Original Analysis on Current Events
FAO Global conducts analysis on hundreds of significant events a week that impact the business environment between the U.S., China, and emerging economies in Asia. While most of these assessments are for client and internal use, we like to share events that may have been overlooked if you only follow the major media outlets. We send these assessments out via our newsletter.
Highlights you may have missed for the week of July 29 – August 02.
1. PepsiCo makes strategic China investment in natural food company – China Daily
Analyst Take: Operating in China for about 40 years, Pepsi’s new step is going to open a bigger market for itself in China. Healthier food options are becoming increasingly valued by people in China, especially the younger generations. Pepsi’s decision to invest in Natural Food Company diversifies its holdings and caters to its newest customers’ needs. FAO Global predicts the partnership with Natural Food can help Pepsi develop a more comprehensive understanding of the Chinese business environment and customers through the developed business models, data base and portfolios of Natural Food.
Analysis contributed by FAO Global Associate, Sophia Song
2. Shrinking Chinese car market sparks fears over foreign groups’ future – Financial Review
Analyst Take: Slower economic growth, new emissions rules, and cuts to subsidies for vehicle purchases have reduced the Chinese automotive sector employment by 5% – 220,000 jobs – since July 2018. This has heavily impacted foreign manufacturing groups, with some companies now operating at a fraction of their potential output, such as Ford and Peugeot owner PSA. Despite this, China’s car market is still the largest single market with tremendous room for grow as 3rd and 4th tier cities develop. Sales of premium cars are still performing well, and localized marketing and features have made a significant impact. FAO Global anticipates a return to growth based on a range of smaller initiatives, such as the introduction of subsidies for rural residents to trade in their old vehicles, which are likely to help increase demand. A cut to value added tax for businesses will allow companies to cut prices without eroding their profits and likely simulate sales. From these observations, we suggest foreign manufacturing groups to look at the business and success of Japanese carmakers and local competitors to identify successful strategies to stay competitive in the Chinese auto market.
Analysis contributed by FAO Global Associate, Jennifer Hsu
3. High-tech spurs growth of secondhand goods market – China Daily
Analyst Take: The secondhand economy is growing rapidly in China and high-tech transactions are helping create an estimated RMB 1 trillion market. The concept of a secondhand goods market is only now starting to catch on in China. The advent of technology is creating unrealized opportunities and negative perceptions of secondhand goods is slowly fading. There are still issues that may create friction such as the current transaction systems, cleaning services, quality assessments and pricing of goods. However, with experienced market and pricing professionals to aid the development of AI assessment features, there are substantial opportunities. FAO Global recommends distribution companies in the U.S. and European markets begin establishing footholds and strategic partnerships to seize early adopters before the sector explodes.
Analysis contributed by FAO Global Associate, Sophia Song
4. Beijing to halt individual travel permits to Taiwan over rising tensions – South China Morning Post
Analyst Take: The ban of individual China mainland travelers to Taiwan is going to lead to a dramatic drop in Taiwan’s travel industry. Currently, many Chinese people now prefer traveling individually – especially for business – rather than joining travel groups when they visit Taiwan. Taiwan’s tourism industry is a major contributor its economy and Beijing’s decision intensifies the cross-strait relationship. Although this may be a temporary situation, FAO Global sees opportunity for group travelers to get inventive and offer more value and flexibility for the group travelers. For business established in Taiwan as a foothold to the Chinese market, FAO Global recommends they review the strategies and have business continuity plans in place in case relations worsen an degrade business travel.
Analysis contributed by FAO Global Associate, Sophia Song
Edits by Kelli Sullivan
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