The Chinese government is always making intense efforts to develop the economy and it seems, as 2016 is the year of consumer goods. Since the heavy industry and steel industry are facing serious cuts, there have to be new promising sectors to focus on. Therefore it is no coincidence that the government recently announced that China will implement special measures to establish a more advanced consumer sector within the next two years. The idea is to increase product variety and quality and to ensure more domestic brands to achieve an international reputation.
The measures were discussed and decided at a State Council executive meeting and were supervised by Premier Li Keqiang.
Another step forward to innovation
The project can be regarded as a major step in supply-side structural reform and the strategy is to encourage the consumer goods sector to nurture innovative products with more variety and quality in order to better satisfy consumer demand. Basically, the project aims to provide more varieties of high-end consumer goods to customers based on demand. Although the sector has enjoyed advantages in China due to the low cost of labor over many years, it recently has had to face some difficulties resulting both from intensified global competition and the lack of innovation, quality and ideas. Premier Li emphasized that the market should dominate the upcoming moves and it’s the government’s responsibility to help build a good environment for companies. Furthermore, he sees it as the government’s responsibility to assist companies to lower production costs and improve product quality. In order to achieve these goals, enterprises are encouraged to spend more on research and development and also to enhance product design. The overall idea is to meet international standards and also to change the sector from quantity to quality. Major consumer goods producers are especially being targeted with this project with the intention of helping them get established on the global market.
What are consumer goods and who is benefitting?
Food, products in the sports or health sector, goods for daily consumption, watches or bicycles-they all are consumer goods. This sector is especially popular as the target group is extremely high. Adding on this, China is particularly interesting, as people here are sensitive and receptive to brands. There is a certain peer pressure when it comes to mobile phones, bags or watches. If Chinese want to show people their success-and usually they want to- a common way to do so is by buying famous brands. But Chinese customers are not just unique in this manner. Furthermore, the way it is advertised is crucial in China. Digital commerce is the key to success for consumer packaged goods companies. Therefore Chinese companies need to split their strategy and employ both traditional models and new ones, where consumer engagement is digital and social influence is perceived to be a trustworthy source.
So who is benefitting from the new strategies in the consumer sector? Well, of course the Chinese economy in general. According to a record from the service company Accenture, China’s consumer goods and service industry will grow by $200 billion by 2020. In order to boost the sector and the economy in general, the government is presenting this new course.
But besides the government there are also many Chinese companies benefitting from the project. Within emerging markets, China is the largest consumer story there is by far and has many successful companies listed in the sector.
One of them is the sportswear company Li Ning. Their main focus is on disciplines such as badminton, basketball, table tennis, athletics and tennis. The Olympic games in Beijing 2008 marked the breakthrough for the brand. After the games the stock price of the company had registered a significant increase. Currently, 98% of the turnover is generated in Mainland China, but Li Ning is aiming for a global presence. The self-confessed strategic goal is to generate 20% of its turnover abroad by 2018. According to the company’s chairman Li Ning, a former gymnast, the company tries to compete with Nike and Adidas. In order to meet this goal, Li Ning recently opened its first store in the U.S. and it also sponsors several famous athletes, including Shaquille O’Neal and Asafa Powell. The current measures in the consumer goods sector can be regarded as supportive for the company’s strategy.
As this example shows, companies and economy are both benefitting from the new innovative course of the consumer goods sector. It shows that China is willing to compete with international companies and is trying to adapt to global standards. It is another step forward in opening the Chinese economy to foreign influences, in order to be at eye level with countries like the US or UK.