A Boost To China Economic Powerhouse – Loyalty For Local Brands Skyrockets

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Mar 22 2018
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One of the reasons why North America, particularly United States of America, has reigned supreme for nearly a century as the world’s strongest and biggest economy is because of its consumption-based economy. Although some may argue that production, not consumption, is the true source of wealth, U.S.’ consumption-driven society is one of the main contributors.


That’s why India (1.32 billion populations) and Indonesia (261 million populations) are no where near United States (325 million populations) as far as economy is concerned. Heck, even China, the planet’s most populous nation with 1.38 billion people, is still the second largest economic powerhouse behind America, for now. But that would soon change.


If people don’t consume and spend, there’s only so far a country can go. Imagine Americans don’t spend but save most of their money in the banks. However, before we can consume, we need to produce. Therefore, a country has to produce sufficiently not only for local consumption but also for export, earning foreign exchange in the process.

China - World Largest Production Factory

Sure, China is still the world’s biggest production factory. But the Middle Kingdom doesn’t grow at double-digit anymore. Its massive production engines need to continuously run in order to provide employment to hundreds of millions of people. Like the U.S., China has no choice but to shift to a consumer-oriented economy to reduce dependency on foreign consumption.


In what seems to be a boost to the Chinese economic powerhouse, a survey done by Credit Suisse reveals that an overwhelming 87.4% of Chinese consumers prefer local home appliance brands over foreign brands. Chinese consumers in the 18 to 29 age bracket said they would prefer to buy domestic home appliance brands in the next 6 to 12 months.


According to the report, which interviewed 14,000 consumers face-to-face in eight emerging economies – Brazil, China, India, Indonesia, Mexico, Russia, South Africa and Turkey – young Chinese Millennials are the consumers driving consumption or lifestyle upgrade. And they are now showing a “Chinese bias” in their purchasing decisions.

China Consumers

The Eighth Annual Credit Suisse Emerging Consumer Survey also found in the 18 to 65 age range, 19% of Chinese consumers surveyed said they are willing to pay more for domestic sportswear brands than for international ones – an increase from 15% in 2010. A report by Nielsen last year supported this latest Credit Suisse study.


According to Nielsen, Chinese companies producing consumer goods such as food and beverages or personal care products were slowly but steadily eroding market share from foreign competitors – leaving them with 30.2% of the market in 2016 versus 33.5% in 2006. Apparently, Chinese consumers were interested not only in low prices but also higher quality.


Charlie Chen, head of China consumer research at Credit Suisse, said – “We are surprised to see the rising of a more confident generation of consumers in China. Chinese consumers, especially the younger generation, don’t just believe the notion that foreign brands are better. Right now, Chinese consumers think China is good and ‘Made in China’ is not bad at all.”

China Consumers - Shopping

“Like it or not, China is becoming a major power globally and that makes the younger generation more proud about Chinese brands. People tend to eat and drink better, they want to wear better-quality clothes and spend more on travel.” – said Charlie Chen at a Credit Suisse Asian Investment Conference. But what are the factors contributing to this shift?


It has everything to do with Chinese culture and values – the growing rise of Confucianism values among younger Chinese consumers. Prophet senior partner and ex-JWT veteran Tom Doctoroff said that despite China’s growing population of young, tech-savvy consumers, old-world traditions still remain crucial for marketers trying to reach modern audiences.


After President Xi Jinping consolidated his “absolute power”, he sent a “comprehensive and systematic” message that the PRC (People’s Republic of China) now has the “cultural confidence” of Confucius to rejuvenate the Chinese nation and its cultural heritage in “socialism with Chinese characteristics for a New Era.”

China - Confucianism - Confucius

There’s also the factor of local companies know the consumers best. Chinese companies are making more inroads because they know their customers better, can make faster decisions than multinational entities, and are better adapted to fast-growing online sales. And of course, there’s the factor of nationalism or national pride.


It’s not just local brands that are gaining market share in China though. Chinese consumers are increasingly aware of premium products as they tend to eat and drink better and healthier. Brands such as Midea, Haier, Mengniu Diary and Huawei are just some of the products Chinese consumers are proud of. And ZTE and Huawei could become the brands to roll China and world’s first 5G mobile network.


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