about 19 billion yuan, and it reached about 23 billion yuan in 2018. In 2020 it will grow to 47 billion because of the big demand.

The popular remote office in this epidemic were DingTalk and WeChat Work. Later Zoom, Xiaoyu Yilian and ByteDance’s Feishu subsequently joined the competition. According to statistics, there are currently about 4,500 cloud office companies in China. At present, DingTalk and Enterprise WeChat already have a certain lead in terms of user size.

 

After the outbreak, the probability of using these remote office tools will only increase. This epidemic has caused more people to start to understand and understand remote office software.

 

About CBME

 

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