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Why do Chinese consumers favor domestic brands? [Copy link] 中文

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Post time 2019-10-21 09:56:20 |Display all floors
Editor's note: Hou Ruoshi is the deputy director of the Institute for Fiscal Big-Data & Policy of Zhejiang University. The article reflects the author's opinions, and not necessarily the views of CGTN.

As China becomes the world's largest exporter, Chinese products now enjoy growing popularity in global markets. Quite a number of Chinese brands are much sought after by foreign consumers.

Just a few years ago, Chinese consumers were infatuated with foreign products like toilet lids, mobile phones, computers, milk powder, etc. To get stuff like these, they went abroad for shopping, or commission others to buy things on their behalf, or use the international services of online shopping websites.

Back then, to meet Chinese consumers' demand for foreign goods, international companies started to cast their eyes on China's enormous market, which possess 1.4 billion consumers. As put by The Wall Street Journal, "for years, American companies view China as a land of new opportunity."

Today, China contributes to one-third of the world's economic growth and ranks second globally in terms of household income.

It is also expected to overtake the U.S. in 2021 to become the world's largest consumer market with a 5.8 trillion U.S. dollars worth of retail sector. In a sluggish global economy, foreign companies look to Chinese consumers to cushion the blow of weak domestic consumption and shake up their businesses.

However, as the development of domestic brands gathers new momentum, Chinese consumers are turning their back on foreign goods.

According to McKinsey & Co., the market share for foreign products in China has dipped to the lowest point since the Global Financial Crisis, with the most prominent drops seen in areas including pet food, vehicles, video games, smartphones, and home appliances.

The shift, according to The Wall Street Journal, "signals a possible end of an era."

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Post time 2019-10-21 09:57:05 |Display all floors
The growing popularity of domestic brands among Chinese consumers is a natural product of its economic development. For countries, especially big ones, home-made products are usually popularized alongside economic growth. This can be explained by the economic concept of import substitution.

At the early stage of economic development, people's daily life and production rely on imported goods, rather than their shoddy and pricy domestic counterparts. Years later, when foreign investment and technologies have promoted national industrial development to the point of being able to manufacture goods that would otherwise have been imported independently, the period of "import substitution" comes to an end.

Some countries would start to work on their export industry and build competitive edges for domestic products in the global market. This is exactly what China did after the reform and opening-up policy was initiated.

Quality and affordable Chinese products appeal strongly to domestic consumers. China's competitiveness appears in both lower labor costs and desirable labor skills. This has made Chinese workers true heroes behind the country's productivity growth and the economic miracle.

For the same product, the manufacturing cost in China would be way lower than in some foreign countries; a case in point is the balance bike for kids. Back in 2008, an imported balance bike cost as much as 60,000 Chinese yuan, while a domestically manufactured counterpart now costs only 600 Chinese yuan.

Besides, the manufacturing cost of drones in China is only half of that in the U.S.; and Chinese mobile phone brands such as Huawei and Xiaomi, on par with Apple and Samsung in terms of quality and performance, are much cheaper.

Chinese consumers' increasing preference for domestic brands is also attributable to the fact that China's export processing industry feeds back into the production of domestic goods. Advantages in labor costs have made processing trade one of the priority sectors that China chose to develop at the early stage of its economic takeoff.

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Post time 2019-10-21 09:57:27 |Display all floors
This sector has helped introduce advanced foreign techniques and cutting-edge managerial expertise into China, and subsequently boosted the country's manufacturing capability.

Driven by ballooning domestic consumption, factories originally manufacturing products for foreign brands are now working for Chinese clients, yet following exactly the same standards. Products thus made are as good as their foreign counterparts in terms of features and quality, so Chinese consumers would naturally find them attractive.

Meanwhile, Chinese buyers start to turn a cold shoulder to some major international brands. This, to some extent, is of these brands' own making. Poor management of foreign companies operating in China and quality issues have all contributed to their downfall.

For example, the swimming trunks of a globally renowned brand, sold at a stunningly high price of 500 Chinese yuan per pair, are not even as well made as the same products from a Chinese brand, which only cost 70 Chinese yuan per pair.

That aside, some foreign companies, although running their businesses in the Chinese market, are too arrogant to forgo their sense of superiority. Some of them have done things that have hurt the feeling of the Chinese people or challenged China's political red line.

Admittedly, China has been riding on the wave of globalization to develop its economy, and at least part of the credits of growing popularity of domestic brands among Chinese consumers should go to foreign-funded companies for the transfer of their technology and management expertise.

Chinese brands are bound to grow exponentially in years to come, but this does not mean foreign products will be rejected. Instead, a closer partnership will be forged between Chinese and foreign companies. China and the rest of the world are now inextricably linked with each other.

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Post time 2019-10-26 13:43:58 |Display all floors
"The shift... "signals a possible end of an era.""

In other words, it hasn't happened yet.

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