Beijing is awash with restaurants, but locals Cherry and Andy Ho haven’t bothered going out to eat for months. The proliferation of Groupon-style coupons and deals means it’s easier to have food delivered.
It’s half the cost, with no delivery charge – great for consumers, but not so good for some traditional businesses.
Indeed, this was among the reasons Chinese retail sales data had been flagging in recent times. The sheer number of startups, small businesses and coupon culture meant a widespread decline in prices.
But while headlines paint a picture of a sharply slowing economy and turbulent stock market, Chinese consumer confidence is rising. It’s at the highest level since May 2014, according to the Westpack MNI China consumer sentiment index. Confidence remains below the lofty highs of 2010, but then the good ship China isn’t steaming ahead at the pace it was back then.
Consumers "appear to be increasingly confident the authorities will be able to successfully steer the economy through the current torrid waters", said Philip Uglow of MNI Indicators. Chinese authorities have recently decided to step up infrastructure spending again, in the latest attempt to boost and realign the economy.
The "wild grabs for market share" and deep discounting among companies is changing too, said Dale Nicholls of the Fidelity China Special Situations fund. "There’s been a change in mindset among companies… and they are more focused on returns."
Although still a developing market, China is leap-frogging the west in terms of internet shopping – and a lot of this consumption is by under 25s on their smartphones, says Charlie Awdry of the Henderson China Opportunities fund.
"Consumers are changing their habits rapidly. Online sales are capturing increased market share at a faster rate than in many other economies," explains Julian Mayo of Charlemagne Capital. That’s behind the success of internet giant Alibaba, which is like eBay and Amazon rolled into one, and had the world’s biggest flotation in 2014.
E-commerce is so commonplace that people book holidays on their phones through the Ctrip app – a Chinese travel agent that went digital, and has now listed in the US. They’re travelling further than before, too. "Ten years ago, Hong Kong was a leading destination for Chinese," Awdry says. He frequently hosts Chinese businesspeople in his London office, and they’re often planning a trip to designer outlets at Bicester Village, a nod to how well-entrenched shopping has become as a pastime for the wealthier.
Death of Luxury
They may be looking for designer brands abroad, but luxury’s suffered a slow death back home. President Xi Jinping made cracking down on corruption a cornerstone of policy when he came to power in 2013. It’s worked, and gifting of cognac, watches and high-end bordeaux wines has been "crushed". "The outlook for luxury in China is very bad," says Awdry.
One local luxury which has had a resurgence is Chinese rice wine, known as Baijiu – although Moutai is the best-known brand. It’s a liquor that is sought after for banquets, celebrations, and for gifts, says Diamond Lee of the Old Mutual China Equity fund. "It’s quite potent and can be very expensive," he adds.
In China, Korea’s hip fashion brands and pop culture have considerable sway over young Chinese. Cosmetic companies AmorePacific and Etude House are two of the most popular. Their creams and potions are either made with traditional ingredients such as bamboo and Korean ginseng, or packaged in kitsch animal-print tubs – but all promise women flawless pale skin.
That’s another key difference in China – the beauty market is predominantly skincare, unlike in the west where make-up matters.
Investors can buy shares in AmorePacific – whose chairman Suh Kyung-Bae is South Korea’s second-richest man – and LG Household & Health Care, two of the dominant players in Asian beauty.
Aside from the attractions of K-pop culture, South Korean products are also valued simply because they’re not Chinese.
Numerous scandals over contaminated food and healthcare have left a lingering unease towards China-made goods. Nowhere is this felt more than in baby formula, as the 2008 crisis when 54,000 infants were hospitalised from poisoned milk has not been forgotten.
Western companies such as Mead Johnson are relied on for baby formula as locals "remain wary of their domestic providers", says Jake Robbins of Premier Asset Management.
But perhaps the most desirable consumer good is education. It’s routine for parents to have their children in several evening and weekend classes for English, Japanese, maths, violin – and considered totally normally for children to study from 7am to 9pm. Tuition firms tend to make for "resilient" investments and Awdry holds shares in US-listed New Oriental Education through his fund.