2.8% growth is actually a quite good number in the context of a new normal here.
There is a lot of service-based growth that's happening.
The property market is still not supporting the growth of the overall consumption by a very large extent.
Just by lifting these things will unlock The leading Chinese companies in the pet economy in China.
Their return on their asset is marvelous.
15, 20 percent, sometimes even more than 20 percent.
It reflects a genuine change in how Chinese consumers have started to define value.
On hot issues in a more casual way.
Welcome to the chat lounge.
I'm to you and joining me for a chat on China's consumption rebound.
Are super mania, but founder and CEO of the Singapore based marketing technology company China's trading desk John gone.
Professor of economics.
University of International Business and Economics in Beijing and Chen Jiahe, Chief Investment Officer of the Beijing-based NOVEMRK Technologies.
It's a great pleasure to have you all back for the chat, gentlemen.
So China's consumer spending showed a noticeable rebound in the first two months of the year.
But before we dive into the numbers, Let me start with our two Chinese guests here.
A quick question.
What's the latest thing you've bought or what's currently on your shopping list?
Shall we begin with John?
Okay.
Well, I have contributed my fair share of China's consumption.
Lately, you know, manifesting efforts to renovate my new condo actually,
Right, we had a new place that we are just about to start in three days, actually on 29th well, four days.
And this is going to be, you know, a big chunk of money to refurbish the apartment.
You know I'm thinking about.
I have a budget for 20000 yuan, so it's actually a quite significant number.
It's a three-bedroom apartment.
Yeah, almost 3,000 U.S. dollars?
No, more than that.
It's actually 30,000 U.S. dollars, right?
You were saying 200,000 yuan, not 20,000.
Yeah, it's a renovation of a new apartment.
Right okay yeah, that would cost a lot.
A great contributor, i think i can.
I can call you, and what about java?
Well uh, i would say, first of all, it's a lot of closest.
You know, the weather is turning.
You just buy a lot of clothes and second, toys for the kids.
The kid is turning into her age of two to three.
So it's so many toys you keep on buying.
And final thing is that it's not something that I buy, but the hotels are booked, because I've been traveling recently.
So it's quite a lot of hotels you keep on booking.
Yeah, it's a lot of consumption.
I think my most recent purchase, coincidentally, it's also about traveling.
And that was a five-day cruise along the Three Gorges.
So we'll see whether you represent any aspect of the new trends later on.
But now let's take a look at the general picture.
China's retail sales have beaten expectations, rising 2.8% in the first two months.
The pace was almost two points faster than the growth recorded last December.
So, Subu, from your observation, how significant is this rebound?
Yeah, I think.
From my side, I would say this is more astounding rebound, not a big boom.
Right, the number matters because it's showing improvement and it's such as that the consumer demand is no longer deteriorating.
All right, but it is just too early to call it a broad-based comeback.
And we are seeing the same thing.
When we do our quarterly travel sentiment survey.
We run like one of the largest surveys in china.
What we see is that there's a big market demand that exists, but consumers are becoming more deliberate, more selective, much harder to convert.
So we find that demand has settled, but conversion has not.
So the challenge is no longer generating appetite.
It's more about giving consumers enough value clarity, trust and justification to make that commitment.
Right.
Like you said, it's kind of modest.
And of course, some media reports say it remained the weakest start to any year on record since 2000, excluding the pandemic slump.
And the figure was notably lower than the 4% growth recorded during the same period last year.
So Subbu, what's your interpretation of that?
Yeah, I mean, that is true, but it's also very selective, I would say, right?
Because it is not uniform across all the sectors.
What we are seeing is that the service sector is picking up a lot more than the traditional retail sector.
And we are seeing that there is quite a bit of interest in a lot of other areas that are making up for it. the consumption rather than the traditional areas of big ticket items, more experiential, more emotional values that go into purchases across these different sectors.
Right.
Then to John, how desirable is this one?
Would you focus on it's a rebound, especially when compared with the later stage of last year, or would you focus on it remains the weakest start to any year?
Well, I think 28 growth is actually a quite good number in the context of a new normal here about China's economic growth.
We are no longer in sort of a high growth era now.
China's economy is becoming more like a developed economy.
So, you know, 3%, 4% is considered very high growth.
So, you know, 2.8% is fairly a decent number.
I would give it a little bit more months to make a decision as to whether this represents a sort of a trend or it's just an iron off thing.
I'm actually quite a little bit reserved about, you know, the prospect of a strong uptick trend.
I think, if you look at the economy, there are still points of weakness, and I would give it more time to see whether this represents more of a long-term trend.
I think one thing probably on the more optimistic side is the low prices.
I think consumers are starting to realize that these prices are too good to be true here in China.
You know, I mean, you know, I've been traveling quite extensively in the last few years.
And everywhere you go you go to Europe, you go to North America you see these prices going up very, very noticeably.
And, you know, you think about the price level here in China.
It's really competitive.
It's really a bargain in my view.
And I think, more and more consumers starting to realize that, you know, this is a very good time for low prices.
But it's not going to last forever.
I think prices here in China are going to catch up with the rest of the world.
So if that's the case, people have a more urgency to go and buy things.
I think purchasing power is still there.
If you look at the aggregate savings at the banks, look at the banks' deposit level.
It's at an all-time high.
And also the stock market is doing quite well in the last few months.
There's a wealth effect here.
So I think people have to have the purchasing power.
It's a matter of whether they're willing to spend money or not.
Now, when people realize that the good prices are not going to last forever, they probably go out and buy things.
You know, I'm thinking that way.
I think that I'm going to spend a whole bunch of money to refurbish my apartment.
And I think that, you know, if I wait for too long, things are going to rise.
Prices are going to rise.
Then what are the key drivers behind this early year pickup in consumer spending?
So we just mentioned the service sector has experienced some growth.
Well, I mean, in January and February, the stock market has been doing quite well, right?
That might be the reason.
That's something I can think of.
And I don't have other reasons off the top of my head.
But I think you know I would give it more months to see whether we're going to continue this momentum or this is just the iron off thing.
Okay.
Jia He, what's your observation then?
Well, we can see the overall consumption has been growing pretty stable in the first two months of the year.
If we look at many sub-sectors, for example travelling film industry, these kinds of things, they have got pretty rapid growth.
One of the reasons why the overall consumption growth is not very rapid is because the property market is still not supporting the growth of the overall consumption by a very large extent.
And if you exclude the impact from the property market, you can see the rest sectors of the consumption economy have been growing at a more rapid speed.
And if you just look at you know how much people have been consumer online, how much people have been traveling I mean these kind of things are really not that much connected with the property market then you you can observe a slightly faster growth of the consumption in these sectors compared with the overall consumption market.
And also the policies from the government has been strongly stimulating the consumption.
For example, a lot of subsidies has been given if you purchase large home appliances, items such as air conditioner, TV sets, you know fridges, these kinds of things.
Also the interest rate that is now charged by financial institutions to consumption loans.
They are really low.
I mean, I'm personally having quite a large amount of loan quota from the banks.
They're offering me the rate of 3% only.
So that's a very, very low interest rate.
I mean think about how much rate you get um in united states if you borrow money from the bank, i mean um the.
The benchmark rate is like three to four percent, and if you go to borrow money from financial institutions, you talk about six or seven percent because there is a premium that will be charged by the financial institutions on top of the um benchmark interest rates offered by the fed.
So china is that if you go to bank as a consumer, like me, um i don't have any collateral pay for the banks, Only for my personal credit.
I can borrow a large chunk of money at only 3 per year.
That's not for a lot of people.
It's just for a few people like you, right?
No, it's actually quite a lot of people.
I mean, as long as you get a regular job in China and you pay regular social insurance, you don't have much previous default records, then you can get a pretty large amount of money from your banks.
I would say that usually people get like half a million or quarter of a million yuan only by your credit.
You don't need to pay any collateral and the interest rate is as low as three percent.
I heard some are offering uh 29 percent, so it's really low rate and this rate is helping to stimulate the consumption that many people are saying okay, as far as you can borrow from the banks at such a low rate.
Why don't I borrow something?
All right.
Subbu from your perspective?
Is it, you know, driven more by pent-up demand or policy support, like subsidies or like a lower interest rate, like Jacko just mentioned?
Yeah.
I would say that pretty much all the ones that I mentioned earlier play a very big role.
But I do see that there are a couple of other points that we have not yet touched, because it's the first two months.
I do see that spring festival itself was a strong effect.
Right this year, we saw almost close to 600 million domestic trips and almost over 800 billion yuan being spent in domestic travel.
And for this year our projection for international outbound travel by the Chinese is estimated to be about 280 billion US dollars.
So that's the highest it's going to be so far.
And last year, based on safe BOP, balance of payment.
We saw it's almost 250 million, 254 billion, I think to be right, US dollars.
So there is a substantial growth that we're estimating in terms of just the tourism sector.
Outbound of China.
So the Spring Festival itself made a big contribution to the first two months because it was included in FAB.
And like I mentioned to you, service offering goods, right?
The service retail sales itself, I think, rose about 5.6%.
But things like faster than, this was faster than total retail.
Catering food rose almost close to 5%.
So there is a lot of service-based growth that's happening.
The other one that we see is also things like online retail stores, especially categories around self-reward social locations, gifting and emotional economy.
So these are something that we've also highlighted in our reports.
These will be some of the new growth categories that we see for this year.
Right.
Like you said, beyond the headline rebound, there are some structural shifts in Chinese economy today.
Then, John, what's your interpretation of that?
What are the most important ones?
I think the most frequently mentioned weaknesses of China's economy, namely the local government debt.
The real estate markets are getting worse.
Improved, I think.
I think there is clear indications that the real estate market decline is about to bottom out.
It's close to reach the bottom if it's already bottomed out.
And in some cities, like I've read in Shanghai, for example, the prices actually are going up.
This is the first time to see real estate price going up. in quite a few years, right?
I mean, it's only a few cities, by the way.
Doesn't mean that everywhere it's going up, but there's some very good signs.
I think it represents the earliest stage of a recovery in the real estate market.
Where are those cities?
Like what I know is that only in Shanghai.
Well, I mean, this is the general rule of the real estate market.
Usually, you know, the best locations see the last drop and they recover the first time.
That's generally the rule.
So the market recovers firstly at the best locations.
So so it's not surprising to see that the inner cities of Shanghai and Beijing are starting to see recoveries.
First,
Right.
So I think, you know, this is a sort of a very good sign.
And also the just a few things about the local government debt.
I think, you know, this used to be a notorious problem, right?
And it has huge implications for the local economy.
The government's not paying its bills.
It percolates down, and you get a chain of bills that are not being paid.
So the central government is doing a lot to help local governments and I've heard that these bills are starting to be paid.
So I think these are, if you ask me, the structural shifts.
I think these are the two things that are very encouraging to see about China's economy right now.
Right.
The property market is really a unique sector, and we've talked a lot about it in previous episodes.
But this time there are also a lot of other features that are very eye-catching, such as the tobacco and alcohol sector.
We'll have more on that right after the break.
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Welcome back to the chat lounge.
We continue our chat on the new trends in China's consumption rebound.
Now some new changes in the tobacco and alcohol sector.
They have surged nearly 20%, well above last year's 5.5%.
What's behind this spike?
Xubu mentioned the spring festival effect.
Jacob, what's your interpretation of that?
Well, this is a very interesting thing, because usually we don't have that much changing with the um.
You know, tobacco and alcohol, because if you look at tobacco, people don't smoke much more.
Just in a few months time compared with last year, you know the smoking is is Probably very similar.
And if you look at alcohol, then in recent years we actually had a trend of dropping consumption for alcohol, especially the Chinese spirit.
There has been a dropping of the consumption over there.
A potential reason is that maybe the alcohol consumption has actually experienced a slightly trough in last year's first two months.
Then when you are making a comparison between this year's data with last year, you see rapid growth.
But this might only say that it's going back to normal.
So this is a reason that I have been thinking about.
But the trend of China's alcohol consumption is actually that the younger people are drinking less and less alcohol spirits, but they're drinking more things like wine, Chinese yellow wine beer, these kind of alcohols that are much less strong.
And because these alcohols actually are cheaper compared with the Chinese traditional spirit, then we're actually seeing a dropping of the overall consumption for the alcohol.
And if you look at tobacco, it's that China has been doing quite a lot of efforts with containing the smoking, especially in public places.
I mean now, if you are smoking in China, you find it's very difficult for you to find a smoking place in many places, such as within shopping malls.
You can't smoke in any shopping mall.
You just can't smoke there. restaurants don't even talk about trends.
It's really a difficult situation for tobacco smokers, which is a good thing for the health of the people.
But if you look at the overall consumption of tobacco, it's actually in a trend that is not growing too much.
So I'd say it's probably the reason because of some statistical disturbance that happened back in the comparison phase of 2025.
All right.
Subbu, have you studied that?
What's been supporting the spike then?
Yeah, in terms of if you talk about alcohol and tobacco, I think what Jair mentioned is probably quite accurate.
But what we also see is, like I mentioned to your earlier part, The Spring Festival is making a big dent in some of these consumption growth, especially around gifting and family gathering and just general hospitality spending.
Even if it is not hardcore alcohol that we are looking at, and derived alcohols like fruit-flavored tea-based alcohol.
There are so many innovations that's happening right now in the alcohol industry that more younger generation are willing to try something not as harsh and as strong as Baidu, et cetera.
Right,
So they are looking at more social way of drinking and experiencing alcohol, that this is probably one of the reasons why there is such
Right.
But this year figures is almost four times of that recorded last year.
That's a bit unusual, right?
Yes, it is certainly unusual.
So beyond that, I don't see a big reason to see why this is increasing so much.
I probably will have to wait for a few more months to do a more deeper analysis.
All our clients that we work with, especially in the marketing side for alcohol, have seen pretty much depression, not just in China but across the globe.
Right.
So the younger generation have been drinking less.
All these big alcohol companies now have a lot of stock in hand, which means that they are either waiting for it to expire especially their products expire and have to throw away or they have to sell at a loss.
So we are seeing quite a bit of pressure in the alcohol industry.
But to see that it's increased so much is something that is more of an outlier than i would say directly contributed to any rational explanation yet for the first two months.
And then john, do you have any explanation for this?
That, can you know?
Surprise us.
I don't know whether this is sort of temporary or it's a sort of a more of a trend.
You know, if you look at tobacco and echo i i might better be on the alcohol side tobacco i think that Total consumption has been steady coming down.
Why is alcohol?
Maybe it's because of the, you know, we have the New Year season.
I mean, the spring festival season, people drink a little bit more.
I don't know.
It's actually, I don't have a very good idea about why that's the case, actually.
Right, maybe we can find out after this.
Yeah, I do have an opinion about, you know, the gold and silver.
Yeah, this is actually very simple.
It's all because of the gold price.
Gold prices is undergoing a strong uprise for the last few months.
So uh, i guess uh, people probably view gold more, view jewelry more as a as an investment vehicle, as opposed to, you know something, just for decoration.
I guess i know people like that around me.
I never believe in, By the way, but obviously people you know start to see the jewelry they buy, they bought in the past, are appreciated because of the gold price.
That may be the reason.
Jia He, are you an ardent investor here?
Gold, silver, jewelry?
We have seen a very large correction of the gold price and silver price in recent months.
I'm personally not in the investment of gold at this very moment because it has been rising so much.
I'm personally a value investor and we talk about valuation quite a lot.
And I'm more getting used to things of what we call bottom fishing rather than current following, which means that I would more prefer to buy something when its price has been dropping for many months or even many years and the valuation is very attractive and nobody really wants this asset.
That's the way I make investment in the capital market.
But if you look at gold, also silver, even copper, their prices have been rising quite a lot in the past many years.
I mean gold is Probably in one of its largest bull markets in its history ever, since its price has been free floating since, I think, 1970s.
So I'm not the kind of investor who will follow such a trend.
I'm just not getting used to that.
Okay.
And there were also some fluctuations.
Automobile sales saw a decline. of over 7% and a new low for this period over the past five years.
So Subbu, what happened?
Yeah, so I think this industry is still in a very selective recovery, right?
Big ticket categories remain much more vulnerable to cautious timing effect policy transition than smaller, emotionally rewarding purchases.
Right
So this is one of the biggest reasons why there's a big decline.
But again, with the recent news about what you're seeing, with the war and the oil prices going up, I think there is going to be a substantial reversal here, especially with a lot of different promotions that's being offered by EVs, including totally free charging for say, 30000 kilometers or et cetera.
Those marketing gimmicks are going to play a big role in hopefully reversing this trend because the EVs are going to make a big comeback.
The oil prices is going to most likely hold being quite high for the foreseeable future.
Reverse that of automobile sales.
Right.
John, I understand you've been supporting, you know, loosening license plate restrictions in big cities like Beijing.
Would that be a solution to this concern, you know, automobile sales declining?
Yeah, well, I have a very strong opinion about this issue.
I think you know I'm not against the restricting the use of automobiles in major cities because of the traffic jam.
But I'm totally against the idea of essentially banning people to buy cars.
I think these are two different things.
There's a way of still allowing people to buy automobiles but, at the same time, restrict their use because of the traffic jams.
So I think the idea of the most expensive steel plate in the world in Shanghai for an automobile license plate is a bad idea.
And I think here in Beijing, the lottery system is even worse in a sense.
I think just by lifting these things will unlock a huge demand.
I want to buy a car.
I can't buy a car.
That's the problem.
Yeah.
But on the other hand it also means decision makers still got some leeway or room if they want to further boost consumption right.
Well, I mean, right now they are using the rebates and incentives.
But, you know, as soon as these things are gone, I mean, I think it's becoming a pattern now.
As soon as you see, or as soon as the expectation of these things to be gone, you know, the automobile sales start to drop.
So I think rebates and incentives can last forever.
There are still untapped demand in China, especially, I think, in major cities.
I think a lot of government officials tend to equate car ownership with traffic jams.
It's not true, actually.
There are ways to get around that.
Nevertheless, it's unfortunate that still a lot of cars are not being bought because of these reasons.
Yes, this is a good topic for another session.
But now we turn to another highlight of this consumption rebound in the first two months, which is the rise of China's emotional economy.
Actually, I think the latest purchases of three of us are more or less associated with this emotional economy right.
So probably, John, how is it different from traditional models?
Yeah, well, you know, emotional economy, it's kind of emotional to talk about.
Satisfaction, like your condo redecoration.
Let me explain what I mean by that.
I mean, there are a couple of things in that category.
Things like people, you know, buy those brand items that are extremely expensive and, you know, for emotional attachment, like Labubu kind of a thing.
I call, you know, this is essentially a, you know, one category.
And the other category that I see related to this concept of emotional economy that has been seeing a tremendous growth is the pet economy.
You know, more and more young people are raising companion dogs and cats.
Indeed, that's what I mean.
You know it's emotional to talk about these things because I think, as Chinese people's uh living standards get getting higher and higher and they get some extra money, people are starting to realize what a bargain um what what, what a great, wonderful life to have a companion dog, for example.
Um, you know, this is man's best friend, right?
You know you give the dog some foods in return.
They gave the entire life to you.
Uh, it's the, it's the greatest bargain.
You know you can get out out in the consumer world so uh, more people are going out and raise dogs.
I know it's been going, you know, like crazy.
So uh, that's a good thing.
I think uh, you look at the per capita dog ownership here in China compared to, for example, United States and Europe still very low.
A lot of room to grow.
And I think it's a good thing.
People are getting happier, getting more satisfied with their life.
And it's a wonderful thing to see people doing that.
What's driving consumers to prioritize emotional value and personal experience over purely functional purchases, then?
I think it's, you know, why people do that?
Well, I think you know these days there's more stress in life and you know it's just a quality of life issue, I guess.
You know, your life quality is indeed getting much better with a four-leg friend in your house.
It's a It's something you don't realize until you have it, experience it.
It's experience good in a sense.
So I would encourage you to go out and get one if you can, if you have the resources.
My problem is that I travel too much, so it's going to be a problem.
But once I don't travel too much, I will go out and get one, you know.
Okay.
We got a perfect candidate here, Jia He.
Jia He is a big fan of cats, cat lover.
So can you tell us more about him?
Well, basically I love all kinds of animals, not only cats, but I had a pet cat a few years ago, because that was a stray cat who worked in writing to the garden of my parents, and we just adopted her.
So it wasn't very intentional uh raising and that cat uh lived for 18 years under our uh, you know, caring now so we did quite a lot to carry his health.
So i remember this kind of uh.
You know, i just love all the pets turtles uh, goose i had a goose before dogs, all these kind of things and when you love animals you really make a lot of purchasing.
I mean i like my cat.
Well, that that previous cat, I still remember that because it kept on carrying things like mice and squirrels around my parents' garden.
So we had to give it a peel every three months in order to protected from any potential hazard.
And that pill cost me about 41 per pill.
So that's really expensive, because when I got sick myself, for example, such as catching a cold or got some problem with my throat, my medicine is about 10 to 21.
And the cat costs 40 for every pill that it takes.
So it's really kind of expensive.
And the reason I picked that pill because it's really good quality and it's good for the health of an old cat.
At the age of almost 20, you really want to care for your pet.
So I'm making this example, saying that people really spend quite a lot for their pets, especially when they really take the pet as a part of the family, rather than just a cat or a dog.
And you spend quite a lot of money on that.
And because one of the very important reasons that encourages the growth of the pet economy is because when you are making a purchasing, you don't really know whether this is good or not.
For example, when you are buying some food for yourself, you know the taste of the food, you know how you feel after you have taken, for example, the dish from a certain restaurant and you can just feel that and you can Make judgment yourself and you will say okay, I paid this money.
It is worthwhile or maybe it is not worthwhile.
You can make the judgment yourself.
But when you're feeding your pet, you can't.
You don't know how your pet is feeling when it.
You know, for example, when my cat is taking the cans that I bought for it.
You just don't know.
The pet won't communicate with you.
It looks happy all the time, whatever the food I give it to the cat or especially the dog.
The dog is always happy, whatever you give it to it.
Um, so if you want to care for your pets, the only thing that you can do is spend more money.
Okay, so you look at the product.
It says quite fancy, saying that we're offering very good quality and our price is expensive.
You love your pet, you spend your money.
So that's why uh find many uh companies in the pet economy and the pet industry are making very good profits, because people just like to express a love with spending more money.
So this is is happening in China right now.
I mean, if you look at the list of companies in China's pet industry and pet economy, you see their profits, their return on equity are soaring.
Some companies are making like 15 20 return on equity and their income growing at 10 to 20 every single year.
They're really good companies.
The only problem is that everyone knows that they're good companies, so they're usually trading at pretty high valuation, but they're really good compass.
Then, more broadly, what's driving the rise of the emotional economy, not just limited to pets like other, like niche hobbies or collectibles or other things.
Well, that's basically because China's economy is growing and it is passing the threshold of 10000 USD in the past few years.
Because if you look at economic growth, when an economy is developing below the threshold of 10,000 USD per capita, then many of the consumption that people make to the critical consumption, for example, paying the rent for the house, paying the bill for the gas or paying for food, paying for traveling, this kind of very basic consumption.
These consumption are that if you don't make them, you just can't make it.
But when the economy is passing the threshold of 10000 USD, more and more of this kind of compulsory consumption has been fulfilled.
I mean, not all of them, but a large degree of them has been fulfilled.
And more people are having the money and they're saying, okay, I've had enough to eat.
I've had enough money to pay for my air conditioner, pay for my electricity.
That's not a problem.
And where should I be spending now?
So they turn to this kind of emotional consumption or so-called please yourself consumption, these kinds of things.
Okay.
Subbu, do you have a different interpretation of this?
Is it like someone say it's because of economic uncertainty or generational shifts?
What's your take?
Yeah, I think I would say it signals to both, but it is more of a structural transformation rather than just a weakness in traditional demand.
So it's not just a temporary response to a soft economy.
I think it reflects a genuine change in how Chinese consumers have started to define value.
But at the same time, I think the recent acceleration in emotional and experience spending is clearly happening alongside continuous caution on big ticket items.
All right.
So we've identified this emotional economy almost two years back, when we started putting out some of our reports where we said that you know, especially when it comes to travel and spending, we are more tied to meaning, gifting and memories.
And together paired that with the two other economies that we talk about value economy and confidence economy.
It's important because in China today the emotion, the trust and values are interacting but not replacing one another.
So you have the trust and values that also come forefront, together with the emotional need for being satisfied with whatever you want to purchase with.
So Chinese consumers still have demand, but they increasingly need confidence, clarity and emotional justification.
So this means that this is both a structural shift in behavior and also a market where, I would say, traditional demand remains more fragile than before.
This has been The Chat Lounge.
As the rise of the emotional economy comes into focus?
What should policymakers, investors and businesses do to adapt to the new trends?
That's coming up right after the break.
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Welcome back to the chat lounge.
We continue our discussion on the new trends in China's consumption rebound.
Turning to policy and investment implications of that kind of shift, China has wrote out a range of pro-consumption policies, including subsidies and trading programs.
And John, how effective do you think those measures have been so far?
Well, definitely they're effective.
Every time a program is introduced, it boosts sales.
There's no doubt about that.
I think the issue is that once this program is phasing out, then whether the effect, the boosted effect, is going to be sustainable.
That's a difficult question to answer.
And we know that these subsidies and trading programs I mean the money is coming from essentially the taxes associated with the sales.
And so the government essentially getting less money from the sales.
Whether it wants to do this perpetually, I hope it does, actually.
But, you know, there's also a tax implication for this.
So, in any case, you know, obviously with subsidies, with these trading programs, the price has been reduced and demand has increased, because the demand curve is always downward sloping for most products.
So, you know, in a nutshell, I think such measures have been quite successful.
But again the issue is whether you know what's going to happen when these programs are phased out.
Then how do you think policy should evolve to better support this kind of shift?
It's a tough question.
I think the answer really lies with the income side, I would say.
I think people tend to have a willingness to buy things.
They go out and buy things.
I mean, if they have money, I guess.
So in order to beef up consumption I think at a very fundamental level, you know, people's income level have to be raised.
You know, you look at the Wage income in China is a composition of GDP.
It's quite low compared to many industrialized countries.
So what it means is that the consumers are getting a smaller share of the total pie compared to their Western counterparts.
I think we need to gear our economy towards a model where the return on labor should at least keep pace with the return on capital.
In other words, we need to put more money into the pockets of the workers, of the laborers, of the people who are actually doing the work.
And in that way, I think consumption can be beefed up.
Yeah, that's the ultimate answer.
Basubu, your suggestions here?
Yeah, I think.
In terms of the policies, I think that they need to move forward gradually from mainly simulating goods purchases to probably more supporting service and experience and build out the household confidence.
So this means probably more support for tourism culture entertainment wellness, et cetera, but also, you know, support for confidence side of consumption in terms of, you know, better jobs, social security healthcare, education.
I mean, this is already happening in most sectors in China.
So we do not see that waning anymore.
But I think building a much more stronger confidence on all these sides will add much more confidence in the purchases of, in economic purchases.
I would also add that the policy should also recognize how consumer journey now actually works.
So with the digital age, discovery is more social first.
So decision-making is very fragmented.
Conversions often happen, depending on reducing friction and increasing reassurance, building that trust.
So in that sense, confidence from policymakers almost as much as consumption policy.
Very clear message there.
Then to Jiahao.
What do these emerging trends mean for investors, and how should investors and businesses adapt?
Well, when we look at the rising of China's consumption, it's one of the main you know trends that investors are actually following.
Quite a lot of capital we're trying to seek for the next rising of the consumption.
For example, as we have been discussing about the pet economy, I know quite a many friends in the PE industry, the private equity industry and investment industry.
They keep on looking for new businesses and new models.
And there has been quite a lot of money made.
So regarding these investments is that sometimes people are just paying too much money for the new things.
So this is one of the problems.
But altogether, these funds are actually supporting the growth of China's consumption market with their investment into all these views, with their testing into these views.
You know, you have an idea and you serve somebody.
You saw millions, tens of millions or hundreds of millions saying that we're going to make a new kind of investment.
We're going to create a new kind of business model.
Are we going to make money?
Some are going to make a lot of money, some are not.
But altogether these investments pushes forward China's overall consumption economy and it is benefiting the whole of China's economy.
And if you take all these funds together, they're making quite a lot of profit.
So it's an average return that is definitely positive.
That's why so many people are actually rushing into the growing of China's consumption market.
Right.
What about John?
I guess investors are usually chased where the money is, I guess.
We spend quite a bit of time talking about these new developments, these new trends in consumption. so uh you know like the emotional economy the new frontiers of consumption you know like the for the wealthy i guess uh you know like the um the low attitude economy uh yachts you know uh jd.com's boss is investing money in making yachts right so uh These are the new frontiers.
I think in general, as China's middle class expands, as income level rises, as more and more people folks make into the billionaire category, there will be demand for a lot of new things.
What about, you know, out of space travel, for example, right?
I mean, this can only be affordable today.
To the billionaires, I guess.
Well, I mean, we're going to have more and more billionaires.
So that could be a new consumption frontier, right?
So I think, you know, investors are definitely keeping a close eye on these things.
They chase where the opportunities are, where the money is.
Yeah, maybe risks they should be aware of.
Yeah, of course.
I mean, when they invest, they certainly look at the risks.
I guess they don't need us for lectures.
Yeah, if you're asked to give them some tips, you know what kind of risks they should be mindful of.
Some of the things are quite risky.
I mean there are plenty of precedents and examples of how you know investment in these cutting edge consumption technologies are getting burned out.
I think we should look at a history, look at the successful cases in the past And also unsuccessful cases in the past.
And, you know, learn from that.
And also think about, you know, the unique situations in China.
You know, these are usually the things that investors would be very carefully looking at. john's mind has already um taken off because he's got something else to the cash or i'll let you go john thanks a lot thank you yeah i'll talk to you next time then to subu how do you think investors and business should adapt and if there are any risks they should be mindful of what are they yeah so my main takeaway is that you know china consumption is is no longer just one broad story right it's it's not uniform so it's very selective it's category by category market and so investors have to be cognizant of that and need to understand that it is not uniform you can't just throw money against everything and then expect it to have some great returns all right so winners are likely to be brands or platforms that you know that combine what we talked about all these things before things like emotional resonance cultural relevance is something that's also very important being able to have the to be efficient in those conversions so this will generate a lot more conversions and sales and profits than just general attention and the businesses also will need to reduce friction some of the key risk point is that investors should not overestimate the breadth of the rebound.
It is going to be category by category.
So you have to look at where the individual wants to understand.
You can't just mistake social bus for durable demand.
All right.
As we saw in the latest news, PopMart's sales have been a bit more disappointing than expected.
All right.
So while it's still growing, the growth is not as much.
So investors are pulling back some money.
But again, you know, just the social bus will not sustain your business.
So you need to, you know, emotional economic momentum with just immunity to macroeconomics and macro weaknesses.
So the entire world economy is very fragile.
Which also brings to this very good point, which I was reading quite recently, is that more investors are now willing to pile money into China because they see that as the most stable of the leading economies, compared to others where fluctuation in oil and gold is swinging by so much even the stock market.
So investors are going to be more cautious and they're going to look for places where stability is much, much higher than just outsized returns that they would look for.
Indeed.
And last but not least, Jia He.
As an investment expert, do you have anything to remind those who want to invest you?
I would say I'm an expert.
I've just been investing for quite a long period of time and still surviving this market.
Capital market is where there is the most difficult place.
I mean, it's good business on one hand, And it is sometimes making profit is something on the other hand.
So I would say, in the world of investment, it's not that difficult for you to understand which industry is good and which industry is not good.
And it's not very difficult for you to find out which company is good and which company is just living a normal life.
But the difficult thing is finding out the balance between the price and the quality of the company.
So this is the most important part.
I mean, if you have a very good industry, you have a very good company, for example, the pet industry.
If you look at the The leading Chinese companies in the pet economy in China, they're very good companies.
They're making tremendous amount of growth and making up their brand, challenging the global pet food brand who are operating in China.
They're making higher and higher profit.
Their return on their asset is marvelous 15 20, sometimes even more than 20.
But everyone knows this.
So this is a problem.
If everyone knows it's a good company.
People are making a very high offering for the stock price and if you're jumping you're not promised to make a good profit.
But on the other hand, some companies when you look at some other companies they're not very good.
They're still well.
I would say that some of them are even surviving with their competition against their strong opponents.
But they are not dying and the market don't like them.
Give them a very low price.
They can be very good investment targets.
So it's a hard job.
It's always a hard job.
All right.
And with that, we conclude this session.
Many thanks to Chen Jiahe, Chief Investment Officer, Nova Market Technologies, Subramania Bakht, Founder and CEO of Singapore-based marketing technology company China Trading Desk, and John Gon, Professor of Economics University of International Business and Economics.
Your time and insights.
Drop us a line anytime at radio at cgtn.com.
Tell us what you think.
I'm Tuyen.
Until next time, take care.
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