Over the years, Chinese consumers have given a boost to global businesses and global economic growth. At a time when China's economy is gradually emerging from the impact of the COVID-19 epidemic, Chinese consumers are back, but the way they shop has changed.

As the first country to fight the epidemic and achieve results, China has more time than other countries to adapt to the epidemic environment. China has also implemented more stringent production shutdowns than other countries, making it one of the countries whose economies have been hit hardest. China's GDP shrank 6.8 per cent in the first quarter, the first decline in at least 28 years, compared with a 5 per cent contraction in US GDP and 3.6 per cent in eurozone GDP. In the first two months of this year, retail sales of consumer goods in China fell by 20.5%.

At a time when China is preventing a resurgence of the epidemic through extensive virus testing and tracing the source of infection, the economy is also gradually starting to pick up. Capital Economics said in a report to clients on July 29th that with the help of anti-epidemic measures and supportive policies,China's economy will return to its pre-outbreak growth track by the end of this year, much earlier than any other major economy.

Traffic in China has returned to near pre-outbreak levels, long queues have formed in front of restaurants, consumers are still snapping up real estate, and prices in some places are not much lower than they were before the outbreak. A number of small shops are emerging in Chengdu, Sichuan province, and just two months ago, a large number of shops had to close their doors. Retail sales in china fell by just 1.8 per cent in June, with sales in product categories such as home appliances and cosmetics rising.

China is the only major economy expected to achieve economic growth this year.. While there are huge differences in the political system and epidemic response between China and the United States, China's economic recovery gives reason to be optimistic about the future as the United States is committed to controlling the epidemic and the spread of the economic crisis. Danton Goei, portfolio manager at Davis Funds, said: "the economy can recover better only if people no longer feel threatened by the virus. "

China's economy has given a big boost to the stock market, driven by policy support from the Chinese government and recently allowing insurance companies to increase investment in the stock market. The CSI 300 index is up 14.2% this year. As Chinese consumer spending picks up and consumers adjust their preferences to adapt to the epidemic, fund managers have been looking for companies that can benefit from it. So far, tensions between China and the US have not worried fund managers too much.

Some trends have become more obvious:Consumer spending on the Internet continues to increase, including groceries, electronics and educational services. They have also increased spending on health care. In addition, despite the impact on the economy, fund managers still believeThe demand for high-end products has not disappeared.。

But the situation has not fully returned to normal. Household consumption in China was weak in the second quarter, with average rents in large and medium-sized cities falling more than 2 per cent from a year earlier. A consumer survey conducted by UBS across China found that fewer respondents expected income growth compared with the same period last year, leading economists to expect consumption to rebound sharply from the downturn in the first quarter, but by the end of the year it would be the same as in 2019. However, they expect consumer spending to grow by nearly 9 per cent in 2021.

Nonetheless, signs of recovery are growing. In the early days of the epidemic, an estimated 70 million to 80 million people were unemployed or unemployed, and UBS economists estimate that more than 3/4 of them have returned to work. Consumers are also saving more, which meansOnce consumer confidence returns, an improvement in household finances will pave the way for a stronger recovery.

Although travel plans and spending have fallen by about 30%, consumers are spending some of that money on skincare products and home furnishings. At the same time, consumers' preference for brands is also changing, and now they prefer the products of large companies that they see as reliable and safe, as well as more domestic brands. "although the service sector has not returned to normal at 100 per cent, buying in some sectors looks strong," said Leon Eidelman, an emerging markets equity fund manager at JPMorgan Chase & Co. These industries are gradually getting rid of the negative effects of the epidemic. "

Barron Weekly interviewed fund managers and analysts to find out how Chinese consumers spend, what changes have taken place in their consumer preferences, and which companies are expected to benefit from it.

Shopping has turned to the Internet.

As of May, more and more shoppers and elderly shoppers in third-and fourth-tier cities began to shop online.Nearly 1/4 of China's retail sales are contributed by online shopping, about twice that of the United States.. Fund managers hope that this trend will eventually become a consumption habit, companies will have to change their business models, and companies that are already in a strong position will benefit from industry consolidation.BABA (BABA), JD.com (JD), Tencent (700.HK) and New Oriental Education & Technology Group (EDU)These companies, which dominated Internet services before the outbreak, have further strengthened their strength, increasing investment in businesses such as e-commerce, cloud computing, streaming, video games and online education. this phenomenon is similar to that in the United States.

The share prices of these companies have risen by double digits this year, albeit sharply, but fund managers still believe there are investment opportunities given their strong position in areas where consumers spend heavily. "in terms of BABA's cash flow earnings, or a comprehensive analysis of the company's business, and look at the company's achievements in cloud computing, digital payments or more e-commerce services," Edelman said. You can see that this company is of considerable value. "

At a time of rising tensions between China and the United States, some Chinese companies listed in the United States, such as JD.com and BABA, may face the threat of delisting, but fund managers believe that these fluctuations are only short-term interference. it will take some time for any relevant US measures to be implemented, and these companies have made secondary listings in Hong Kong.

Increased expenditure on health care

In recent years, as Chinese consumers have become richer, they have become more concerned about their health, a trend that has been further intensified by the epidemic. Ramiz Ramiz Chelat, an assistant consultant and fund manager at Virtus Vontobel Global Opportunities, said that the rising consumer demand for sportswear and footwear could helpNike Inc (NKE)With the recovery of the company, Nike Inc has shown a great spirit of innovation in increasing user participation and expenditure through fitness applications. Consumers now prefer healthy and high-quality snacks.Negotiate Food (002557)And other local food manufacturers are very popular.

Chinese consumers prefer big brands when they resume eating out, which they think are more in line with food safety. Edelman saidYum China (YUMC)和Haidilao International Holding (HDALF)This has benefited large restaurant chains, which are larger and better able to make up for rising costs after the epidemic than small restaurants.

Reduced air travel

China is a big tourist country, with 150 million people traveling abroad in 2018. Chinese consumers are also big buyers in fashion capitals such as Paris, Milan and London, accounting for 13 per cent of global luxury sales last year.

But at a time when the epidemic is still raging in many countries, the prospect of overseas travel remains uncertain. UBS believes that overall tourism demand will not return to 2019 levels until the end of 2021.

Consumers have spent part of their travel budgets elsewhere, fuelling a recovery in the real estate market and increasing spending on high-end products. In a survey of Chinese consumers conducted by UBS, 3/4 of respondents said they were willing to spend more money on better products. Cherat says revenue growth in first-tier cities has been stronger than in smaller cities, reflecting better revenue in services than in manufacturing.

Expenditure on home decoration has increased

While the DIY home improvement trend that benefits companies such as The Home Depot Inc is not so popular in China, fund managers note that Chinese are more willing to spend money to make their homes more comfortable and healthy. One of the companies that has benefited isMidea (000333)The company is integrating air purification into air conditioning products. Shen Wenting, an analyst at Harding Loevner China, said that more and more people are cooking at home, and the demand for rice cookers and food blenders is also increasing.

Wang Lili, a 44-year-old account manager at a bank in Chengdu, said in an interview that she and her family spent much less during the quarantine period and was now prepared to use savings to buy a new house, while the previous plan was to slightly renovate the existing house.

"We have made our home better than before, partly because we have more money, and partly because we realize that we may have to spend more time working and living at home in the future, and we should make our home more comfortable. "

A strong demand for luxury goods

Demand for some luxury goods is also strong. Although consumers are no longer as interested in clothing or jewelry as they were before the outbreak, fund managers are seeing an increase in demand for high-end cosmetics and skin care products. They say Chinese consumers still preferThe Estee Lauder Companies Inc (EL)Wait for foreign brands.LVMH (MC. France)和Kering Group (KER. France)Diversified luxury goods manufacturers, such as those with strong digital and brick-and-mortar stores in China, are well equipped to cope with changes in shopping patterns, which will help offset some of the revenue loss caused by the reduction of outbound travel by Chinese tourists.

Zhang Yilin, a 26-year-old German and English teacher living in Chengdu, said that most of her shopping was done online, and the epidemic changed her view of luxury consumption. "I didn't really buy jewelry or (a lot) bags before, but after the epidemic I said to myself, 'you never know how long you'll live', so I started buying higher-end clothes. "

The Chinese government has relaxed restrictions on domestic duty-free zones and lowered tax rates, allowing consumers to spend more money on things. "Chinese consumers no longer go abroad to buy duty-free cosmetics or luxury bags, but transfer some of their spending to places such as duty-free shops in Hainan," Shen said. "she also saidChina medium exemption (60188)To be one of the beneficiaries.

Compared with consumers in other countries around the world, Chinese consumers are the first to recover, but it may not give much boost to the global economy. This time the Chinese government has been more restrained in terms of stimulus measures than in previous downturns, curbing demand for commodities and other exports. In addition, recently, consumers prefer domestic brands in areas such as hotels, dairy products and sportswear. "China has gone through a difficult period and everyone has made sacrifices, which gives people a sense of national pride," Gay said. "

For investors who want to buy shares in non-essential consumer goods companies, which derive almost all their sales from China, exchange-traded fundsGlobal X MSCI China Consumer Discretionary (CHIQ)It's a good choice.

As the epidemic in the United States is not yet under control, the recovery of American consumers may take longer, but judging from the recovery of Chinese consumers, there is hope for the future.