China’s spending pattern shows mismatch
Hong Kong/Shanghai, April 3: Official numbers may suggest a rosier 2017 for China, but the bottom lines of the country’s top consumer firms — from brewers to noodle makers and cinema chains — paint a patchy picture of spending in the world’s second-largest economy.
Tsingtao Brewery Co, China’s number two brewer, posted its steepest drop in net profit in 20 years last week, blaming tough competition and weak demand.
Noodle maker Tingyi saw profits drop by a third.
China’s top cinema operator Wanda Cinema Line saw 2016 profits rise 15.2 per cent — down from growth of nearly 50 per cent the year before, as broader box office sales stalled. IMAX China’s profit tumbled, too.
“There’s still a tonne of room for growth, but these markets are much more competitive now and even bigger brands are starting to struggle,” said Ben Cavender, Shanghai-based principal at China Market Research Group.
“Consumers are becoming more cagey about how they’re spending their money, (from) food to clothing and movies.”
Increased caution — and sophistication — will push companies to innovate, and to spend more to fend off competitors, if they are to survive, analysts said.
After growing at the slowest pace in 26 years in 2016, official data have indicated a strong start to the economy this year, supported by bank lending, a government infrastructure spree and a much-needed resurgence in private investment.
But China’s consumption trends have been less clear.
Retail sales in December rose at their fastest pace in a year, thanks to cars and cosmetics, but they disappointed in the first two months of this year.
Consumption contributed the bulk of China’s growth last year at nearly 65 per cent, but income growth didn't pick up, and a measure of China's income inequality rose slightly last year.
A private business survey last month showed growth in the services sector slowed to a fourmonth low as increasing competition made it harder for companies to pass higher input costs on to consumers. — Reuters