TheNewUntouchables

I can’t comment on the economy at a macro level but can add some anecdotes on the situation based on my observations and experiences of doing business in China for 12 years. I have worked 6 years for an European multinational company and 6 years for an American multinational company. We are part of the supply chains to the healthcare, food and beauty sectors, and have enjoyed good growth over the years. 2024 has been challenging mostly in the beauty sector as Chinese consumers are buying more and more local brands instead of more expensive imported products. This is because Chinese brands are getting more and more accepted thanks to their faster new product launches and their quality has improved significantly. Western or Japanese brands have been suffering for various reasons. All the geopolitical factors of course have an impact on how Chinese consumers decide what to buy. There is deflationary impact when you buy less expensive cosmetics products that are made locally, with also more competitive ingredients and packaging options. We supply those products, so we all face very fierce local competition on pricing and delivery times etc. In the whole eco-system you can find everything with more capacity than we need. The demand volumes are still growing, but not as faster as supply, and at lower costs. So you get the picture! Same goes with healthcare, whether prescription drugs, OTC or nutraceutical products. Volumes are growing. But government is pushing on localization and affordable pricing with government bidding programs. Same here. Volume up, prices down. Deflationary. But it fits in the country’s vision of getting more people in the bottom of the pyramid a more affordable quality life style. Our other sector is in foods and beverages, that is growing, those products are already in a lower pricing range, and consumers will always buy them, especially fueled by an experience-focused consumer trend. People are going to concerts, going outdoors, traveling in china… they always buy snacks and drinks… So that business is doing well. All suppliers in this sector also doing quite well if you have interesting and affordable products. The days when money came to us no matter what we made are gone. The market is still there. We just need to get even faster at local innovation and be competitive on pricing, that can only happen if we fully localize our supply chains. At the end, even multinational companies will cut down imports from their own internal supply from overseas simply because the supply chain is too slow and costs are too high. In a very interesting way, the decoupling will eventually favor China and Europe might lose out in this big fight because of the market fundamentals. 1.4 billion people will always consumer. Manufacturers need to work harder to find what to make, at what price, and at what speed. One more thing, I had this brainstorming session with my team and asked them for their view. I got to say I am shocked over and over again by the resilience of Chinese people. The best working culture anywhere we can find. Everyone sees the challenges but everyone is committed to working things out and believing in their abilities to make a difference. I think fundamentally the best quality of the economy in China lies in the people: people accept, adjust, move on, commit.