THIS MATERIAL IS A MARKETING COMMUNICATION.
Thematic Insights: Emerging Consumer Trend in China: Guochao
Q1: What is the emerging consumer trend in China?
The rise of homegrown Chinese brand seems to be one of the strongest trends in China. “Guochao” has become a buzzword ever since China’s sportswear brand Li Ning’s debut at New York fashion week in 2018 which turned out to be a huge success. Its “Wudao(悟道)” collection embedded with traditional Chinese culture with the four big Chinese characters 中國李寧 or China Li Ning in English right in the middle at the front are believed to be a symbol of cultural confidence which has its roots in China’s rapid rise in the past few decades.
Young Chinese consumers have grown up amid strong economic growth in China and thus they are very proud of their country, i.e. strong patriotism. Parent generation preferred foreign brands and products over local brands in the past with a general perception that foreign products have better quality. This perception has changed that today many young consumers feel no difference whether it is local or foreign, and prefer whichever brand with more trendy style. In addition, the escalating tensions between China and the US have also accelerated the pace of domestic substation as strengthening patriotism pushes more Chinese people to buy domestic brands. Lastly, booming e-commerce platforms in China play an important role in the process. A digital world makes domestic brands’ penetration much easier and faster. Key Opinion Leaders rely on Alibaba’s Taobao platform, Tiktok, and Kuaishou to do live streaming for marketing and selling products.
Domestic brands have been adopting digital trend faster than foreign competitors. We believe this “Guochao” trend is likely to last as long as domestic brands continue to adapt to consumer needs quickly and improve their products accordingly. The new generation prefers encompassing quality, aesthetics, embedding Chinese culture and high-tech elements, and telling their brand stories via the ever-changing channels.
Q2: Which industry would benefit from this trend?
We are seeing emerging local brand trend across different consumer industries and categories including mobile phones, home appliances, sportswear, apparel, cosmetics, and packaged food. For instance in Sportswear, China Li Ning is a high end brand that Li Ning launched in 2018. Anta and Li-Ning products tend to be sold 40-50% cheaper than those of Nike and Adidas. Some product lines of China Li Ning were launched at similar price points to those foreign brands, but still, they have been prevalent among many Chinese. Another example is smart phone market in China. Apple and Samsung lost market shares from 38% and 11% in 2015 to 21% and 2% in 2019 respectively. Meanwhile, the top 4 Chinese smartphone brands had a combined value market share of 35% in 2015 to 73% in 2019. 1
Q3: What’s your outlook on foreign brands in China?
China is becoming one of the largest consumer markets in the world and more importantly it is the market with still a low penetration, i.e. untapped potential. This provides opportunities to both foreign and local brands. What we want to highlight is that foreign brands are no longer preferred just because they are from overseas. Quality of local brands has improved, trust has been built and more importantly mindset of local consumers has changed. Thus, foreign brands will also need to understand Chinese consumers better and be more innovative to attract the younger generation’s attention after the low-hanging fruit has been picked. They have to stay more relevant with local consumers need and adapt to fast changing demand in the country.
Disclaimer & Information for Investors
No distribution, solicitation or advice: This document is provided for information and illustrative purposes and is intended for your use only. It is not a solicitation, offer or recommendation to buy or sell any security or other financial instrument. The information contained in this document has been provided as a general market commentary only and does not constitute any form of regulated financial advice, legal, tax or other regulated service.
The views and information discussed or referred in this document are as of the date of publication. Certain of the statements contained in this document are statements of future expectations and other forward-looking statements. Views, opinions and estimates may change without notice and are based on a number of assumptions which may or may not eventuate or prove to be accurate. Actual results, performance or events may differ materially from those in such statements. In addition, the opinions expressed may differ from those of other Mirae Asset Global Investments’ investment professionals.
Investment involves risk: Past performance is not indicative of future performance. It cannot be guaranteed that the performance of the Fund will generate a return and there may be circumstances where no return is generated or the amount invested is lost. It may not be suitable for persons unfamiliar with the underlying securities or who are unwilling or unable to bear the risk of loss and ownership of such investment. Before making any investment decision, investors should read the Prospectus for details and the risk factors. Investors should ensure they fully understand the risks associated with the Fund and should also consider their own investment objective and risk tolerance level. Investors are advised to seek independent professional advice before making any investment.
Sources: Information and opinions presented in this document have been obtained or derived from sources which in the opinion of Mirae Asset Global Investments (“MAGI”) are reliable, but we make no representation as to their accuracy or completeness. We accept no liability for a loss arising from the use of this document.
Products, services and information may not be available in your jurisdiction and may be offered by affiliates, subsidiaries and/or distributors of MAGI as stipulated by local laws and regulations. Please consult with your professional adviser for further information on the availability of products and services within your jurisdiction. This document is issued by Mirae Asset Global Investments (HK) Limited and has not been reviewed by the Securities and Futures Commission.
Information for EU investors pursuant to Regulation (EU) 2019/1156: This document is a marketing communication and is intended for Professional Investors only. A Prospectus is available for the Mirae Asset Global Discovery Fund (the “Company”) a société d'investissement à capital variable (SICAV) domiciled in Luxembourg structured as an umbrella with a number of sub-funds. Key Investor Information Documents (“KIIDs”) are available for each share class of each of the sub-funds of the Company.
The Company’s Prospectus and the KIIDs can be obtained from www.am.miraeasset.eu/fund-literature . The Prospectus is available in English, French, German, and Danish, while the KIIDs are available in one of the official languages of each of the EU Member States into which each sub-fund has been notified for marketing under the Directive 2009/65/EC (the “UCITS Directive”). Please refer to the Prospectus and the KIID before making any final investment decisions.
A summary of investor rights is available in English from www.am.miraeasset.eu/investor-rights-summary.
The sub-funds of the Company are currently notified for marketing into a number of EU Member States under the UCITS Directive. FundRock Management Company can terminate such notifications for any share class and/or sub-fund of the Company at any time using the process contained in Article 93a of the UCITS Directive.
Hong Kong: This document is intended for Hong Kong investors. Before making any investment decision to invest in the Fund, Investors should read the Fund’s Prospectus and the information for Hong Kong investors (of applicable) of the Fund for details and the risk factors. The individual and Mirae Asset Global Investments (Hong Kong) Limited may hold the individual securities mentioned. This document is issued by Mirae Asset Global Investments (HK) Limited and has not been reviewed by the Securities and Futures Commission.
Copyright 2021. All rights reserved. No part of this document may be reproduced in any form, or referred to in any other publication, without express written permission of Mirae Asset Global Investments (Hong Kong) Limited.