As we come to the end of celebrations for Chinese New Year, Head of Asia Business, Paul Gestro, reveals his Chinese New Year predictions for the Chinese market.
- A financial time bomb: As we saw late last year there will be a lot of noise in the finance sector in 2016. IPO process improvements, interest rate deregulation, financial companies rise & fall, plus speculation on the renminbi depreciation (likely falling) will mean it will be another volatile year. With the Chinese Government insistent to maintain growth targets, there will be odd moves to control capital and capital markets. More nervousness will lead to knee jerk reactions that will continue to cause confusion and disbelief.
- A changing manufacturing dynamic** :** There will be big changes in the manufacturing sector with some sectors nearly disappearing, but others will flourish with increased emphasis on productivity and innovation. Larger Chinese firms will also look to acquire outside China providing a better hedge, scale and movement up the value chain. The lower value of the renminbi will help with more ‘controlled’ outbound investment. ‘One Belt One Road’ will drive cross border investment growth and be a big talking point in 2016, plus you will see a cozy Anglo-Chinese relationship develop.
- Food, food and more food: Russia will become more prominent as a trade partner to China and be competitive to current suppliers including NZ, but demand for NZ imports will still be huge especially for meat. Local production will never keep pace, so imports will still boom which is great for export led agriculture countries. Consumers still want to spend but will be less optimistic so some tightening may exist. However more disposable income will go to travel internationally as the Chinese see others doing it and want to have the same experiences to talk about.
- Decentralization to Centralization: It’s been happening already but the central Government will take more control. President Xi Jingping will exert more power and take decision making away further from the provinces and into Beijing. The power move will be with the massive pension funds as these are still at provincial level. Watch this money work its way back to the PBOC!
- Hollywood, Bollywood, Wellywood, Great Wall of Wood? What will they call China’s movie industry? It will be huge in 2016 and get continue to get bigger and bigger. Add soccer (Olympics & next World Cup), with more corporate involvement into this and you will see consumer lifestyles changing. The consumer market will see online businesses trying to be more offline to develop their brands, a women’s only market will develop as Chinese women become more independent, and there will continue to be greater emphasis on health (facilitated by technology of course!). Ecommerce already is and will continue to dominate the business landscape – watch Alibaba, JD.com and Tencent buy everything that moves.
Final word. All the big brands target Chinese New Year for maximum impact. But poor old Nike got it horribly wrong. They released a shoe that on one tongue had a traditional Chinese character “Fa” meaning getting richer. On the other shoe tongue it had “Fu” meaning fortune arrives. Perfect for Chinese New Year but when put together it makes “Fa Fu” which means FAT in Chinese. Not quite the image Nike wants for its products!!!