In recent years, China’s rapid economic growth has fueled global market prosperity, and multinational corporations have consistently regarded China as a vital growth engine. However, recent reports and data indicate that demand in the Chinese market is gradually weakening, raising concerns among major multinational companies. This article explores the current situation of declining demand in China, analyzes the causes behind this phenomenon, and examines the response strategies of various brands, as well as their forecasts for China’s future economic prospects.
I. Current Situation of Declining Demand in the Chinese Market
From June to August this year, multinational corporations frequently mentioned weak demand in the Chinese market in their financial reports, manifesting as declining sales, shrinking profits, and increasing inventory. Examples include:
1. L’Oréal Group
L’Oréal Group reported that its sales in China declined by approximately 2% to 3% in the first half of this year. While this figure may seem small, it is significant for the luxury and beauty product industries. Typically, the beauty products market relies on consumers’ continued investment in self-image and personal care, and a reduction in this spending may reflect uncertainty about the economic outlook. Additionally, L’Oréal’s performance in China has been affected by the rise of local beauty brands, which attract a large number of customers with products and prices that better align with Chinese consumer preferences.
2. Porsche (a subsidiary of Volkswagen)
Porsche’s sales in the Chinese market fell by one-third in the first six months of this year compared to the same period last year. As a key player in the luxury car market, Porsche’s sales decline is particularly noteworthy. This not only indicates a cooling of high-end consumption in China but also reflects Chinese consumers’ cautious approach to big-ticket purchases amid increasing economic uncertainty. Furthermore, the demand for Porsche’s electric sports car, the Taycan, also faces uncertainty, indicating that Chinese consumers’ acceptance of luxury electric vehicles remains variable.
3. Mercedes-Benz Mercedes-Benz reported a 9% year-on-year decline in car sales in China in the first half of this year. As a leading brand in the luxury car market, Mercedes-Benz’s sales decline aligns with the overall cooling of the luxury market in China. Mercedes-Benz CEO Ola Källenius mentioned that the real estate market crisis is one of the main reasons for the decline in consumer confidence, further affecting luxury car sales. Consumers have become more cautious in their car purchasing decisions, especially when it comes to high-priced luxury vehicles.
4. Anheuser-Busch InBev
The world’s largest brewer saw its second-quarter sales in China drop by 15%. This decline reflects the dual impact of weak consumer demand and adverse weather conditions in some parts of China. Despite this, CEO Michel Doukeris noted that there is still a trend in the Chinese market toward drinking less but more expensive alcohol, suggesting that high-end consumer goods still have opportunities in certain segments. While facing short-term challenges, Anheuser-Busch InBev remains optimistic about the long-term fundamentals of the Chinese market.
5. Overall Market Share of Overseas Auto Brands
According to data from Shanghai-based consultancy Automobility, overseas brands’ market share in China fell from 64% in 2020 to 38% in the first half of 2024. This data suggests that the competitiveness of foreign automakers in the Chinese market is significantly weakening, particularly in the electric vehicle sector, where foreign brands have failed to adjust their strategies in time to respond to Chinese consumers’ growing preference for new energy vehicles. This decline in market share highlights the advantages of domestic brands in terms of technological innovation, pricing strategies, and meeting consumer needs, especially against the backdrop of accelerated economic transformation.
6. Starbucks
Additionally, Starbucks, the world’s largest coffee chain, reported that its same-store sales in China fell by 14% in its third fiscal quarter, mainly due to reduced discretionary spending by consumers amid economic uncertainty. Starbucks also noted that its store expansion plans in China will slow down to address the current weak demand.
These data points indicate that multinational brands across various industries are experiencing varying degrees of sales declines in the Chinese market. This trend is mainly influenced by sluggish economic recovery in China, low consumer confidence, and intensified competition from domestic brands. Meanwhile, as Chinese consumer demand gradually shifts toward domestic brands and more cost-effective products, the operating environment for multinational companies in China is becoming increasingly complex. This trend not only has a direct impact on current market performance but also poses new challenges and demands for future market competition.
II. Analysis of the Causes of Declining Demand
Several factors contribute to the decline in demand in the Chinese market, including:
1. Economic Growth Slowdown: China’s economic growth rate has slowed in recent years, directly affecting consumers’ purchasing power and confidence. According to data from the National Bureau of Statistics, China’s GDP growth rate in 2023 was only 4.5%, significantly lower than the high growth rates of previous years. The slowdown in economic growth has made consumers more cautious, particularly in the purchase of big-ticket items and high-end consumer goods.
2. Real Estate Market Adjustment: The real estate market has long been a vital pillar of the Chinese economy, but in recent years, increased government regulation has led to price fluctuations and market uncertainty, reducing consumer spending in other areas. The weakness in real estate-related industries has also affected the demand for related products, such as furniture and durable goods like appliances.
3. Global Economic Environment: Global economic uncertainty, particularly the trade friction between China and the United States, has put considerable pressure on the Chinese economy. This has not only reduced Chinese exports but also affected consumers’ psychological expectations, making them more conservative in their spending.
4. Demographic Changes: China’s aging population and the declining proportion of young people have also led to changes in consumption patterns. The younger generation’s consumption habits are more rational and diverse, posing challenges to the traditional big-ticket consumer goods market.
III. Response Strategies of Multinational Companies
Faced with weakening demand in the Chinese market, major multinational companies are adjusting their market strategies to address these changes. These policies include:
1. Product Line Adjustments: Some companies are adjusting their product lines to adapt to changes in the Chinese market. For example, Apple plans to launch more mid-range smartphones to meet the needs of a broader consumer base while increasing its investment in services and software to offset the decline in hardware sales. Meanwhile, in order to attract users in the Chinese market who have high expectations for high-tech products, at the World-Wide Developers Conference (WWDC) conference, Apple introduced its Apple Intelligence system. The system integrates the powerful functions of generative artificial intelligence, which can be applied across platforms and programs to Apple phones, tablets, computers and other products. Nike is focusing more on developing products designed in China to cater to Chinese consumers’ aesthetics and needs.
2. Increased Localization: Multinational companies are increasing their localization efforts in the Chinese market. Brands like BMW and Mercedes-Benz are collaborating with Chinese tech companies to develop new energy vehicles and smart driving technologies tailored to the Chinese market. Additionally, some multinational companies are establishing more R&D centers in China to accelerate product innovation.
3. Diversified Channels: With the rise of e-commerce and live-streaming sales in China, multinational companies are also focusing on the development of online channels. Many companies are collaborating with Chinese e-commerce platforms to launch products specifically for the online market and using live-streaming and social media for marketing to enhance brand influence and sales.
4. Focus on Sustainable Development: In the context of the Chinese government’s increasingly stringent requirements for environmental protection and sustainable development, some multinational companies are shifting their operations in China towards sustainability. For example, global consumer goods giants Unilever and Procter & Gamble have both announced increased efforts to promote eco-friendly packaging and green products in China to respond to the growing environmental awareness among Chinese consumers.
IV. Forecast for China’s Future Economy
Despite the current weak demand in the Chinese market, multinational companies generally believe that China’s long-term economic potential remains strong. The Chinese government is actively promoting economic structural transformation, shifting from investment and export-driven growth to domestic demand-driven growth, and the potential of the future consumer market remains significant.
Besides, renowned institutions such as the World Bank and the International Monetary Fund (IMF) have expressed cautious optimism about China’s future development in their 2024 global economic outlook. The World Bank expects China’s economic growth to rebound to around 5% in 2024, driven mainly by government economic stimulus policies and the gradual recovery of the consumer market. At the same time, McKinsey & Company, in its latest report, pointed out that with the expansion of China’s middle class and the continued upgrading of consumption, China’s consumer market will continue to grow in the coming years. The report predicts that by 2030, China’s middle-class population will reach 12 billion, providing enormous market opportunities for multinational companies.
Moreover, despite the challenges to China’s short-term economic growth, in the long term, China’s sustained investment in technological innovation, new energy, and smart manufacturing will contribute to high-quality economic development. These emerging sectors will not only become new drivers of China’s economic growth but will also present new business opportunities for multinational companies.
Conclusion
In summary, despite the current weak demand in the Chinese market, multinational companies remain generally optimistic about the long-term prospects of China’s economy. In the future, as China’s economy continues to develop and transform, these companies will see new growth opportunities in the Chinese market.
I. Current Situation of Declining Demand in the Chinese Market
From June to August this year, multinational corporations frequently mentioned weak demand in the Chinese market in their financial reports, manifesting as declining sales, shrinking profits, and increasing inventory. Examples include:
1. L’Oréal Group
L’Oréal Group reported that its sales in China declined by approximately 2% to 3% in the first half of this year. While this figure may seem small, it is significant for the luxury and beauty product industries. Typically, the beauty products market relies on consumers’ continued investment in self-image and personal care, and a reduction in this spending may reflect uncertainty about the economic outlook. Additionally, L’Oréal’s performance in China has been affected by the rise of local beauty brands, which attract a large number of customers with products and prices that better align with Chinese consumer preferences.
2. Porsche (a subsidiary of Volkswagen)
Porsche’s sales in the Chinese market fell by one-third in the first six months of this year compared to the same period last year. As a key player in the luxury car market, Porsche’s sales decline is particularly noteworthy. This not only indicates a cooling of high-end consumption in China but also reflects Chinese consumers’ cautious approach to big-ticket purchases amid increasing economic uncertainty. Furthermore, the demand for Porsche’s electric sports car, the Taycan, also faces uncertainty, indicating that Chinese consumers’ acceptance of luxury electric vehicles remains variable.
3. Mercedes-Benz Mercedes-Benz reported a 9% year-on-year decline in car sales in China in the first half of this year. As a leading brand in the luxury car market, Mercedes-Benz’s sales decline aligns with the overall cooling of the luxury market in China. Mercedes-Benz CEO Ola Källenius mentioned that the real estate market crisis is one of the main reasons for the decline in consumer confidence, further affecting luxury car sales. Consumers have become more cautious in their car purchasing decisions, especially when it comes to high-priced luxury vehicles.
4. Anheuser-Busch InBev
The world’s largest brewer saw its second-quarter sales in China drop by 15%. This decline reflects the dual impact of weak consumer demand and adverse weather conditions in some parts of China. Despite this, CEO Michel Doukeris noted that there is still a trend in the Chinese market toward drinking less but more expensive alcohol, suggesting that high-end consumer goods still have opportunities in certain segments. While facing short-term challenges, Anheuser-Busch InBev remains optimistic about the long-term fundamentals of the Chinese market.
5. Overall Market Share of Overseas Auto Brands
According to data from Shanghai-based consultancy Automobility, overseas brands’ market share in China fell from 64% in 2020 to 38% in the first half of 2024. This data suggests that the competitiveness of foreign automakers in the Chinese market is significantly weakening, particularly in the electric vehicle sector, where foreign brands have failed to adjust their strategies in time to respond to Chinese consumers’ growing preference for new energy vehicles. This decline in market share highlights the advantages of domestic brands in terms of technological innovation, pricing strategies, and meeting consumer needs, especially against the backdrop of accelerated economic transformation.
6. Starbucks
Additionally, Starbucks, the world’s largest coffee chain, reported that its same-store sales in China fell by 14% in its third fiscal quarter, mainly due to reduced discretionary spending by consumers amid economic uncertainty. Starbucks also noted that its store expansion plans in China will slow down to address the current weak demand.
These data points indicate that multinational brands across various industries are experiencing varying degrees of sales declines in the Chinese market. This trend is mainly influenced by sluggish economic recovery in China, low consumer confidence, and intensified competition from domestic brands. Meanwhile, as Chinese consumer demand gradually shifts toward domestic brands and more cost-effective products, the operating environment for multinational companies in China is becoming increasingly complex. This trend not only has a direct impact on current market performance but also poses new challenges and demands for future market competition.
II. Analysis of the Causes of Declining Demand
Several factors contribute to the decline in demand in the Chinese market, including:
1. Economic Growth Slowdown: China’s economic growth rate has slowed in recent years, directly affecting consumers’ purchasing power and confidence. According to data from the National Bureau of Statistics, China’s GDP growth rate in 2023 was only 4.5%, significantly lower than the high growth rates of previous years. The slowdown in economic growth has made consumers more cautious, particularly in the purchase of big-ticket items and high-end consumer goods.
2. Real Estate Market Adjustment: The real estate market has long been a vital pillar of the Chinese economy, but in recent years, increased government regulation has led to price fluctuations and market uncertainty, reducing consumer spending in other areas. The weakness in real estate-related industries has also affected the demand for related products, such as furniture and durable goods like appliances.
3. Global Economic Environment: Global economic uncertainty, particularly the trade friction between China and the United States, has put considerable pressure on the Chinese economy. This has not only reduced Chinese exports but also affected consumers’ psychological expectations, making them more conservative in their spending.
4. Demographic Changes: China’s aging population and the declining proportion of young people have also led to changes in consumption patterns. The younger generation’s consumption habits are more rational and diverse, posing challenges to the traditional big-ticket consumer goods market.
III. Response Strategies of Multinational Companies
Faced with weakening demand in the Chinese market, major multinational companies are adjusting their market strategies to address these changes. These policies include:
1. Product Line Adjustments: Some companies are adjusting their product lines to adapt to changes in the Chinese market. For example, Apple plans to launch more mid-range smartphones to meet the needs of a broader consumer base while increasing its investment in services and software to offset the decline in hardware sales. Meanwhile, in order to attract users in the Chinese market who have high expectations for high-tech products, at the World-Wide Developers Conference (WWDC) conference, Apple introduced its Apple Intelligence system. The system integrates the powerful functions of generative artificial intelligence, which can be applied across platforms and programs to Apple phones, tablets, computers and other products. Nike is focusing more on developing products designed in China to cater to Chinese consumers’ aesthetics and needs.
2. Increased Localization: Multinational companies are increasing their localization efforts in the Chinese market. Brands like BMW and Mercedes-Benz are collaborating with Chinese tech companies to develop new energy vehicles and smart driving technologies tailored to the Chinese market. Additionally, some multinational companies are establishing more R&D centers in China to accelerate product innovation.
3. Diversified Channels: With the rise of e-commerce and live-streaming sales in China, multinational companies are also focusing on the development of online channels. Many companies are collaborating with Chinese e-commerce platforms to launch products specifically for the online market and using live-streaming and social media for marketing to enhance brand influence and sales.
4. Focus on Sustainable Development: In the context of the Chinese government’s increasingly stringent requirements for environmental protection and sustainable development, some multinational companies are shifting their operations in China towards sustainability. For example, global consumer goods giants Unilever and Procter & Gamble have both announced increased efforts to promote eco-friendly packaging and green products in China to respond to the growing environmental awareness among Chinese consumers.
IV. Forecast for China’s Future Economy
Despite the current weak demand in the Chinese market, multinational companies generally believe that China’s long-term economic potential remains strong. The Chinese government is actively promoting economic structural transformation, shifting from investment and export-driven growth to domestic demand-driven growth, and the potential of the future consumer market remains significant.
Besides, renowned institutions such as the World Bank and the International Monetary Fund (IMF) have expressed cautious optimism about China’s future development in their 2024 global economic outlook. The World Bank expects China’s economic growth to rebound to around 5% in 2024, driven mainly by government economic stimulus policies and the gradual recovery of the consumer market. At the same time, McKinsey & Company, in its latest report, pointed out that with the expansion of China’s middle class and the continued upgrading of consumption, China’s consumer market will continue to grow in the coming years. The report predicts that by 2030, China’s middle-class population will reach 12 billion, providing enormous market opportunities for multinational companies.
Moreover, despite the challenges to China’s short-term economic growth, in the long term, China’s sustained investment in technological innovation, new energy, and smart manufacturing will contribute to high-quality economic development. These emerging sectors will not only become new drivers of China’s economic growth but will also present new business opportunities for multinational companies.
Conclusion
In summary, despite the current weak demand in the Chinese market, multinational companies remain generally optimistic about the long-term prospects of China’s economy. In the future, as China’s economy continues to develop and transform, these companies will see new growth opportunities in the Chinese market.