China’s policymakers are pinning their hopes on the younger demographic to move the country towards a consumer-driven economy and are coming up with incentives for businesses to make it happen.
It’s Saturday evening. Nayuki, a teahouse-cum-bar on Dongfang Road in Shanghai’s Pudong district, is buzzing with activity. Dozens of young patrons have paid between 100 yuan (US$14) and 200 yuan each to watch Kamu, a rising stand-up comedian and the winner of the latest season of Rock & Roast, an online show that has clocked 2.33 billion views.
Since Nayuki introduced stand-up comics in September business has been booming.
The bar’s manager, who identified himself as Rex, said as the theme was a runaway success the owner was thinking of increasing the frequency of the stand-up shows to drive up business on weekdays as well.
This is exactly what China’s policymakers are looking for to spur economic growth that has been slowing down since the trade war with the US started 15 months ago. Consumer spending during this year’s “golden week” holiday from October 1 to 7 – traditionally the high-water mark for retail sales and travelling – rose 8.5 per cent to 1.52 trillion yuan, the slowest annual pace of growth in nearly two decades since the government relaxed its grip on the work calendar to spur spending.
“Night-time spending on food and beverages and some entertainment activities such as singing at karaoke parlours will eventually play a role in driving up the local economy,” said Eric Han, senior manager with business advisory firm Shanghai Suolei. “It is certain that an increasing number of people will flock to the landmark shopping streets at night as a result of herd mentality.”
Since July, the local governments of Shanghai, Beijing, Guangzhou and Shenzhen have unveiled a series of measures to stimulate night-time consumption in a bid turn their cities into world-class “nightlife capitals”.
In August, the State Council, China’s cabinet, approved some 20 measures to stimulate consumption, including permitting longer business hours, allowing the setting up of late-night business zones, more 24-hour convenience stores and late-night eateries.
Beijing, for example, has extended the operating hours of two of its subway lines on Fridays and Saturdays, with the last train departing after midnight. Chengdu has also extended the opening hours for zoos, circuses, galleries and beauty parlours.
In late September, Shanghai municipality designated nine shopping streets, including The Bund, Xintiandi and Jing’an Temple as landmark nightlife areas as part of its month-long shopping festival.
Banking on the policymakers’ efforts to boost consumption, companies like Nayuki, famous for its Instagrammable bubble tea in China, stepped into night businesses, hoping to reap the benefits of the government’s initiatives.
A Nayuki spokeswoman said that it took a lot of brainstorming to come up with the jackpot idea of a bar and stand-up comics, explaining that tea in Chinese culture is similar to coffee in the west – it is a drink that people consume mostly during the day.
“We serve tea during the daytime, but what after that? We realised that our customers wanted a space to relax at night,” the spokeswoman said. So to cash in on the Chinese yuppies’ nightlife and spending, the bubble tea shop set its sights on the liquor business.
And with bars closing at 2am, that translates into an extra two to three hours of business for Nayuki.
Nayuki’s transformation offers a peek into the activities of food and drinks vendors tapping into the nightlife business between 6pm and 6am in the services sector.
“We’ve seen at least 10 per cent of soft drink and light catering businesses in major cities extending their operating hours, trying to get a piece of cake of the bolstering night economy,” said Joseph Zheng, head of advisory and transaction for retail at CBRE, in Guangzhou. “Shopping malls have been encouraged to have an area with access to outdoor space on the ground floors and more of them are willing to lease such space to such stores operating late.”
Shanghai Suolei’s Han said that shopping areas in prime locations, known for fancy venues and scenic spots, would have no difficulty in attracting night-time crowds.
China’s gross domestic product expanded 6.2 per cent in the second quarter, the slowest since records started in March 1992, heightening fears about a further downturn that could potentially lead to massive bankruptcies and job cuts across the nation.
Overall retail sales from January to August grew 8.2 per cent from the same period in 2018 – the slowest since 2004, according to data from the National Bureau of Statistics.
But in the face of weaker fixed-asset investment and slowing exports owing to the US-China trade war, retail sales emerged to be the biggest contributor to the economic expansion, making up 60 per cent of the growth in the first half.
“[Although] consumption has emerged as the top choice for China to drive the economy, it is not a sure-fire bet since a slowing economy is also having an impact on consumer spending,” said Jennifer Ye, a partner with PwC.
Restaurants, films and live performances, and bar spending are the top three after-hours activities of young consumers on the mainland, who are expected to spend 30 trillion yuan by 2020, according to iimedia Research, a Chinese consultancy.
Last year, the out-of-home alcoholic drinks market in China rose 1 per cent to 565 billion yuan, but market research firm Mintel China expects that to grow at a much faster rate of 1.6 per cent and reach 611 billion yuan by 2023.
It was because of such studies that popular soft drink vendors were testing consumers’ acceptance of their alcohol-related business.
US coffee giant Starbucks has opened four Bar Mixato, its arm selling alcoholic drinks, in Shanghai, Beijing, Shenzhen and Tianjin since May.
Heytea, the Chinese bubble tea chain known for its cheese-topped drinks, has been selling boozy versions since the end of last year.
Nayuki said that its bar operation has been raking in 30,000 yuan a night. It added that on average each table serves as many as six rounds of customers a night, with individual spending rising on the weekend to more than 500 yuan.
“Young people between the ages of 20 to 35 are seen as the main late night spending force, and they are also the major consumers of out-of-home alcoholic drinks,” said Belle Wang, food and drinks research analyst at Mintel China. “As a result of such overlap, we see the country’s policies favouring night businesses will help fuel alcohol consumption.”
A UBS survey of 3,000 mainland shoppers in May showed that one in three consumers was spending more money on goods and services.
Mainland China’s efforts to spur retail sales was in stark contrast to Hong Kong where the economy has been beset by anti-government protests, which were now in their fifth month.
The latest IHS Markit Hong Kong purchasing managers’ index found that the city’s private sector economy remains in a sharp downturn, as the effects of the US-China trade war and political unrest continued to dampen demand in September. For 2019, the government is predicting zero to 1 per cent GDP growth.
Unlike developed countries in the West, where a 6 per cent economic growth appears to be lofty, China is heavily reliant on rapid GDP expansion to maintain the stable operations of millions of privately owned small companies and create new jobs.
But rising discretionary spending by the younger demographic is seen as too little to provide momentum to the world’s second largest economy.
Bank of America Merrill Lynch economists predicted recently that China’s GDP may have slowed further to 6 per cent in the third quarter, the bottom of the government’s target range of 6-6.5 per cent for this year.
As the economy has been slowing, so too have sales of big-ticket items such as cars.
“The golden week turned out to be of little help to stem declining sales,” said Tian Maowei, sales manager at Yiyou Auto Service in Shanghai. “The key issue is that people just don’t want to spend even if you offer big discounts.”
China, the world’s largest car market, reported year on year sales drop in vehicles for the 14th consecutive month in August.
Unlike the more exuberant and lively younger demographic, mature consumers view the current slowdown with caution.
“Middle-aged people are worried about jobs and income,” said Li Yan, a 42-year-old technician at a state-owned media organisation in Shanghai. “I will only buy what I need and shun expensive items and unnecessary entertainment activities.”
For now, Beijing’s dream of a consumption-driven economy is proving to be an uphill task. Policymakers have their task cut out for them and have to get consumers of all ages to pull in the same direction.
Since Nayuki introduced stand-up comics in September business has been booming.
The bar’s manager, who identified himself as Rex, said as the theme was a runaway success the owner was thinking of increasing the frequency of the stand-up shows to drive up business on weekdays as well.
This is exactly what China’s policymakers are looking for to spur economic growth that has been slowing down since the trade war with the US started 15 months ago. Consumer spending during this year’s “golden week” holiday from October 1 to 7 – traditionally the high-water mark for retail sales and travelling – rose 8.5 per cent to 1.52 trillion yuan, the slowest annual pace of growth in nearly two decades since the government relaxed its grip on the work calendar to spur spending.
“Night-time spending on food and beverages and some entertainment activities such as singing at karaoke parlours will eventually play a role in driving up the local economy,” said Eric Han, senior manager with business advisory firm Shanghai Suolei. “It is certain that an increasing number of people will flock to the landmark shopping streets at night as a result of herd mentality.”
Since July, the local governments of Shanghai, Beijing, Guangzhou and Shenzhen have unveiled a series of measures to stimulate night-time consumption in a bid turn their cities into world-class “nightlife capitals”.
In August, the State Council, China’s cabinet, approved some 20 measures to stimulate consumption, including permitting longer business hours, allowing the setting up of late-night business zones, more 24-hour convenience stores and late-night eateries.
Beijing, for example, has extended the operating hours of two of its subway lines on Fridays and Saturdays, with the last train departing after midnight. Chengdu has also extended the opening hours for zoos, circuses, galleries and beauty parlours.
In late September, Shanghai municipality designated nine shopping streets, including The Bund, Xintiandi and Jing’an Temple as landmark nightlife areas as part of its month-long shopping festival.
Banking on the policymakers’ efforts to boost consumption, companies like Nayuki, famous for its Instagrammable bubble tea in China, stepped into night businesses, hoping to reap the benefits of the government’s initiatives.
A Nayuki spokeswoman said that it took a lot of brainstorming to come up with the jackpot idea of a bar and stand-up comics, explaining that tea in Chinese culture is similar to coffee in the west – it is a drink that people consume mostly during the day.
“We serve tea during the daytime, but what after that? We realised that our customers wanted a space to relax at night,” the spokeswoman said. So to cash in on the Chinese yuppies’ nightlife and spending, the bubble tea shop set its sights on the liquor business.
And with bars closing at 2am, that translates into an extra two to three hours of business for Nayuki.
Nayuki’s transformation offers a peek into the activities of food and drinks vendors tapping into the nightlife business between 6pm and 6am in the services sector.
“We’ve seen at least 10 per cent of soft drink and light catering businesses in major cities extending their operating hours, trying to get a piece of cake of the bolstering night economy,” said Joseph Zheng, head of advisory and transaction for retail at CBRE, in Guangzhou. “Shopping malls have been encouraged to have an area with access to outdoor space on the ground floors and more of them are willing to lease such space to such stores operating late.”
Shanghai Suolei’s Han said that shopping areas in prime locations, known for fancy venues and scenic spots, would have no difficulty in attracting night-time crowds.
China’s gross domestic product expanded 6.2 per cent in the second quarter, the slowest since records started in March 1992, heightening fears about a further downturn that could potentially lead to massive bankruptcies and job cuts across the nation.
Overall retail sales from January to August grew 8.2 per cent from the same period in 2018 – the slowest since 2004, according to data from the National Bureau of Statistics.
But in the face of weaker fixed-asset investment and slowing exports owing to the US-China trade war, retail sales emerged to be the biggest contributor to the economic expansion, making up 60 per cent of the growth in the first half.
“[Although] consumption has emerged as the top choice for China to drive the economy, it is not a sure-fire bet since a slowing economy is also having an impact on consumer spending,” said Jennifer Ye, a partner with PwC.
Restaurants, films and live performances, and bar spending are the top three after-hours activities of young consumers on the mainland, who are expected to spend 30 trillion yuan by 2020, according to iimedia Research, a Chinese consultancy.
Last year, the out-of-home alcoholic drinks market in China rose 1 per cent to 565 billion yuan, but market research firm Mintel China expects that to grow at a much faster rate of 1.6 per cent and reach 611 billion yuan by 2023.
It was because of such studies that popular soft drink vendors were testing consumers’ acceptance of their alcohol-related business.
US coffee giant Starbucks has opened four Bar Mixato, its arm selling alcoholic drinks, in Shanghai, Beijing, Shenzhen and Tianjin since May.
Heytea, the Chinese bubble tea chain known for its cheese-topped drinks, has been selling boozy versions since the end of last year.
Nayuki said that its bar operation has been raking in 30,000 yuan a night. It added that on average each table serves as many as six rounds of customers a night, with individual spending rising on the weekend to more than 500 yuan.
“Young people between the ages of 20 to 35 are seen as the main late night spending force, and they are also the major consumers of out-of-home alcoholic drinks,” said Belle Wang, food and drinks research analyst at Mintel China. “As a result of such overlap, we see the country’s policies favouring night businesses will help fuel alcohol consumption.”
A UBS survey of 3,000 mainland shoppers in May showed that one in three consumers was spending more money on goods and services.
Mainland China’s efforts to spur retail sales was in stark contrast to Hong Kong where the economy has been beset by anti-government protests, which were now in their fifth month.
The latest IHS Markit Hong Kong purchasing managers’ index found that the city’s private sector economy remains in a sharp downturn, as the effects of the US-China trade war and political unrest continued to dampen demand in September. For 2019, the government is predicting zero to 1 per cent GDP growth.
Unlike developed countries in the West, where a 6 per cent economic growth appears to be lofty, China is heavily reliant on rapid GDP expansion to maintain the stable operations of millions of privately owned small companies and create new jobs.
But rising discretionary spending by the younger demographic is seen as too little to provide momentum to the world’s second largest economy.
Bank of America Merrill Lynch economists predicted recently that China’s GDP may have slowed further to 6 per cent in the third quarter, the bottom of the government’s target range of 6-6.5 per cent for this year.
As the economy has been slowing, so too have sales of big-ticket items such as cars.
“The golden week turned out to be of little help to stem declining sales,” said Tian Maowei, sales manager at Yiyou Auto Service in Shanghai. “The key issue is that people just don’t want to spend even if you offer big discounts.”
China, the world’s largest car market, reported year on year sales drop in vehicles for the 14th consecutive month in August.
Unlike the more exuberant and lively younger demographic, mature consumers view the current slowdown with caution.
“Middle-aged people are worried about jobs and income,” said Li Yan, a 42-year-old technician at a state-owned media organisation in Shanghai. “I will only buy what I need and shun expensive items and unnecessary entertainment activities.”
For now, Beijing’s dream of a consumption-driven economy is proving to be an uphill task. Policymakers have their task cut out for them and have to get consumers of all ages to pull in the same direction.