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Consumer confidence robust

By Zhou Yan (China Daily)
Updated: 2009-04-11 08:16

Chinese consumers appear more optimistic amid financial woes than their Western peers due to active bank lending and the recent stock rebound, said David Parma, global president of consumer research at Nielsen, a global information and media company.

"There's big optimism here in the country. We've seen that the banks are still lending, and the mainland stock market has been performing well recently. And there are also indications of the focus moving from exports to domestic consumption. These factors in general generate more optimism," Parma told China Daily.

He noted that China's savings rate, which is much higher than that in the United States and Europe, makes consumers better able to cope with economic difficulties.

China's domestic savings ratio has increased from 37.5 percent of gross domestic product in 1998 to 49.9 percent at the end of 2007, when the figure in the US was just over 0.5 percent, according to Zhou Xiaochuan, governor of the People's Bank of China.

Related readings:  Consumer confidence continues to fall in February  Consumer confidence 'hits 6-year low'

"Chinese consumers will try to trade off the rising unemployment through their better savings, and still look at value brands and private labels when shopping," Parma said, adding that purchasing power here has seen fewer declines than in foreign markets.

Even the uncertain domestic dairy industry, hit hard by the tainted milk scare of last September, has seen a turnaround since December, he said.

"Although consumers switched to foreign dairy brands over the period of the melamine scare, local brands remain relatively strong. Consumer demand for dairy products in 2009 will continue to be positive and strong, " Parma said.

The contaminated milk, which sickened 53,000 children and tarnished the reputation of China's leading dairy brands, led to a significant drop in domestic dairy sales last October, most notably within the milk powder category.

Nielsen Retail Index figures showed that milk powder sales fell 22 percent in October from September, followed by liquid milk with a 19 percent drop. A further fall continued in November, although significantly less than the initial drops.

"Leadership in dairy categories continues to be dominated by local brands," Parma said.

He noted that retailers continued to stock liquid milk during the sales drop period, thus, the shelve in the stocking areas continue to be "pleasant" for local companies, even though they were losing market share. "It's easier to go local because of the nature of the category. "

But Parma also pointed out that the scare could be a learning experience for local manufacturers, an opportunity for them to think about building a stronger and safer brand.

Domestic brands with abundant cash also have more opportunities in gaining sales and market share during a recession, when multinationals are suffering from the plummeting demand in the West, he said.

"Cash is king in crisis, and many Chinese companies have good cash flow. They should continue to invest in fundamentals, like building brand equities and developing product innovation," Parma said.