The China newsletter | October 2023

Welcome to the second issue of Retex China's monthly newsletter, bringing you the latest updates from China straight from our Shanghai team.

This month, we will highlight the effectiveness of Chinese economic policies in addressing current challenges. We'll analyze the economic impact of the Asian Games in Hangzhou and the Golden Week, and then delve into trends in the Fashion, Luxury & Design world. We'll also explore new frontiers in Chinese technology, taking a look at the record installations of industrial robots in 2022 and the express delivery service via the Beijing metro. Finally, we'll deep dive into the behavior of Chinese consumers in the face of rising prices in the luxury sector.

Keep reading to discover the latest economic and cultural trends in China!

Macro Economy News

China’s microeconomic policies are effective, the economy is growing positively

China's effective microeconomic policies, outlined in a recent State Council Information Office briefing, have addressed global challenges. The focus on stability measures, including reduced interest rates on existing mortgages, has positively impacted consumption. This financial relief has boosted residents' spending power, fostering growth. Additionally, local governments' issuance of 2.95 trillion yuan in special bonds from January to August reflects a strategic move, contributing significantly to expanded investment opportunities.

The Asian Games in Hangzhou

The recent Asian Games in Hangzhou, boasting a record number of participants, had a substantial economic impact on the local economy. Hangzhou, known for being Alibaba's hometown and a tech hub, embraced sports digitization during the event. Utilizing AI technology, the city enhanced the sports experience with advanced features in various public and private fitness venues. The economic benefits were significant, with investments made for the Asian Games contributing approximately 414.1 billion yuan to Hangzhou's local economy, equivalent to 7.6% of the city's overall growth.

China’s railway system has reached 190 million trips during Golden Week

During the Golden Week in China, more than 190 million train journeys have taken place. The railway system has geared up to handle an average of?15.83 million trips per day, with a peak on September 29th. This significant passenger flow reflects robust growth fueled by the combination of holidays. To meet the increasing travel demand,?over 11,500 trains?have been scheduled daily.

Fashion, Luxury & Design News

Fashion companies' international performance post-epidemic lacks a significant boost. Beauty and luxury groups drive acquisitions, highlighted by Tapestry acquiring Capri Group. Kering and Richemont also make notable purchases, and L'Oreal's acquisition of Aesop marks its entry into the Chinese market. Estee Lauder invests in the Chinese brand codemint dude's skin. Key strategies focus on the importance of the Chinese market and the resurgence of travel retail, leading luxury brands to open new stores in airports.

Fashion

• Prada's Seed Project: Prada's Fall/Winter 2023 Seed Project, a global initiative offering limited-edition flower seeds, gained traction in China.
• Victoria's Secret Collaboration: Victoria's Secret collaborated with Chinese designer Rui Zhou for the "Victoria’s Secret x RUI-built" collection, marking a significant co-branding venture.
• LVMH's Market Moves: LVMH strengthened its presence in China with openings by Louis Vuitton, Dior, FENDI Casa, and DFS, reflecting strategic expansion.
• Kering's Luxe Initiatives: Gucci's "GUCCI COSMOS" exhibition, Saint Laurent's pyrotechnic show, Bottega Veneta's Beijing fashion show, Pomellato's art exhibition, and Vans' collaboration with Tagi showcased Kering's dynamic presence in China.

Beauty

• L'Oréal's Aesop Acquisition: In April 2023, L'Oréal acquired Aesop from the Brazilian group Natura & Co. with a $2.5 billion investment, followed by the opening of three new stores in Shanghai and Shenzhen between June and September 2023.
• Estée Lauder's Initiatives in Asia: In 2023, Estée Lauder expanded its presence in Asia with LE LABO opening its first store in China and a successful collaboration with the Chinese brand FENG CHEN WANG. La Mer contributed to the expansion by opening the world's largest duty-free store in Haikou.
• Grown Alchemist's Debut in China: In July 2023, Grown Alchemist, a brand under the L'Occitane group, officially debuted in the Chinese market with its products available on Tmall and JD, celebrated with a four-day thematic event in Shanghai.

Luxury & Design

• Frette Sale: Change Capital Partners sold its entire 100% stake in the luxury Italian home linen brand, Frette, to the Hong Kong-based consortium Raza Heritage Holdings for approximately €200 million.
• Watches & Wonders in Shanghai: On September 13, Watches & Wonders returned to Shanghai, showcasing classic collections and new masterpieces from 14 prestigious Haute Horlogerie brands on the West Coast. The event, now open to the public, included conferences, exhibitions, and workshops aimed at engaging a younger audience.

Science and Technology

IFR report: China installs record number of industrial robots in 2022

China achieved a record in 2022 with 290,258 industrial robot installations, marking a 5% increase. This places China as the global leader in industrial robot installations, surpassing other major countries. However, a slowdown is expected in 2023 due to global economic challenges.

Beijing subways pilot express delivery service to cut carbon emissions

Beijing launched a pilot project for express delivery via the subway during off-peak hours to reduce road congestion and carbon emissions. This project leverages Beijing's extensive urban rail transport network, covering 27 lines and 807 kilometers, to facilitate parcel transport and alleviate road traffic in a city handling around 15 million express packages daily.

Latest trends

The Daigou market in China is estimated to be worth USD 81 billion

LVMH chairman Bernard Arnault said that there is nothing worse for a brand's image than Daigou, a business that has grown by 40% compared to 2019. As explained in the Daigou Index 2.0 report, Daigous are a kind of personal shoppers who buy luxury products in Western countries to resell them in China. This business was born out of the huge price differences between China and the rest of the world, and is becoming increasingly professional. They pose a threat to brands as they lose control of their image and products in the Chinese market.

Shanghai Fashion week

The 21st edition of Shanghai Fashion Week, themed "Vitality Interlinked," featured around 100 national and international brands. Sustainability took center stage, with Kering awarding sustainable innovation and Harrods focusing on sustainable materials, product design, and retail innovation. The "Future of Fashion" event explored innovative materials, reflecting a growing interest in sustainability in the Chinese fashion landscape.

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