What’s up in Digital China? | Chinese Consumers, Retail, Marketing and Tech Digest | Jan’25

A year of Wood Snake is soon to be upon us! It’s expected to be a year of transformation, business success and personal growth.?

So, whether in 2025 you're looking to deepen your understanding of China’s latest trends, launch a research, or organise a China learning expedition, my team is here to help. Emails me with any projects in mind, and I’ll link you right up.

Meanwhile, in this issue of my Digital China newsletter, we’ll explore China’s surging service consumption, the shifts in the consumer and retail sectors influenced by recent fiscal policies, and the resilience of Chinese tech giants like ByteDance amid the ongoing US-China tech war.

Let’s make 2025 our most successful year yet!?

I. CHINESE CONSUMERS - JAN 2025

Chinese consumers will benefit from a substantial US$41.1 billion subsidy program in 2025, designed to boost sales across various sectors, including over 5.2 million passenger cars and 49 million home appliances through trade-in initiatives.

They will receive a 15% subsidy on consumer electronics and safety products, particularly for items priced under 6,000 yuan (US$ 840). However, the limited support—less than 500 yuan (US$ 70) per device—suggests a focus on promoting budget-friendly purchases rather than high-end spending.

Although these policies aim to stimulate consumption, many Chinese consumers may choose to save, anticipating larger subsidies in the future. This cautious approach could suppress immediate buying behavior.

Overall, these subsidies have the potential to lower costs for consumers and drive demand across various markets. However, increased competition may encourage manufacturers to improve product quality and innovate more rapidly, benefiting consumers with better options and advancements in technology.

CONSUMERS CHART OF THE MONTH

Since mid-2023, China's service consumption has risen, with sectors displaying monopolistic advantages outperforming goods. In 2024, service consumption grew by 6.2%, establishing itself as a vital economic pillar.

The proportion of per capita spending on services in overall consumption expenditure increased by 0.9% YoY, indicating a clear consumer preference for services over goods.

The travel sector exemplifies this trend, with national rail passengers expected to reach 4.08 billion in 2024 (up 10.8%) and civil aviation projected to exceed 700 million passengers (up 17.9%), according to the National Bureau of Statistics.

As the Spring Festival approaches, travel within China is set to surge, driven by favorable visa-free policies and pent-up demand, signaling a strong recovery in the sector, yet still not be able to reach pre-Covid levels.

Overall, annual growth in service consumption could reach 9%, with per capita spending projected to rise to 23,000 yuan (US$ 3166) by 2030. Experts suggest that expanding consumption subsidies into the service sector could further stimulate this growth, enhancing consumer access and driving innovation within the industry.

CHINESE CONSUMER TRENDS

So, what exactly are Chinese people buying? Let’s take a look at some Chinese consumer behaviour trends that stood out in the past month.

1. Chinese travel booms after extended 8-day Spring Festival?

As consumers shift spending to services like dining and travel, sales in these sectors rose 6.7% in early 2024, with over 80% of travelers planning family trips. (Read more here)

2. Chinese now consider wellness a top priority, especially gut health

85% bought more in healthy-aging, and over 80% value gut health with over half planning to prioritize it more in 2-3 years. (Read more here)

3. Chinese drive integration of local culture in global beauty products

Prioritizing efficacy, sustainability, and cultural relevance, ingredient-savvy Chinese fueling domestic innovation in beauty products. (Read more here)

4. China's indoor ski resort industry is booming and unstoppable

Indoor resorts alone generated 4.88 million skier visits, a 33.7% increase from the previous year, and accounted for 21.14% of total skier visits in China. (Read more here)

5. Shanghai tops South Korean tourist destinations?

Weekly flights between South Korea and Shanghai are booming, with Busan experiencing 115.8% growth, leading hotels to offer special packages for them. (Read more here)

FREE REPORTS ON CHINESE CONSUMERS

1. Key Trends And Issues For China Consumer Goods Sector in 2025

Explore how government support, evolving consumption habits, and the adoption of new technologies are driving investment in the consumer goods sector. (Read here in Chinese)

2. China Luxury Consumer Forecast 2025 by MDRi

Highlights the shift in consumer behavior during the current cyclical downturn, noting that about 40% of Chinese luxury consumption takes place outside mainland China.? (Read here)

II. CHINA’S RETAIL & MARKETING - JAN 2025

China's economy has reached its 5% GDP growth target for 2024, according to official sources, driven by manufacturing and exports. However, this growth is tempered by weak consumer sentiment and sluggish retail sales, raising concerns about the sustainability of economic recovery.

Retail sales increased by just 3.5% last year, largely due to consumer hesitance stemming from a housing market downturn. This weak performance highlights the critical role of consumer spending in overall economic health.

Additionally, issues like falling residential property prices and a shrinking population complicate the retail landscape, making it difficult for businesses to maintain sales growth.

For business, the focus should be on adapting to policy changes and aligning with government initiatives. Additionally, enhancing customer experiences through targeted marketing can create valuable opportunities for growth in this challenging environment.

CHINA’S RETAIL & MARKETING TRENDS

To highlight effective responses to these economic challenges, let's examine recent trends in how brands and social media platforms have adapted their marketing strategies.

1. Taobao-based Fashion Brands Have Started Opening Offline Stores

With around 20 brands launching locations in the last 6 months, founders believe that a physical presence reduces return costs and boosts brand loyalty. (Read more here)

2. Luxury Brands Embrace Superstition for CNY Sales

High-End Brands have moved beyond simply adding red to their product lines for festivity, though Chinese zodiac animals still remain the most popular choice.? (Read more here)

3. RedNote Recruits US Influencers Amid TikTok Ban Uncertainty

RedNote is recruiting US influencers to promote its 300 million users, highlighting the app's engaging experience and fostering cross-cultural connections.? (Read more here)

4. JD Launches Gifting Feature to Compete With Alibaba, Tencent?

As a rising trend in China's e-commerce, Online gifting highlights increased competition amid sluggish economic growth and government scrutiny of price wars. (Read more here)

5. Rare new iPhones discounts offered in China?

Apple is offering limited-time discounts of up to 500 yuan (US$ 68) on iPhones, responding to rising competition from local brands like Huawei amid economic challenges. (Read more here)

MARKET CHART OF THE MONTH

• China's CPI has consistently decreased, hitting a low of 0.2% in August and a five-month low in November 2024. Businesses should adjust pricing strategies to stay competitive in this low-inflation environment.

• Despite the People's Bank of China's stimulus efforts, near-zero retail inflation highlights sluggish domestic demand and deflationary wholesale prices. Focusing on customer engagement and offering promotions can help stimulate demand.

• Goldman Sachs predicts near-zero CPI figures will persist in 2025, indicating ongoing economic challenges. Companies should closely monitor economic indicators to adapt strategies proactively.

• Overall, to attract discerning consumers, businesses should enhance their value propositions and emphasize quality in their offerings.

FREE RESOURCES ON CHINA MKT AND SALES

1. Asia Pacific Retail Innovation Index 2024 by CBRE

Highlights 12 attributes driving retail real estate innovation, analyzing Asia Pacific cities and providing strategic recommendations for landlords and tenants. (Read here)

2. China Marketing & Media Trends Report 2025 by TOTEM

Learn how brands in China are pivoting to slower growth by refining positioning and pricing while prioritizing sales. (Read here)

III. CHINA TECH - JAN 2025

In a year of economic recovery and heightened tech rivalry, cross-border tensions affected major Chinese firms. TikTok went offline just 2 hours before a January 19 ban, but Trump's promise to restore the app may change the trend of “Tiktok Refugees” seeking alternatives.

• With over 1.9 billion monthly active users globally, including 145 million in the U.S., TikTok generated 450 billion yuan (US$ 63.3 billion) in video revenues—nearly doubling YouTube’s 233 billion yuan (US$ 33.3 billion).?
• Most of Tiktok’s revenue comes from advertising, with about $8 billion from the U.S. alone. A ban could wipe out 9.1 billion yuan (US$ 1.3 billion) in a month, impacting 10 million U.S. influencers and over 225,000 small businesses, according to CNBC.
• Meanwhile, China remains the leading market for TikTok, while the U.S. stands out as the most significant overseas market for Chinese short video content, with TikTok as the primary platform. As of August 2024, revenue from leading Chinese short video apps in the U.S. reached 1.07 billion yuan (US$ 151 million), accounting for 64.8% of their total income.

In summary, the TikTok ban and unban underscore the ongoing uncertainty in the US-China tech war. Businesses should stay agile, diversify their marketing strategies to mitigate risks associated with sudden platform changes and maintain engagement with their audiences.

CURRENT DATA

As we navigate these complexities, let’s delve into the question of whether TikTok will sell, supported by the impressive statistics of its user base and revenue.

• TikTok boasts over 1 billion monthly active users—19.3% of the world’s internet population—averaging 95 minutes of daily usage.?

• In Q4 2024, it generated substantial revenue: over US$ 452 million (2.94 billion yuan) in China, US$ 176.6 million (1.15 billion yuan) in the U.S., and nearly US$ 40 million ( 260 million yuan)in Japan, making it attractive to potential buyers.

• However, TikTok's parent company may resist a sale due to its strategic importance and profitability. With 170 million users in the U.S. alone and strong growth potential, the platform might choose to remain independent, focusing on maximizing its value and market position.

The decision to sell will ultimately hinge on regulatory pressures and market dynamics. With over half a million "TikTok Refugees" migrating to alternatives amid fears of a ban, the future remains uncertain, making it a complex situation with no definitive answer.

CHINA TECH CHART OF THE MONTH

Countries tariffs on China's tech industry due to concerns over economic dependence, national security, and market fairness. Here's an overview of this trend, reflecting a broader escalation of trade measures in the global tech landscape.

• In Europe, Chinese EVs' market share soared from 0.5% (2019) to over 8% (2023). Soon after, the EU launched an anti-dumping probe, planning up to 35.3% duties. Recently, Brussels and China held talks to manage the influx of Chinese EVs through non-tariff measures.
• In the US, tariffs may be a cornerstone of Trump's economic plan. He proposed a 10-20% universal tariff on most foreign products, 25% on imports from Mexico and Canada, and extra measures on Chinese goods. This could notably affect Chinese EV imports to the US.
• In India, the government cut high end EV import tariffs from 70-100% to 15%. EV makers must invest US$ 500 million (3.57 billion yuan)? locally in 3 years, aiming to boost domestic manufacturing and allow imports.
• In Turkey, a 40% tariff on Chinese cars set for July 2024, was unexpectedly cut to 10% days before implementation, affecting imports.

With tariffs rising across key markets, China’s dominance in the EV sector is reshaping global trade dynamics, pushing countries to recalibrate their strategies and attract leading manufacturers.

RECENT TRENDS

1. AI: Shanghai Targets Global Medical AI Hub by 2027

Shanghai is heavily investing in medical AI, expanding its applications in clinical healthcare and traditional Chinese medicine. (Read more here)

2. Semiconductor: Strategic M&A Drives Growth

China’s semiconductor sector saw 31 M&A deals in 2024, mostly after September, focusing on materials and analog chips to drive innovation. (Read more here)

3. Robotics: GAC to start production of humanoid robot in 2026

Chinese automaker GAC will begin small-scale production of humanoid robots with wheels for feet in 2026, reducing power consumption by 80%. (Read more here)

4. EV: China EV sales to Surpass Traditional Cars by 2025

China's domestic EV sales are projected to grow 20% YoY to over 12 million units in 2025, leading the clean energy transition ahead of Western markets.(Read more here)

5. Quantum Computing: China Gaining Ground in Quantum vs US

Despite the fact that only 20 quantum computers are produced globally each year, China has managed to become a key player in quantum computing.? (Read more here)

FREE RESOURCES ON CHINA TECH

1. China’s Automotive Transformation: Insights & Impact?

Check out my Ashley’s interview with Bill Russo, founder of Automobility, as we talk about China's automobile sector, the country's innovation ecosystem, and the three waves of mobility innovation. (Watch here)

2. Foresight 2025 Roland Berger China Annual Trends Report

This report explores key topics such as globalization, AI, industrial modernization, automation, internationalization, new productive forces, and sustainability. (Read here)