Even in a climate of geopolitical upheaval and unfavourable market conditions, Chinese consumer growth continues to fund economic prosperity in the country. This is reflected in the performance of several Chinese IPOs that launched in 2019, with their encouraging figures suggesting that Chinese consumer growth will continue as 2020 unfolds.
Central to these indicators was the arrival of Alibaba on the Hong Kong stock exchange. Alibaba has established itself as the largest eCommerce company in China, and its $11.2 billion IPO was indicative of its success in the world’s most populous nation. In addition, the company’s share price has risen rapidly since then. By mid-January, the share price had risen by more than 20%.
Alibaba’s success has also been reflected in other business figures. On Singles’ Day in 2019 (November 11) – initially started as an unofficial celebration of a person’s singledom in the 90s – its gross merchandising volume increased by 25.7% up from 2018, reaching 38.6 billion USD. Single’s day has become one of China’s biggest shopping events.
Chinese Starbucks competitor conquers stock markets
Elsewhere, Luckin Coffee provided another example of a Chinese company experiencing trading success after floating on a foreign market. Luckin is a hugely successful chain of coffee stores in China, having established over 3,500 outlets. The Starbucks competitor’s stock price has doubled since being listed on the US stock exchange in May last year.
This elevation in value demonstrates an intriguing faith in a beverage that has made little culture penetration in competition with China’s infamous taste for tea. Indeed, figures indicate that the average Chinese person consumes only five cups of coffee per year.
On the subject of tea, the leading Chinese tea brand, Hey Tea, is also musing over the possibility of a United States IPO, with the company having enjoyed a successful 2019. Hey Tea launched a series C financing campaign during 2019, with Tencent and Sequoia actively involved as investors. The company was able to achieve a valuation of about 1.3 billion USD, and it is now believed that it may target the United States market at some point this year.
Chinese Restaurant Industry Booming
Another Chinese company enjoying a successful IPO in early 2020 is Jiumaojiu International. The company has become renowned within China as a successful restaurant brand manager and operator. On the first trading day in Hong Kong, the stock rose 56 per cent closing with of HK$10.32 – giving it a market value of 1,77 billion USD.
Underlining the potential in the chinese restaurant niche, Jiumaojiu’s major rival, Haidilao – which is particularly invested in hot pot restaurants – has also doubled its share price, since it debuted on the Hong Kong exchange back in September 2018.
Consumer Boom Continues
With Chinese consumer spending being a catalyst of economic success in the country, some of the demographics of the country suggested that this consumerist boom is set to continue. For example, Chinese GDP per capita is expected to exceed 10,000 US-Dollars imminently. If this sounds insignificant, it should be noted that the cost of living in China means that the country already boasts one of the world’s highest saving rates according to the World Bank, at almost 50%, compared to just 17% in the United States.
Slowing GDP growth
Despite the economic success that China has experienced in recent years, the GDP growth of the country is slowing. Figures for 2019 representing the lowest GDP growth in the country for nearly 30 years. As income grows in China, so the general public is investing more money in consumer products, and the high savings rate in the country means that vast swathes of Chinese people have significant amounts of disposable income to invest.
As the Chinese economy continues to mature, imports are also becoming more prominent, especially in product categories deemed to be luxurious or high-quality. Imports now account for 18% of China’s total Fast-Moving Consumer Goods (FMCG) consumption, and this was primarily driven by online channels.
Taking the saving rate into account, it is most likely that Chinese consumer spending will continue in 2020 – fueling the Chinese economy.