China’s commercial sector to get 2024 boost from rural commerce, green products, ‘silver’ economy: analysts

China’s commercial sector will see a rebound in 2024 as retail sales are expected to grow by more than 6 per cent thanks to supportive government policies and recovering consumer confidence, according to a Hong Kong-based think tank.

Despite gloomy prospects for the property market, China’s gross domestic product (GDP) may grow 4.8 per cent this year, Fung Business Intelligence said in its “Ten Highlights of China’s Commercial Sector 2024” report released on Friday. Sectors with strong growth potential, including rural commerce, green products and the “silver” economy catering to older consumers, will help drive growth in commerce, the report said.

“The government’s more proactive economic policies and expectations for China’s steady economic growth will help China’s consumer market recover this year,” said Chang Ka-mun, senior adviser with the think tank.

Retail spending in China jumped 7.2 per cent year on year to 47.1 trillion yuan (US$6.6 trillion) in 2023, according to the National Statistics Bureau.

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Service consumption rebounded in 2023 as people sought experiences they missed during the pandemic, with sectors such as catering, culture, tourism and entertainment seeing a resurgence in business, the report said.

“Chinese consumers are placing an increasingly strong emphasis on the overall experience when making purchasing decisions,” said Helen Chin, the company’s vice-president. “They value personalised consumption and are highly price-conscious and value-driven.

“Store experiences have also gained significance, highlighting the importance of creating immersive and engaging environments that captivate and retain consumers.”

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Companies in China are actively pursuing long-term sustainable development, driven by policies that promote green manufacturing and consumption, as well as a shift in consumer values, Fung’s report said.

Consumers are increasingly seeking eco-friendly and sustainable products and services, leading to an expansion of the green market, including renewable energy, electric vehicles, organic food and eco-friendly household goods, Chin said.

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“Being transparent while making genuine efforts to go green is essential to gain favour from environmentally conscious consumers,” she said, stressing that enterprises should avoid superficial efforts that could lead to accusations of greenwashing.

Rural commerce has greater growth potential than that in large cities, thanks to robust e-commerce platforms and supportive policies, the report said.

China issued a three-year plan in July 2023 to promote county-level commerce, which aimed to establish around 500 leading counties with upgraded commercial systems by 2025.

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“Despite the ongoing process, the county-level commercial system still needs a wider variety of goods, further improvement in the consumption environment, and a reduction in logistics and distribution costs,” the report said.

Enterprises should also step up in offering elderly-friendly products, as the silver economy will expand as the percentage of elderly people in China grows. Recent joiners to this cohort have substantial purchasing power, the report said.

The ready-meal industry, digital transformation and cross-border e-commerce also present opportunities for companies in China in the year ahead.