Weekly Update

Those CNY Retail Sales...
Rising Tides Do Not Lift all Boats...

Indeed they don’t. China’s New Year sales were pretty impressive once again, you have to admit. Strong growth overall – even stronger inland than on the coast, proving once again that China is now firmly two distinct retail markets: the maturing, increasingly sophisticated but highly competitive coastal cities; and the fast developing, new consumer hinterlands. The statistics put out by the government are questionable (and we do seriously question them in our reports, of course), but the trends are good, and without doubt China remains the world’s best consumption story.

There were, as ever, some particularly strong sectors: mobile phones (up 19.2% on the back of new 3G phones), jewellery (up 19.1% on strong interest in gold and precious stones), food (up 16.5%, due in part to food price inflation) and appliances (up 16% due to strong sales of plasma screen TVs). And there were some underperformers – the once ‘golden’ sector of sports, for instance, showing signs of tiredness, the downturn of the fashion cycle and inventory problems for some key players such as Adidas. The prolonged and rather cold winter is still dampening consumer’s enthusiasms for the new spring collections, though the upper mass market fashion brands we’ve touted as being the drivers of the sector repeatedly these days, replacing the sports brands, were pretty much consistently 5-7% ahead in terms of growth compared to the general clothing market. Those young urban professional females in particular are still spending like there’s no tomorrow – you go girls!

Still, while all this is good news for China’s overall consumption story, retailers and brands still face unprecedented levels of competition in the market. To a large extent most of the world’s major fashion retailers have established some sort of China presence – the inward rush of brands and retailers since the opening up of China’s retail market in line with WTO since 2004 is now slowing. Add to a High Street that would look familiar to anyone in North America and/or Western Europe the large number of Chinese chains and brands, in just about every sector, and you arguably have a more crowded and competitive market than in the West, which means that there may be plenty of winners in China, but others may find the going tough, even as the stats tell them times are good.

Those rising tides are good news... but they most definitely are not raising all boats. Here’s hoping you’re seaworthy for the coming year.

Seems like it’s a ‘Shopping Festival’ all the time these days!

And so welcome to the Access Asia Weekly Update – hopefully a shipshape and Bristol-fashion email, rather than a rusty leaking tub of a missive sailing under a Mongolian flag of convenience. We’ve got an EXPO Ball of the Week for you (you know we wouldn’t let you down), pre-bout analysis on the biggest upcoming China books fight for quite some time, the latest on those creepy CBDs that keep on popping up and spreading like herpes, more bad news for China’s beleaguered hoteliers and a very good reason not to go anywhere near Hainan.

Feeling depressed in the prolonged cold snap. Don’t worry! Remember it’s just 202 days till the end of the EXPO now – doesn’t that make you feel as good as a cup of milky cocoa?

Access Asia Report News

Condiments, etc. is well on the way to completion, and we are getting the massive amounts of unruly data on Fish and Seafood in China under control. Think angry octopus into string bag.

Meanwhile, we are also cracking on with the next issue of the China Retail Quarterly, which, if you’re not a subscriber, you really should subscribe to! Contact us for subscription rates. This coming issue will look at the top-100 listed retailers in China, and how they fared financially. Also, we are looking at the emergence of high-end supermarkets and whether the market is really ready to support them, plus we are looking at how some rural retail chains are now fancying their chances in the tier-1 cities!

Talking of retailing, our update report on Supermarket and Hypermarket Retailing in China is also under way. As the consumer segment of the Chinese economy grows in importance, so is this sector, as it is increasingly taking over control of large chunks of the consumer market. The key retailers in this sector are also growing in their significance to both the national and regional economies, both on the consumer side, and in regard to many manufacturing sectors, which are increasingly relying upon supply to these chains.

Although China is still a long way off reaching the kind of “Tescopoly” seen in the UK, there is a growing trend already for the grocery chains to expand their economic control beyond simple grocery sales. Tesco is already targeting the provision of consumer financial products in China, as it does in the UK, and many supermarket groups are becoming regionally significant players in sectors such as property development, logistics, manufacturing and service sectors. This new edition of the report will look at how these chains are using the cashflow generated by their retail operations towards investment in wider business interests, and what that might mean both for the retail market, and the wider economy in China.

For more information on any of our reports, please contact us by return.

So, like a Toyota approaching a stop sign at speed, let the mayhem begin...

EXPO Ball of the Week

What? You thought we’d stopped with the EXPO balls? No such luck mate.

Yes, everyone’s piling in on the EXPO – and so this great headline in the ever reliable Shanghai Daily:

‘Gome Becomes 2010 World Expo's Home Appliances Sales Partner’

Gome, China’s major home appliances retailer has signed a franchise license agreement with the 2010 Shanghai World Expo to become the authorized retailer of World Expo-related home appliances. A range of World Expo-related licensed home appliances products will be available.

Now you too can:

[       Wash your grimy undies in a Haibao-branded washer after a hot day at the EXPO;

[       Clean your dusty floors with a Shanghai (Better City, Better Life) vacuum cleaner;

[       Open your tins of Haibao food with an EXPO 2010 electric can opener;

[       Scour your EXPO 2010 Official Shanghai 48 Piece Dinner Service in a Haibao branded dishwasher.

And on, and on, and on...

China Books News...
Claws Will be Drawn
Pre-Fight Analysis

Well, 2009 didn’t give us anything very exciting in the way of China books – Marxy Martin Jacques donated a long and rambling tome that repeated itself every 40 pages or so, but not much else was forthcoming from the China punditocracy. So, will 2010 be any better? You bet! Indeed, GET READY TO RUMBLE!! 2010 will see a no-holds-barred throw down between two of the mightiest marketing machines in the pugilistic old United Kingdom, as two opposing China hacks both launch tomes on the world and fight to the death Rollerball style for shelf space. We know that you, like us, like nothing better than either a good old fashioned bare knuckle fight (or battling goats at the site of the Dongtan Eco-city that never was), so here’s the low down on the contestants in this clash of the UK media’s left and right wings.

In the left corner lurks the mighty but bespectacled Jonathan Watts, representing the Grauniad Media Group (GMG), the big beasts of King’s Place, that may at first sight appear all woolly and liberal, but can get as down and dirty as any right wing media organisation when they choose to (by proportional representational vote though, of course). Battling Watts roams the environs of Beijing, training for the bout Rocky style with an organic log, while his publicity machine back in London limbers up with a moccachinno and veggie wrap. His new book, provocatively titled When a Billion Chinese Jump: How China Will Save the World – or Destroy it, is out around June. Be afraid, be very afraid and don’t let the gangly gait and specs fool you. A Springtime launch perhaps, but there’ll be no thawing the cold heart of The Guardian’s publicity demons on this one. It’s the environment, it’s potential global meltdown, it’s the apocalypse and only the man (sorry, person) from The Guardian can prevent it!

Meanwhile, over in the right corner, Richard McGregor of the FT-Pearson Group is cracking his knuckles ready for a Square-Go. He slayed Tokyo, took down Shanghai and now he’s looking to be the King of the ‘Jing. They’re free marketeers and finance capitalists, they swap equities and eat babies before breakfast, so it’s no gloves, no Queensbury rules (all regulation is BAD) and gouging allowed for the boys from the Southwark Bridge Road. The only thing pink about this lot is their newsprint – you’ve been warned! Tricky Dick’s been keeping his tome close to his not inconsiderable and manly chest, but sources inside the FT training camp, somewhere near Brisbane, reveal his book is out late spring and will be called The Party: The Secret World of China’s Communist Rulers.

But make no mistake – Watts will be out to DESTROY; McGregor will ensure this scrap is no PARTY.

Who will win? Which mighty Fleet Street marketing machine will out? Book reviewers report intimidation, Waterstone’s sales girls tell of lavish gifts appearing on their desks, literary festival organisers are being bought Chardonnay by the bucketload. Watts knows well the sour taste of defeat – he’s a Tottenham Hotspur fan after all, while MacGregor is used to being an outsider, disliked by the majority, existing in a cultural vacuum (in other words he’s Australian). Bookies are wavering, the PR teams nervous – it’s all to play for.

Each will have their champions. For the main bout, 60-Watts will have a typically Guardian style corner team – two radicalised nurses and a stressed-out social worker, while McG will bring in the mighty guns of the FT’s readership – a moderately successful Emerging Markets Portfolio Manager and a travelling pensions salesman studying at night for an MBA. Buckets and sponges sponsored by Access Asia.

Stand ready – it’s about to kick off big time in the sleepy world of China books!

The victor gets to go Stateside and kick Jim Chanos’ arse for raining on everyone’s parade.

Ladies...to your corners please and may the best hack win

CBD Creep Update

We pointed out last year that Central Business District (CBD) creep was undergoing a major outbreak across China. Every city was declaring one or more CBDs, often in far flung locations (Shanghai now has one autonomously declared CBD right up Suzhou Creek for instance – and we understand that having something stuck up your Suzhou Creek can be quite painful!). Thanks to everyone who sent us examples of CBD creep in their necks of the woods – it is, it seems, a truly national phenomenon. Of course, CBDs in China are merely constructs of our beloved property developers and endearingly dumb real estate types, rather than anything seriously planned. If saying CBD can add a buck per square metre to the rent, then go for it.

And now Beijing’s CBD is set to spread again. Beijing actually has a CBD Administration Committee (imagine the excitement at their Christmas parties!), but don’t labour under the illusion that this is not a bunch of property developers and real estate firms – it includes such impartial voices as estate agents CBRE for instance. Now the Beijing CBD is to be extended eastwards across some rather choice bits of real estate, purely to reflect Beijing’s role as an ‘international city’ of course you understand.

The Ever Continuing ‘Blood on the Carpet Chronicles’

2010, but things don’t look much better for China’s beleaguered high star hotels – the body claret is still staining those fancy carpets.

According to data from the Beijing Bureau of Statistics, the revenues of star-grade hotels in the city decreased by 9.7% year-on-year in 2009. By star grade, revenues of one-star hotels in Beijing decreased significantly by 22.2%, because of their weaknesses in hardware and services. In addition, many budget hotels launched room offers at the price of RMB100, adding a blow to the solar plexus of low-star-graded hotels. However, the revenue of two-star and three-star hotels did a bit better. But the posh joints took the biggest hit, and the mightier they stand, the harder they fall – the revenues of five-star hotels in Beijing saw a huge decline of 16.9% in 2009, compared with the 2008 Beijing Olympic year when the occupancy of five-star hotels was relatively high.

And now Shanghai hoteliers are crapping their pants in terror too. The mighty EXPO committee continues to revise downwards the number of overseas visitors expected to the EXPO – less than 3% of the total now and spiraling ever downwards. Those daytrippers from Anhui don’t need hotels, while those bussed in from Zhejiang are fine with a budget hotel. Yet five star GMs report to us that their head offices are still expecting a bumper year out of Shanghai – attendance numbers of 70 million dazzle them. It’s just that nobody told them that 99% of those 70 million will probably be country bumpkins enjoying a gratis day off work, a free yellow baseball cap and a 36-hour bus ride to Shanghai.

And Finally...
Need a Reason Not to Go To Hainan?

Well, we’ve got a cast iron one – Eurocrats will be there.

Hainan Airlines has launched a service from Brussels to Hainan via Shanghai – three times a week!

Hainan already has hordes of Chinese package holidaymakers, and also plenty of Russian tourists who come down on the so-called ‘Nipples and Vodka Express’ from the frozen north. And now... Belgians!

It seems that hotel occupancy in Hainan is down, and so desperate times call for desperate measures, and additional visitors from the Low, Low Countries must be attracted. Cultural confusions will ensue – shopkeepers, hotel workers and ladies of the night in Haikou and Sanya are currently speed-learning Flemish and Luxembourgian, though the correct pronunciation of many words in Flemish contravenes the current ongoing Anti-Spitting Better Civilisation Campaign in Hainan, while (as yet) nobody has been able to find a Luxembourgian teacher.

Of course, Hainan Airlines is hoping to cash in on the wave of Eurocrats intending to head to Shanghai for the EXPO – Eurocrats love an EXPO. It’s hard to imagine, but many of these men and women wake every morning, down a croissant and a Yakult, work all day creating mountains of paperwork and mounds of unnecessary regulations, with no other goal than a 3 day Jolly to Shanghai!! And now Hainan Airlines can provide.

But what other spiritual pollution and scum will enter China along with Eurocrats and Luxembourgian off-shore bankers? Yes, that’s right, Haibao’s most feared enemy – The Smurfs, who also claim to be the number one blue coloured mascots of the world. Plane loads of ugly little binge drinking and rowdy (do Smurfs get horny?) Smurfs descending on the EXPO looking for Haibaos to tussle, or (God forbid) mate with. It could get nasty out there.

Ve ar vanting your Tsingtao and ve ar vanting it now

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