Retail in Asia

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What’s happening in China’s commercial sector?

Ten Highlights

Opportunities long sought by Hong Kong and other foreign exporters producing in China to have easier access to its domestic market are beginning to materialize, according to the annual Ten Highlights of China’s Commercial Sector 2021, released by Fung Business Intelligence.

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Pandemic notwithstanding, in the past year, China introduced a raft of measures to facilitate domestic trade by export-oriented businesses. These include relaxing market access restrictions, simplifying and standardizing testing and certification, easing tax burdens, helping export manufacturers build domestic distribution channels, strengthening intellectual property protection, and offering financial and credit support.

According to the Ten Highlights report, major e-commerce platforms have rolled out initiatives to help export-oriented businesses resell their products in the domestic market. Platforms are also offering consumer insights and big data analysis to help export manufacturers develop new products better attuned to the preferences of Chinese consumers.

Underpinning such developments is the continued rise of the Chinese middle class, and the incoming 14th Five-Year Plan (2021-25), which will further energize development of China’s domestic market under the government’s “dual circulation” strategy of achieving increased self-reliance, as a buffer against ongoing disruptions – from the pandemic to geopolitics – affecting external markets.

A further positive factor is the Regional Comprehensive Economic Partnership (RCEP) concluded in November last year. The world’s largest free trade deal, it will facilitate freer flows of goods between China and 14 other Asia-Pacific economies and lower business costs.

More than 160 top-tier Mainland experts contribute to Ten Highlights, now in its 18th edition. A research partnership between Fung Business Intelligence in Hong Kong, and the Expert Committee of the China General Chamber of Commerce, in Beijing, the report comprehensively tracks how China’s commercial sector is evolving, providing overseas enterprises and investors with ground-level insights into latest trends and issues.

The ten highlights forecast for 2021 are:

1. China’s government will continue to promote and strengthen the development of distribution and retail

2. Strong growth is expected in China’s consumer sector as the government’s “dual circulation” development strategy is further energized by the 14th Five-Year Plan (2021-25)

3. Riding the “dual circulation” wave, export manufacturers producing in China will be able to turn more to sales in the domestic market

4. The transformation of agricultural wholesale markets will accelerate, along with revitalization of China’s rural economy, helped by greater distribution efficiency

5. China’s catering sector will recover, and more effort will be put into reducing food waste

6. Digitalization and O2O integration will remain key development trends for lifestyle services

7. RCEP will spur global economic recovery and provide a strong boost to cross-border e-commerce in the Asia-Pacific

8. Changing consumer demands and technological advances will continue to drive innovation; for example, there will be no end in 2021 to the boom in social commerce and livestreaming

9. Embracing digital technologies and innovation remains key for retail businesses in China to seizing new opportunities and staying competitive

10. China’s night-time economy will continue to evolve and flourish, with huge growth opportunities for small stores and shops

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For further details on each highlight, please refer to the full report.

The report’s authors advise enterprises in China to stay agile and adapt quickly to change. Businesses should continue to innovate, embrace social commerce, deploy mobile commerce strategies, leverage technology to optimize supply chains and enhance operational efficiency, and stay abreast of latest government policies and regulations.

The experts believe that the multitude of pandemic-driven changes in China’s consumer habits and patterns are likely to be permanent, which will present enterprises with new opportunities, as well as challenges.

They also point out that, with RCEP, it will be easier and cheaper for companies from other member countries to enter China’s domestic market, both through cross-border e-commerce and physical retail. Foreign trade enterprises anchored in China, meanwhile, can further expand their footprint in ASEAN’s promising production and consumption markets.

“As China’s growth becomes increasingly driven by domestic consumption. Enterprises will find new openings for business growth, especially with the upgrading of consumption to include more sophisticated, higher-value products and services,” the authors write.