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Four women share a moment of light as they take a selfie near a tree decorated with red lanterns for the Lunar New Year at Ditan Park in Beijing. (AP Photo)
HONG KONG: Chinese consumers have reduced everything from iPhones to Swiss watches, while the trade war with the United States hit the economy.
A few days after hundreds of local businesses have issued profit warnings and multinationals have sounded the alarm on slowing demand, the Lunar New Year holiday week will be a test decisive for the resistance of the Chinese consumer.
The travel rush has already begun and the country's residents are expected to make about 3 billion trips, most of them by train from crowded train stations.
The year of the pig officially begins Tuesday. Tens of millions of people will visit relatives, take holidays abroad and open their wallets to buy gifts. In 2018, the Chinese spent 926 billion yuan (137 billion US dollars) in restaurants and stores marking the year of the dog.
This year's celebration is the first to be held during a trade war with the United States, and the data is not optimistic. Trade wrestling has dragged China's stock and real estate markets down, and the gross domestic product of the last quarter of 2018 has grown at the slowest pace since 2008.
Companies that sell to middle-clbad consumers will be the most vulnerable of this holiday as the richest Chinese continue to shop, but the reduction more budget-sensitive, said Adam Xu, partner in Shanghai's consulting firm OC & C, which advises retail and consumer businesses. China's strategy. "The slowdown in growth is occurring and most likely in most of the market," Xu said.
With Chinese consumers in the spotlight around the world, here are the prospects for some industries that rely on them to spend the holiday season.
Bling purchase
Demand for jewelry has traditionally increased during the holidays because gold is considered a gift of auspiciousness by the older generations. Nowadays, it is not just the weakness of the economy that hurts the holiday industry.
Nikos Kavalis, director of London-based research firm Metals Focus, said that the "purchase" will no longer be what it was 10 years ago, as more and more Chinese consumers choose to traveling abroad rather than going to their hometown ".
Hong Kong's Chow Tai Fook jewelery group is forecasting no sales growth this year over the 2018 New Year holidays, said general manager Kent Wong. The company is trying new product designs to incite consumers to splurge.
"We believe that some discretionary purchases, especially for high-priced products, will be affected by market conditions," he said.
Litmus Luxe Test
Many leading luxury brands say that rich Chinese people still buy a lot. On January 29, the French fashion giant LVMH announced a strong demand for its spirits and leather goods to Chinese consumers. "The trend of last year continues in January because the Chinese New Year is very close," said General Manager Bernard Arnault in an interview with Bloomberg Television.
High quality products are popular purchases during the holiday season, and the weeklong vacation will be a sign of the resistance of the biggest spenders. There have already been pockets of weakness. Exports of Swiss watches to China fell in December and Swatch Group said Thursday that China contributed to the slowdown in the fourth quarter.
Boom Duty Free
Chinese consumers account for one-third of worldwide duty-free spending, and the economic slowdown has weighed on travel agencies.
The Lunar New Year could be the key to changing things. According to Citigroup, more than 400 million Chinese tourists will probably be traveling in the country during their holidays, about 4% more than last year. Seven million Chinese will be heading to overseas destinations, up 8% from last year.
With the yuan falling last year, tourists could head to more affordable destinations in Asia. Duty-free operators such as Japan Airport Terminal could benefit, according to a Bloomberg Intelligence report released Jan. 22.
High Rollers
Casino operators rely on their holidays to bring tourists from Mainland China. Last year, Macao welcomed more than 900,000 visitors during the New Year's holiday, about 40% more than the average week. Average hotel prices were about 2,000 patacas ($ 247), almost four times the usual price.
The weak real estate and manufacturing sectors in China have weakened the annual outlook for the world's largest gaming destination. Analysts expect a decline of about 1 percent in revenue from Macau casinos in 2019, according to a survey by Bloomberg. In November, they estimated growth at 5%.
According to Lawrence Ho, CEO of casino operator Melco Resorts & Entertainment Ltd., tourists will always go to Macau during this holiday. The operator has just launched a new stunt show and a Ferrari exhibition in its tourist complexes.
"We will definitely see business growth in this Chinese new year," Ho said, adding that all of the company's hotels in Macau were fully booked for the holiday period.
Boozy time
Holiday purchases will account for about a quarter of the total sales of Kweichow Moutai Co, a baijiu liquor producer, President Li Baofang told the Xinhua News Agency in December. Chinese buyers buy company drinks as gifts and toasts at the family table.
But the economic downturn is hurting alcohol demand for the New Year holiday. Demand for premium baijiu products has been falling for the past two months, according to a report released Jan. 23 by China International Capital Corp. that prices of premium alcoholic beverages have fallen by 20% compared to October.
"The craze for consumption in China has slowed, for sure," Takeshi Niinami, CEO of Japan's Suntory Holdings Ltd., told Bloomberg Television.
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