Can China’s emerging cities help counter the economic slowdown and US-China trade war?
- Retail sales growth in lower-tier cities have posted double-digit growth in the past few years compared with larger cities like Shanghai, Beijing and Guangzhou
- Companies are focusing on growing sales in emerging regions, but they are only likely to alter the national consumption picture in the long term
For 2019, Chinese investment firm and retailer Five Star Holdings is projecting a 50 per cent increase in revenue, even though China is fighting an economic downturn and a trade war with the United States.
The company’s optimism stems from the strong revenue growth it has experienced in the past few years, half of it from China’s smaller cities and the rural regions where spending growth has surpassed that of major cities.
Five Star, which has annual sales of about 50 billion yuan (US$7.4 billion), is backing China’s unheralded regions to keep delivering.
It operates an e-commerce platform targeting less developed cities rural areas, and also a logistics service – Huitongda Network – which covers 17,000 villages and towns across 20 provinces.
Consumers in smaller cities and rural areas now spend about 70 to 75 per cent of their annual disposable income, said Five Star’s strategic development general manager Frank Hu.
“This is compared with 60 to 65 per cent in tier one [such as Beijing and Shenzhen] and two [such as Chengdu and Chongqing] cities, and showed greater confidence and willingness to spend,” said Hu.