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Cherries are an affordable luxury for China’s middle class amid an economic downturn. Photo: Handout

China’s cherry phenomenon bucking trend of the overall economic slowdown

  • Consumers holding back from spending on big-ticket items like cars, appliances and mobile phones, but will buy pricey food items
  • Analysts say strong sales of less expensive items will not offset ‘consumption downgrade’ by middle-class consumers

If there is still a luxury item left on Chinese consumers’ shopping lists these days, it is probably cherries.

The sweet red fruit used to be rare on the tables of Chinese families because they were unaffordable.

But the once “aristocratic” cherry has become accessible to the Chinese middle class in recent years, with sales on fresh food e-commerce platforms jumping, particularly during this month’s Lunar New Year, with media scrambling to report on the boom even as the economy cools nationwide.

The cherry phenomenon bucks the trend of the overall slowdown in consumption, which contributed more than 70 per cent to China’s economic growth last year.

During the Lunar New Year, growth of national retail and catering revenue slowed to 8.5 per cent, according to the Ministry of Commerce.

Car sales have also fallen for seven consecutive months, with January down 15.8 per cent from a year earlier, according to the China Association of Automobile Manufacturers.

Some observers regard the rise in cherry sales as the “lipstick effect”: when the economy worsens, consumers forego big expenditures but splurge on less costly but still high-end goods.

Beijing Missfresh, an e-commerce platform that sells fresh food, said in a report that between January 18 and January 22 sales of cherries from Chile – China’s biggest supplier of the fruit – rose 32-fold from the same period of last year.

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Wu Jiazhe, who imports cherries from Australia’s island state of Tasmania, said his sales had already doubled to 100 tonnes this year.

Two years ago, Wu left behind more than a decade in the steel business and set up his own fruit shop in partnership with an orchard in Tasmania, as the Chinese economy rebalanced from manufacturing to consumption.

Michelle Lam, Hong Kong-based Greater China economist for Societe Generale, said: “A lot of these micro data are from a low base so you can have very impressive growth rates. But I do agree that this is a sign of continued consumer rebalancing. As the supply of quality products improves, it generates demand.”

Last year, China imported more fruit than it exported for the first time in several years, according to the Ministry of Agriculture and Rural Affairs.

In 2018, exports rose 1.2 per cent to US$7.16 billion while imports rose 34.5 per cent to US$8.42 billion – a fruit trade deficit of US$1.26 billion, compared to a surplus of US$820 million in 2017.

Larger fruit imports are also a result of Beijing’s promise to import more products globally as a way to open up its markets to the rest of the world.

China’s imports of fruit exceeded its exports in 2018 for the first time in several years. Photo: Xinhua

The General Administration of Customs allowed Uzbekistan to sell cherries to China in May and gave Argentina the green light in January, expanding the number of source countries for the fruit to 10. The others are Chile, the United States, Canada, Australia, New Zealand, Turkey, Tajikistan, and Kyrgyzstan.

According to United Nations data, Chinese consumers imported more than 100,000 tonnes of cherries worth more than US$771 million in 2017. About 70 per cent of them, by value, came from Chile, followed by the US and Canada.

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In general, cherries from the US – mainly grown in the states of Washington and California – Canada and a few provinces in northern China supply the domestic market from May to October, while the main supply during winter comes from Chile and Australia.

On Tmall, an e-commerce platform that is part of the Alibaba Group, which also owns the South China Morning Post, 1kg of Chilean cherries costs about 138 yuan (US$20.55), while the equivalent amount of seedless sweet tangerines, which are a traditional holiday fruit, costs about 26 yuan (US$3.87).

“When I was a kid about 15 or 20 years ago, they [cherries] were really fancy gifts. Mum would make a big deal of coming home with a bag,” said Alex Shi, a freelance writer in Beijing.

Even though the prices were still high, she said they were now much more commonplace and “even people in my grandpa’s village people can get them”.

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Wang Yongjun, a fruit importer in the south China city of Guangzhou, said that the taste for cherries had also become more widespread because of the movement of migrant workers.

“The actual sales volume is probably the same as last year, but the price has increased quite a lot,” he said. “A single shipping container of imported cherries is worth an extra US$30,000 in revenue to an exporter.”

But a boom in sales of small-ticket items like cherries was not enough to offset the overall decline in consumer spending, Lam said.

“Given the current economic environment, where the labour market is showing some signs of deterioration, big-ticket items and mobile phones are most affected, as already reflected in poor car sales,” she said.

“I am not so confident that a consumer upgrade in small-ticket items can fully offset the downward pressure in spending in 2019. I think the broad picture of Chinese consumers will hinge on the housing market, which appears to me to be a key challenge to domestic policymaking right now.”

This article appeared in the South China Morning Post print edition as: cherry splurge am id sales slump
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