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After a “Zero covid” policy, China is slowly (but surely) lifting some restrictions since last Wednesday. Good or bad news for luxury and other sectors?
China has finally lifted some health restrictions. The population of more than 1.4 billion inhabitants can now move around more freely, without tracing their movements and finally resume a more or less normal life. Little by little, tourists will be able to fly to the second largest country in the world again, and walk the streets in search of luxury.
But we are not there yet. For the moment, a large part of the Chinese population sees this lifting of restrictions as a risk, not a relief. Many are rushing to pharmacies rather than stores for fear of running out of medicine. Others prefer to stay at home, in partial confinement, to avoid any risk of illness. This caution shows why analysts do not expect a strong rebound in spending in China.
In some luxury groups such as LVMH, or in some sectors, such as fast food with players like McDonald’s, Starbucks or Yum China, things have improved somewhat.
However, the relaxations have also led to a new wave of infections. This morning, the country reported more than 8,600 new cases of covid. According to experts, 60% of the population could eventually be affected.
Restrictions lifted, but economy still in disarray
Some economists have lowered China’s growth forecasts for the beginning of next year. They are expected to fall in line with this year’s growth numbers, which rank among the worst in decades.
“Moving from quarantine in isolation facilities to quarantine at home will not increase retail sales significantly,” said Iris Pang, chief economist at ING.
Some reports from analyst firms note an increase in domestic flight and movie ticket bookings, but the baseline is weak. In addition, the easing of restrictions is not the same across regions, with some retaining measures that have been dropped by others. A difference that could be a persistent brake on the growth of the economy and the potential prospects of luxury goods.
Opening up too quickly?
Many companies – in all sectors – say they were taken by surprise. The lifting of the ban took place overnight, and some traders and entrepreneurs were unable to prepare in time. This is particularly true for the hotel industry. Many establishments have been used for quarantine purposes. After last Wednesday’s announcement, it was difficult for owners to reopen to Chinese tourists while hiring new employees.
Meanwhile, sales of items such as cosmetics, wine and spirits are also expected to continue to suffer. Cautious consumers will indeed prefer to stay at home in the coming months according to Jason Yu, managing director of consumer research firm Kantar Worldpanel for Greater China.
For others, including a luxury industry heavily dependent on Chinese spending, the lifting of restrictions is a good thing: “My baseline scenario is that the easing should encourage Chinese consumers to start enjoying life and spending money again, which will benefit, among others, the biggest luxury brands,” said Luca Solca, analyst at Bernstein.
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After a “Zero covid” policy, China is slowly (but surely) lifting some restrictions since last Wednesday. Good or bad news for luxury and other sectors?
China has finally lifted some health restrictions. The population of more than 1.4 billion inhabitants can now move around more freely, without tracing their movements and finally resume a more or less normal life. Little by little, tourists will be able to fly to the second largest country in the world again, and walk the streets in search of luxury.
But we are not there yet. For the moment, a large part of the Chinese population sees this lifting of restrictions as a risk, not a relief. Many are rushing to pharmacies rather than stores for fear of running out of medicine. Others prefer to stay at home, in partial confinement, to avoid any risk of illness. This caution shows why analysts do not expect a strong rebound in spending in China.
In some luxury groups such as LVMH, or in some sectors, such as fast food with players like McDonald’s, Starbucks or Yum China, things have improved somewhat.
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After a “Zero covid” policy, China is slowly (but surely) lifting some restrictions since last Wednesday. Good or bad news for luxury and other sectors?
China has finally lifted some health restrictions. The population of more than 1.4 billion inhabitants can now move around more freely, without tracing their movements and finally resume a more or less normal life. Little by little, tourists will be able to fly to the second largest country in the world again, and walk the streets in search of luxury.
But we are not there yet. For the moment, a large part of the Chinese population sees this lifting of restrictions as a risk, not a relief. Many are rushing to pharmacies rather than stores for fear of running out of medicine. Others prefer to stay at home, in partial confinement, to avoid any risk of illness. This caution shows why analysts do not expect a strong rebound in spending in China.
In some luxury groups such as LVMH, or in some sectors, such as fast food with players like McDonald’s, Starbucks or Yum China, things have improved somewhat.
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