The rise of China’s local leaders

Hyomi Jie, Portfolio Manager for the Fidelity China Consumer Fund, looks at how dynamics of China’s consumer story are changing due to tremendous growth in wealth through better paid jobs.

The consumer story has been a dominant theme in China for some time, but the dynamics of this are changing. Since the turn of the century China has seen tremendous growth in wealth due to better paid jobs. This was initially led by international businesses setting up in China to take advantage of low wages and a large workforce, but now we see local companies adapting and innovating to become industry leaders in their own right, and cater for a local population with greater earnings power.

This first wave of the consumer story saw people simply buying everyday goods like TVs, fridges and cars. While there are still vast untapped markets here, such as rural China, we are also entering a new stage of consumption − services and premiumisation. 

Many consumers have that TV or fridge, and they do not need another. Now people want to use their hard-earned cash for experiences such as eating out and travel, and for better products. This combined with higher income, better quality of living, higher sophistication and greater choice, is driving a change in consumer trends.

Trading up

These same consumers are now looking to trade up, which means consumer premiumisation and greater brand awareness. The interesting nuance is that there are a number of industries where local Chinese firms are becoming the leading brand or premium product due to having a deeper understanding of the local market and being able to cater to local customs and taste.

International brands continue to be popular in areas like autos. There are also a small number of product categories which just fail to gain customers’ trust, especially infant milk formula and wine. It has been interesting to note recently that one of China’s biggest dairy company’s, Mengniu Dairy, announced a bid to acquire 100% of Bellamy’s, a popular Australian organic infant formula company. This will enable Mengniu Dairy to see the economic benefits of selling a premium foreign brand to domestic consumers. 

Homegrown brands

On the whole, however, Chinese consumers have a growing appetite for local brands as they become increasingly affluent and proud of their own culture. People are willing to pay more for higher quality everyday items like tissues and paper made of organic materials like bamboo. 

This has not gone unnoticed, and Chinese companies are responding by implementing multi-pricing strategies. For example, China’s largest brewer, CR Beer, now has a number of brands in its portfolio that taps in to different market segments and generates a desire for customers to purchase the next tier up. 

Domestic fashion companies are also taking notice and are building premium lines for their brands. Sports company Li Ning, a company well-known in China for functional sportswear, has developed a high-end streetwear line that debuted during New York Fashion Week in 2018. This approach has helped boost sales and its share price.

From Made in China to Designed in China


Another company is JNBY who has one of the biggest shares among domestic designers in the affordable luxury market and has successfully been able to adapt to fast changing fashion trends. JNBY has also built a loyal and wealthy following here with nearly three million people in its membership programme: shoppers who still spend even when the economic climate is a little weaker. JNBY’s WeChat account is a key way to reach customers; they invite everyday customers to model their clothes and send in pictures. The company then reposts photos as a way to interact with their shoppers and gain authentic promotion at the same time.

Premiumisation is a trend that extends right across the consumer sector, from beer to home appliances to fashion, and we are just at the start of the journey. We are moving from ‘Made In China’ to ‘Designed and Created In China’. 

About the author

Hyomi Jie joined Fidelity in 2010 where she covered Korean consumer stocks and later the Greater China internet sector. During a highly rated period in research, she also successfully ran an internally-funded Pilot Fund. Hyomi was subsequently promoted to portfolio manager in January 2017 and her track record made her an ideal candidate to take over the Fidelity China Consumer Fund in August 2017. Prior to joining Fidelity, Hyomi worked at AIG Investments and The Boston Consulting Group. She has an MBA from The Wharton School in the United States.

Related fund: Fidelity China Consumer Fund W-ACC-GBP


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This information is for investment professionals only and should not be relied upon by private investors. The ideas and conclusions here do not necessarily reflect the views of Fidelity’s portfolio managers and are for general interest only. Past performance is not a reliable indicator of future returns. Investors should note that the views expressed may no longer be current and may have already been acted upon. The Fidelity China Consumer Fund can use financial derivatives which may expose it to a higher degree of risk and can cause investments to experience larger than average price fluctuations. Changes in currency exchange rates may affect the value of an investment in overseas markets. Investments in small and emerging markets can also be more volatile than other more developed markets. Reference to specific securities should not be interpreted as a recommendation to buy or sell these securities but is included for the purposes of illustration only. Investments should be made on the basis of the current prospectus, which is available along with the Key Investor Information Document and current and semi-annual reports, free of charge on request, by calling 0800 368 1732. Issued by Financial Administration Services Limited and FIL Pensions Management, authorised and regulated by the Financial Conduct Authority. Fidelity, Fidelity International, the Fidelity International logo and F symbol are trademarks of FIL Limited. UKM1019/24798/SSO/NA