Consumption to go Global in Chinese Cities

Despite odds, 2022 may help sustain sales boom in both urban and rural areas in the country

With New Year’s Day and Spring Festival on the horizon, China’s consumption market is expected to scale another peak, industry observers said.

More than others, catering and food sectors are expected to boom despite some challenges brought by the COVID-19 pandemic, they said.

The fourth quarter of this year has seen consumption in China peak, and the uptrend spread to some sections of the capital market as well.

In October, November and early December, shares of many companies in sectors like food, beverage and daily necessities rose.

For instance, shares of Kweichow Moutai, China’s iconic high-end white spirit maker, were trading at 1,830 yuan ($287.3) on the Shanghai Stock Exchange at the end of September. By Dec 17, they jumped 12 percent to 2,050.7 yuan.

Similarly, shares of Yili Group, China’s largest dairy maker, increased from 37.7 yuan to 40.96 yuan in the same period.

“Some sporadic COVID-19 cases in a few Chinese cities led to stricter government management. Coupled with the Beijing 2022 Winter Olympic Games from Feb 4 to 20, the population flow in some cities could be limited in the early part of the new year, which might affect the consumption market,” said Fu Yifu, a senior researcher at the Suning Institute of Finance.

“Still, there is unceasing demand from consumers for necessities for the New Year and Spring Festival celebrations, and this is expected to boost the market,” Fu said.

China Merchants Fund said sales of Chinese white spirit or baijiu are expected to increase with the holidays drawing near, as the scenarios of gifting and social gatherings are foreseen to become more frequent. Particularly, high-end spirits have seen a new round of price rises recently. The 2022 Spring Festival holiday will begin on Jan 31 and last till Feb 6, and Spring Festival itself will be celebrated on Feb 1.

“The run-up to Spring Festival has been a traditional peak consumption season in China, and consumer stocks, especially leading white-horse (blue-chip) stocks, will likely surge,” said Yang Delong, chief economist at the Shenzhen, Guangdong province-based First Seafront Fund.

“Some white-horse shares with high brand value and potential will continue the growth uptrend in the long term. For instance, the climbing share price of Kweichow Moutai definitely gave a boost to many white-horse stocks. China’s sustained supply-side reforms and consumption upgrade trend have boosted investor sentiment toward such consumer stocks,” Yang said. (Source: chinadaily.com.cn)