Earlier this year, China’s online luxury market’s revenue grew to over 10 billion yuan, or $1.59 billion. A report claims that the sector will continue to grow on a yearly basis, and has the potential to increase by 30% over the next few years.
Adam Roseman of ARC China explained in a newsletter that “the turnover of the nation’s online high-end brands hit an unprecedented 10.73 billion yuan last year, surging sharply by 68.8% compared wuth 2010’s sum of 6.36 billion yuan, according to findings released by the Internet analysis research company iResearch Inc.
The market will continue to increase at a speed of 30% over the next few years, which mean the turnover is likely to hit 37.24 billion yuan by 2015, said the report.
Revenues generated by the luxury goods’ direct-sales stores on the Internet were not included in the turnover.”
Adam Roseman, founder of ARC China, recently discussed China’s consumer industry in a newsletter article.
“China’s consumer sector is something of a defensive play,” he wrote. “But DBS Group Research claims that the consumer sector provides ‘beauty of both sides.’ To the somewhat poetic DBS analysts consumer companies offer ‘better resilience during the harsh times as well as fruitful returns whenever skies clear again.’
“More practically, the Chinese government favors rebalancing economic growth toward consumption. To that end, it is pursuing policies that increase the minimum wage, limit individual medical costs, accelerate urbanization with new transportation systems, and build millions of units of affordable housing.”
In a company newsletter, ARC China’s Adam Roseman discussed Jim O’Neill’s outlook on the Chinese economy in comparison to that of analysts of the region.
According to O’Neill, China’s growth in the fourth quarter was indeed slowly than that of previous years, but still exceeded the expectations of numerous experts who predicted a “hard landing” for the economy in 2012.
Roseman writes that “China’s economy grew 8.9% in the fourth quarter from a year earlier, the statistics bureau said in Beijing. That exceeded the 8.7% median estimate of 26 economists surveyed by Bloomberg News and is above the 8% that signals a ‘soft landing’ for China, according to SinoPac Financial Holdings Co.”
The article explains that O’Neill believes the overheated property market is China’s main economic problem. Still, China’s policy makers have been able to reduce the issue by closing in on monetary policy.
The recovery of China’s hotel industry has increased over the last few years, according to a newsletter article by Adam Roseman of ARC China. Many executives feel that China is a haven for luxury hotels.
“We haven’t felt the crisis that they are experiencing in the U.S. and Europe,” said Charlie Dang of Starwood Hotels and Resorts Worldwide. “The domestic economy is still very strong. Generally the second and third tier cities are growing rapidly and that helps our business.”
In general, the Chinese have been boosting the luxury markets recently. According to department store Harvey Nichols, Chinese shoppers increased the store’s December post-tax annual profits by 32%.
Selfridges, another luxury department store in London, has begun accepting payments via China UnionPay cards as a result of the trend.
In a newsletter article, Adam Roseman of ARC China discussed China’s approach to Western infrastructure. He wrote that according to Lou Jiwei, chairman of China Investment Corporation, the organization plans to invest in the run-down infrastructure of developed countries around the world. The fund intends to begin with buildings in the UK.
The Chinese fund “is keen to team up with fund managers or participate through a public-private partnership in the UK infrastructure sector as an equity investor,” Lou wrote in the Financial Times. “We at CIC believe that such an investment, guided by commercial principles, offers the chance of a win-win solution for all.”
Roseman explained in the newsletter: “The British government is looking to UK pension funds and sovereign wealth funds in the Middle East and Asia to help finance upgrades of roads, railways, ports and social housing.
According to Rachel Kyte of the World Market, China’s carbon market has “substantial potential” and will be significant in the global carbon pricing when the national system is initiated.
Australia is also planning to institute a carbon tax, Kyte said, clearing a path for carbon emissions trading and setting an example for other countries currently struggling with environmental policy debates.
“As China embarks on pilots of a carbon market nationwide, if these pilots emerge into a national system by 2015, it has the substantial potential to help set the carbon price globally or at least set a signal of the carbon price as a substantial factor,” Kyte said.
According to an article by Adam Roseman of ARC China, Kyte added that China is currently working to expand its green economy measures, and innovative technologies will undoubtedly originate there.
“For example, China’s ‘green credit’ policy to link environment performances to the availability of credit is highly innovative and important because countries like Thailand, Laos, and Vietnam are trying to replicate this policy,” she said.
China’s 3G cellphone users reached 102 million by the end of September, according to an article by Adam Roseman of ARC China. According to the Ministry of Industry and Information Technology, 43.16 million of the mobile phone users used China’s self-developed TD-SCDMA standard.
Mobile phone users have been on the rise over recent years, resulting in a record-high of 1.24 billion telephone users in China, said Xiao Chunquan of the Bureau of Operation Monitoring and Coordination of MIIT.
According to Xiao, the 3G network covered all cities, counties and several villages in China. During the first three quarters, China’s telecom sector publicized a 10% yearly growth in revenues from its primary business.
In ARC China’s newsletter, Adam Roseman quoted Peter Lacy, a managing director at Accenture.
In an interview with China Daily, Lacy explained that “China has a robust domestic demand and encouraging growth figures. While the wage arbitrage between China and Western markets is closing up, many multinationals are still keen to be a part of China’s growth story.
“What we see in China is rapid urban development, increasing awareness of corporate social responsibility and energy security- all factors creating a stable investment environment for foreign businesses.”
In a company newsletter, Adam Roseman of ARC Investment Partners discussed property prices in China. China’s banking regulator recently stated that the country’s lenders are capable of handling a 50% fall in property prices. Chairman of the China Banking Regulatory Commission Liu Mingkang said the regulator had performed the stress tests mainly on domestic banks.
“The stress tests do not reflect the CBRC’s view about the property market’s direction, but the results should strengthen the confidence of all banks in implementing the property controls,” Liu said.
In the article, Roseman explained that “Mortgages and credit to property develppers account for about 20% of banks’ loan books in China, so stress tests that are confined to the direct impact of falling house prices have produced only mildly negative results in the past. But the property sector is a pillar of the Chinese economy and the indirect impact of a downturn on other industrial sectors and sentiment more broadly could be severe.”
Certainly, companies like ARC China with Founder Adam Roseman always have their eyes set on China and its latest developments. In recent news, Jungdong Mall, which operates one of China’s largest e-commerce sites, may be set for some big advancements. They are looking to raise up to $5 billion next year in New York for what may be the largest internet-related IPO in history.
As the Wall Street Journal reports, this Beijing-based company which operates the e-commerce site 360buy.com is organizing its plan of action at the moment. 360buy.com has investments from Russian’s Digital Key Technologies and other sources, but they face touch competition from other e-commerce giants such as Alibaba Group and Dangdang.
Time will tell how Jingdong Mall will do – and potential investors and those with interests in the Chinese market would do well to keep their eyes set in this area.