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Foreign brands face low demand in China
(MENAFN) The enthusiasm for foreign brands among Chinese consumers is diminishing, with increasing domestic competition further complicating the market dynamics. Leading global companies, including Volkswagen, AB InBev, and L’Oréal, have recently highlighted concerns about weak demand in China. This issue is compounded by the broader economic slowdown, which is straining foreign brands and intensifying the competitive pressure from domestic players. WPP, the London-listed advertising giant, reported a significant drop in sales in China, with a nearly 25 percent decrease over the past three months, reflecting broader consumer caution and weaker expectations in the region.
Mark Read, CEO of WPP, noted that expectations for China have shifted, anticipating a more pronounced economic adjustment compared to the post-pandemic recovery. This sentiment is echoed across the global consumer goods sector, with many companies reporting subdued performance in China. L’Oréal, which caters to both luxury and mass-market segments, projects a sales growth decline of 2 percent to 3 percent for the first half of the year in China. Similarly, Porsche, owned by Volkswagen, has experienced a significant slump in sales, marking a substantial decline compared to the previous year.
The ongoing slowdown in China’s debt-ridden property sector, which began in late 2021, has exacerbated these issues. Recent months have seen a rapid decline in home prices, further undermining consumer confidence and dampening demand despite the relaxation of COVID-19 restrictions. Companies that had anticipated a boost from consumer-focused stimulus measures post-pandemic are now grappling with stagnant growth. Analysts from Fitch Ratings have highlighted a notable deceleration in China’s restaurant sector growth, which fell below 8 percent in the first half of the year, marking its lowest rate since 2010, excluding the pandemic period. This trend underscores the broader challenges facing both domestic and international companies operating in China.
Mark Read, CEO of WPP, noted that expectations for China have shifted, anticipating a more pronounced economic adjustment compared to the post-pandemic recovery. This sentiment is echoed across the global consumer goods sector, with many companies reporting subdued performance in China. L’Oréal, which caters to both luxury and mass-market segments, projects a sales growth decline of 2 percent to 3 percent for the first half of the year in China. Similarly, Porsche, owned by Volkswagen, has experienced a significant slump in sales, marking a substantial decline compared to the previous year.
The ongoing slowdown in China’s debt-ridden property sector, which began in late 2021, has exacerbated these issues. Recent months have seen a rapid decline in home prices, further undermining consumer confidence and dampening demand despite the relaxation of COVID-19 restrictions. Companies that had anticipated a boost from consumer-focused stimulus measures post-pandemic are now grappling with stagnant growth. Analysts from Fitch Ratings have highlighted a notable deceleration in China’s restaurant sector growth, which fell below 8 percent in the first half of the year, marking its lowest rate since 2010, excluding the pandemic period. This trend underscores the broader challenges facing both domestic and international companies operating in China.
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