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China’s market resurgence post-lockdown could turn up the heat on new overseas players


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China’s economy has been effected because of year-long Covid restrictions and lockdowns coupled with drop in overseas demand. Consequently, business has slowed down creating widespread employment. Currently, there is huge pressure on Chinese factories as US demand has dropped after an inventory pile up in the first half of 2022, with apparels remaining unsold and consumer prices moving north over summer and autumn months of 2022.

Coping with post-pandemic demand slow down

For China’s economy, the drop in overseas demand has created huge unemployment problems with lack of high-skilled factory workers now much needed and large number of unskilled workers remaining jobless. The cut-throat competition in domestic markets has led to raging price wars between different local brands, all out to get a share in a shrinking market pie. The current transition from simply manufacturing goods in mass factories to actually conceptualising and branding them is a slow and expensive process that has led to unemployment in China’s changing economic landscape.

Although China abruptly ended its zero-Covid policy in December 2022, business activities were curtailed throughout last year, which adversely affected the economy. Retail sales in the US, which has been China’s largest trading partner on a single-country basis, slowed last year and are expected to be slow in 2023.

As per a CNBC report, Chinese GDP grew around 3 per cent in 2022, its second-slowest growth rate since 1976 and well below the government’s target of around 5.5 per cent. However, short-term data indicates quicker-than-expected recovery as Zero Covid policy restrictions eased and the economy struggles to return to normal.

Factories focus on creating their own brands

Although China still maintains its status as the world’s factory and supplies more than a quarter of global products, some other low-cost manufacturing countries such as Cambodia, Vietnam, Bangladesh have steadily lured away clients during the pandemic and lockdowns. The improved product quality of these new manufacturing hubs at practically the same prices as well as the plethora of new e-commerce channels has given greater choices to customers around the globe. Many Chinese factories are now contemplating launching their brands rather than mass-producing for an overseas company.

Reports suggest, garment factories are experiencing tough times especially those involved in traditional garment making catering to export orders. Some are not breaking even. Many of these units that manufactured for international labels are now contemplating designing, branding and distributing clothes under their factory brand, to survive.

Many small family Chinese businesses are now adopting cost-saving strategies such as opening factories in Cambodia and integrating robotics into their facilities, lessening financial pressures from rent among other things. Companies are also focussing on online retail with live-stream hosts to showcase products, similar to many US shopping channels to reach out to American consumers, who keep them afloat.

With these new ways of doing business and government’s fiscal support, analysts feel the Chinese economy will be back with a bang by the second half of 2023. Reopening post lockdowns will be spearheading the economy while emerging markets will have to fight tooth and nail to keep their share of the market pie built when China’s chips were down.


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