Sun Feier.

With some of the most “glamorous” Chinese sports apparel makers stealing the thunder among H-shares on the Hong Kong bourse in the first half this year, China Dongxiang Group — another of the nation’s stars in the industry — is staking its claim to be a part of a success story, upbeat about rebooting their past glory.

China’s athleisure boom has become somewhat synonymous with its economic miracle, catapulting household names like Anta Sports and Li-Ning to the world sports arena — with the former sponsoring China’s delegation and the latter Canada’s ice-skating team to the Pyeongchang Winter Olympics in South Korea earlier this year.

Does it mark the “return of spring” for Chinese sportswear makers after years in the doldrums?

“The key to the recovery of Chinese sports brands is whether they can stand out with their uniqueness from an emotional perspective,” believes Zhang Zhiyong, chief executive officer of Beijing-based, Hong Kong-listed China Dongxiang, which is well known for its Kappa products on the Chinese mainland, Macao and Japan.

The company brought Kappa’s “back-to-back couple” Omini logo to the mainland market 12 years ago, long after it had become an icon in the casual sportswear business across Europe from the 1960s to the 70s.

Zhang recalls the “golden era”, not only for China Dongxiang with its famous Kappa label, but also the entire Chinese sportswear industry during the first decade of the century, underpinned by the population’s accelerating incomes, as well as the sports sector’s industrial clusters.

Data showed that the industry saw an average annual growth of more than 20 percent during those glorious years despite a subsequent slight backtrack triggered by the 2008 global financial tsunami.

From 2006 to 2008, China Dongxiang saw a whopping 96.7-percent top-line growth and an equally stunning 111.3-percent jump in net income on a yearly basis, propelling the group’s annual net profit to above 1.4 billion yuan over the next two years and hurtling the company to sportswear “superstar” status.

The chain effect prodded mainland-based athletic goods producers onto the world capital market in the pursuit of going public before and after the 2008 Beijing Summer Olympics, with Li-Ning — the eponymous group founded by China’s former Olympic gold medalist — Anta, China Dongxiang, Xiamen-based Xtep International Holdings sequentially launching IPOs in the Hong Kong stock market.

However, pressure against overstock eventually mounted, with destocking or inventory depletion becoming the mainstream for both international brands like Nike and Adidas and domestic Chinese sports apparel producers.

“Five years ago, Nike and Adidas’ combined market share in China was just 10 billion yuan but, today, it has surpassed 30 billion yuan. But, for the domestic companies, they’re merely inching towards 10 billion yuan,” Zhang recounts to China Daily with a gulp of dismay.

Nonetheless, the year-to-date performance of the Chinese sportswear sector, especially in Hong Kong’s secondary market, has exuded a glimmer of hope. Xtep International, which went public in Hong Kong in mid2008, saw its share price having jumped 62.7 percent as of Sept 2 this year from early 2018, hitting a year-to-date high of HK$5.90 in June, while Li-Ning shares surged 28.17 percent to HK$8.28 apiece during the same period — a seven-year high.

This fresh impetus has prompted investors to yearn for a possible replay of the “golden 10 years” in 2018. Zhang is upbeat the industry has the

Editor’s note: This is an extract from The Governing Principles of Ancient China, based on 360 passages excerpted from the original compilation titled Qunshu Zhiyao, or The Compilation of Books and Writings on Important Governing Principles. Commissioned by Emperor Tang Taizong of the Tang Dynasty in the seventh century, the book contains advice, methods and historical notes on the successes and failures of the imperial governments of China. Today it continues to be relevant as a source of inspiration for selfimprovement, family management and interpersonal relations. The key to the recovery of Chinese sports brands is whether they can stand out with their uniqueness from an emotional perspective.”

potential to roll on in the long term. “Consumption upgrade, along with changing lifestyles, does play a big role in creating the strong impetus needed for the reconstruction of the Chinese sportswear business”.

Destocking measures

As part of the group’s strategy to rebuild the Kappa brand, Zhang has taken charge of overseeing destocking measures over the past few years. In the first half of this year, China Dongxiang had got rid of some “defective goods” left over from 2015 and earlier. Products worth approximately 140 million yuan were involved, resulting in a one-off decline in the sportswear producer’s gross profit margin by some 2.3 percentage points.

Further afield, according to Zhang, they will inactivate nonperforming stores and revamp big, efficient outlets and some self-operated ones in key cities, including Beijing, Hangzhou and Shenyang. As of the end of June, 48 stores were shuttered compared with the end of last year on the mainland and in Macao, according to its interim result.

Reforming distribution channels is also seen as one of

PHOTOS PROVIDED TO CHINA DAILY Zhang Zhiyong, chief executive officer of China Dongxiang China Dongxiang owns all the rights to, and is well known for Kappa products on the Chinese mainland, Macao and Japan.