🥊Why does 'China’s Age of Malaise' mean that your China watching needs a revamp? | Following the yuan

-- featuring my arguably irrelevant iPhone gallery 🤔

By now, many of you may already be familiar with The New Yorker piece and the reactions it spurred among China observers.

In the lengthy piece, Evan Osnos, the magazine’s China correspondent from 2008 to 2013 after Peter Hessler, captured people’s sentiments about the country’s future during his recent trip to China.

Among the reactions I’ve seen, the ones from those rooted in or well-acquainted with China, often highlight the article's limited scope, as the latter mostly focused on accounts of the elites, intellectuals, and liberal-leaning urban middle-class. This segment of demographic tends to harbor a pessimistic view of China's trajectory, feeling the pull to leave.

While acknowledging this perspective, my key takeaway isn't a bleak view of China's future, but that business and finance entities should prioritize regional and city-level insights and localization.

Why? As many of the elites and urban middle class are on their way out, what’s left are the vast majority of people, who are supporting the government, and do not have the means or intent to leave their homeland.

At Grand Liz, a ‘guochao’ bakery chain that incorporates Chinese elements into Western baked goods, 2022. Image: author

What’s more, an increasing number of young Chinese consumers may sneer off the idea of studying abroad or learning about foreign culture, as we see in analysis about Gen-Zs from the country; they may also become more price-sensitive and more value-driven in the economic downturn, at least in the near future.

Post-2008, following the Beijing Olympics' welcoming aura, China's consumer markets soared. Recognizing this potential, foreign brands flocked in. By 2018, social retail sales had more than tripled to 377.8 billion yuan (US$51.6 billion) from 111 billion yuan in 2008.

Osnos left China in 2013, around the time when China’s so-called new consumption goods took off. This period witnessed burgeoning domestic startups, fueled by investments, catering to an expanding middle class keen on "consumption upgrade". Those years are the golden period of time where foreign brands reaped the benefits of demographic dividend.

Now, China is visibly becoming more closed off, and first and second-tier cities are saturated with competition from home and abroad.

Last summer, during Shanghai’s shopping festival. This shopping district in Shanghai was blocked under zero-Covid policy, 2022. Image: author

This past weekend, people had been paying tribute to Prime Minister Li Keqiang, who passed away at age 68 of a heart attack in a Shanghai hotel. On my WeChat moments, some of the widely shared pieces of content are video clips of him vowing that China will commit to its policy of “reform and opening up”.

People (to be exact, my middle-class friends and acquittances) are sharing them, because it’s not the reality. Yes, we see Tesla’s super factory doing super well; yes, we see propaganda from local papers singing foreign execs’ confidence in China market. But companies are voting with their wallet, and the amount of foreign direct investment continues to show that there is little confidence, as the number fell 34% to around US$10 billion in September.

This past weekend, social e-commerce platform Xiaohongshu launched a physical campaign in Columbia Circle, which was a popular site for American expats a century ago, 2023. Image: author

So, what does it mean to business/finance organizations focused on China in 2023?

Your insights need to become more local because:

• More trends will become China-specific with unique cultural and policy shifts.

• The potential for growth lies in lower-tier cities, but it's not a guaranteed success for brands who are not bothered to further localize their strategies.

To succeed, a superficial understanding won't suffice. I hope I don’t sound too preachy but you should trust local talent; you should come here in person and immerse yourself in not just premier malls in Beijing and Shanghai, but outside your comfort zone; you should use various information sources, and remember that there are always experts/consumers outside social media platforms.

KFC China has won back young people’s hearts after a complete renovation and with constant marketing collaborations, 2023. Image: author

I often tell people that the reason why I decided to go into journalism wasn't to break news or do exclusives —- that is secondary to me. I do it to enhance mutual understanding and answer questions, with China as the focus throughout my career, first as a translator, then a reporter.

Over the last few months, aside from writing and reporting, I’ve also been doing consumer insights and market research projects and thoroughly enjoyed them. They have a big overlap with business reporting, but now I feel like I’m closer to business decisions and can directly (hopefully) influence them. More on that at another time.

Let me know your thoughts about the article, and your China-watching approach/strategy below! 🔚