Foreign brands are back in China. But the economy has cooled and domestic competition is dug-in.

MW Foreign brands are back in China. But the economy has cooled and domestic competition is dug-in.

Tanner Brown

Experts tell MarketWatch the key to connecting with Chinese customers is being willing to depart from home-market strategies and embracing local tastes

Even as Chinese brands flex their muscles both domestically and abroad in the high-profile market for electric vehicles, many consumers in the world's second most populous country appear ready to open their wallets for goods affixed with foreign branding.

Shanghai-based Liu Wenming, for one, is ready to boost stock of imported goods for his various retail outlets across China.

"March, April and May in particular are going to be big buying times for me across the country. I'm attending trade events in Shanghai, Chengdu, Guangzhou and Beijing," he told MarketWatch in a phone interview.

China is going to be brimming with foreign brands showcasing their goods next year. Consumer-goods expos will be running throughout the year for products including dining ware, cosmetics, food and beverage, baby care, automotive, and many other items that Chinese consumers are keen to have flashing foreign labels rather than domestic ones.

China's share of the global electric-vehicle market reached 76% in October, and Shanghai's April auto show - one of the world's biggest - will feature foreign and domestic brands, alongside joint ventures such as that between FAW and Volkswagen.

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"Consumption is starting to revive a bit, and customers are hungry for foreign brands," Liu said. He has business partnerships in multiple cities across China that mark up foreign goods for Chinese buyers, including toys and clothing outlets in Shanghai and cosmetics in Beijing.

The busy schedule of events extolling foreign goods marks a big upswing since the pandemic, which decimated consumer confidence and put China into a new normal of slower economic growth.

But signs are emerging that consumers and businesses are acclimating to the new era of moderated macroeconomic expansion and are finding ways to buy and sell within their means.

"I'm seeing more interest from Chinese buyers, and in turn more interest from foreign firms that sell here [in China]," said Shanghai-based Wang Ming, whose three-person firm connects local merchants with overseas customers.

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Last week, top policy makers led by President Xi Jinping announced they were increasing the importance of boosting consumption to the country's top economic priority. The elite Politburo - headed by Xi - said this would be done through stimulus measures, including a "moderately loose" monetary policy in 2025, implying more interest-rate cuts to come.

The group also promised a "more proactive" fiscal policy that analysts interpreted as making way for increased central-government borrowing to juice multiple sectors of the economy.

"The wording in this Politburo meeting statement is unprecedented," said Zhaopeng Xing, senior strategist at Australia & New Zealand Banking Group.

Experts said foreign manufacturers with a footprint in China should concentrate their thinking on consumer tastes and local competition more than broader economic trends.

"Foreign brands could do a better job having a more granular focus targeting audiences, and developing products, propositions and touch points that are better suited to them - rather than just a generic strategy hoping to appeal to 'Gen-Z' or even 'Chinese mothers,' " said Mark Tanner, managing director of Shanghai-based China Skinny, a consultancy that focuses on Chinese consumers.

"In addition to developing and executing a smart strategy, I'd ensure that companies are structurally set up to understand the market and adapt to it swiftly - reducing the steps and gates for decision making to ensure they can compete with nimble domestic competitors and continue to attract and retain China's best and brightest," he told MarketWatch.

Tanner's firm maintains a list of upcoming expos and trade shows for overseas consumer brands in China.

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China's biggest buying season, Chinese New Year, will run from late January into early February. Some foreign brands have already begun campaigns tailored to the holiday, which ushers in the Year of the Snake in China.

British luxury fashion brand Burberry (UK:BRBY) (BURBY) has rolled out garments and scarves with the letter "B" embroidered with a snake, and has recruited leading Chinese starlet Zhang Jingyi for a series of short films.

On China's Twitter-like Weibo, the hashtag "Burberry 2025 CNY collection" quickly racked up more than 12 million views and the hung in the top trending section for days.

Scotch whisky brand Glenfiddich has partnered with contemporary Chinese ink artist Zhang Yu on a line of holiday-themed bottles.

Claudia Falcone, Glenfiddich's global brand managing director, emphasized blending foreign-product strengths with local-market traditions. "The Lunar New Year embodies togetherness and harmony," she said of the whisky brand's holiday campaign.

But for smaller brands, or newer entrants into the Chinese market, Shanghai's Wang said: "It doesn't matter if you are Starbucks $(SBUX)$ or you're just looking to get your products noticed by Chinese consumers for the first time. Learn the culture, collaborate with trusted local [Chinese] partners, and have the flexibility to depart from your home-market strategy if needed."

Tanner Brown covers China for MarketWatch and Barron's.

More Tanner Brown dispatches:

China's banking system is still suffering whiplash from its pandemic-era practices

U.S. companies reassert their dominance of Fortune Global 500 ranks vs. rival China

China's economy needs more than this stimulus plan to lift it out of the doldrums, experts say

The world's largest pension fund may be running dry

American and European companies lament record difficulty operating in China

Luxury-goods brands fear their golden goose - China - is cooked

-Tanner Brown

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December 23, 2024 05:50 ET (10:50 GMT)

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