00:00Great to have you. And a really fascinating report here. What do you think is driving
00:04this sort of, you know, preference and cultural sort of phenomenon around Chinese brands?
00:11Yeah. First of all, thanks for having me on the show. Maybe just a little bit background. You
00:15quoted the 35 million, and we actually have a more up-to-date data. So for the first half of
00:19this year, China recorded 23 million foreign visitors into the domestic economy, and that
00:26represents 20% year-over-year from a year ago. And when you look at more popular destinations,
00:31for example, Beijing, Shanghai, that year-over-year growth rate is even higher. So Beijing is at 40%
00:37year-over-year, Shanghai 30% year-over-year. So I think this comes at a very interesting time,
00:41right? Because global consumers are coming to China and providing that incremental support to growth
00:47at a time when domestic consumers are not showing up in the same way, right? And we do think that
00:53has further room to grow, and that will continue to be a bright spot for the economy in the coming
00:58years. And what are they spending, risking to generalize, obviously, a few tens of millions,
01:04what are they spending on? What stand out to you so far? And I do think a really interesting
01:09distinction that categorizes this phase of boom versus prior years is that in the past, when you
01:14think about coming to China, you think about, oh, I'm going to the Great Wall, I'm seeing the bond,
01:18right? But you're increasingly seeing people doing China shopping, that's, you know, into their
01:23itinerary. So some kind of, you know, put numbers into perspective. Last year, when you look at
01:28departure tax refunds, that increased threefold year-over-year. And then because of this tax
01:33refund, right, you can see what people are purchasing. So obviously, Labubu is a very prominent
01:38example that went viral last year. But beyond that, for example, consumer electronics is one big
01:44bright spot. You know, Shenzhen is a perfect place for, you know, it manufactures, sells a lot of cool
01:50products that are affordable. So when you look at tax refund data out of Shenzhen portal, it's
01:56predominantly skewed towards consumer electronics. Last year, for the first eight months, just like
02:01Huawei DJI itself accounted for nearly 40% of that. Yeah. And when you move to maybe fashion, right,
02:07one brand that's gaining a lot of popularity, paying shoe brand, I don't know if you guys have heard of
02:13it. But yeah, so it's very popular in on the global stage. And so they have two stores in Shanghai.
02:20And when you look at their sales revenue, over one third is generated by foreign visitors.
02:25Yeah. So there is this growing kind of aspiration and acceptance from the global consumer that they
02:32want to be, you know, more immersed in Chinese brands. So I think back to the China Maxx story,
02:37right? I think social media loves this term. But what it means for macro really is, you know,
02:42global consumers are more willing to purchase Chinese goods, which means this inbound tourism
02:47benefits is broadening beyond traditional hospitality, but are including more kind of
02:53Chinese consumer retail brands as well. Does it help at all the broader consumption story in
02:58any way, you think? Yeah, I mean, inbound tourism, it's very separate for domestic demand, right? And
03:03it's in no way a substitute of it. But in terms of numbers, you can look at travel exports,
03:09which is part of services export. So that number accounted for around 0.3% of GDP for first quarter
03:17of this year. So obviously, it's still small, but it is growing very fast. But I do think, you know,
03:23for the sectors and brands that are specifically catered to it, it is providing a meaningful boost.
03:29But for the broader consumption story, fundamentally, you still need, you know, income expectations and
03:34for that to turn. Yeah. Does the momentum continue? The framing of that question is more from a policy
03:41perspective. Is this a policy priority? Tourism? Yeah. Inbound tourism, specifically? Yeah. I do
03:48think it is because China unveiled its five-year plan this year, right? And compared to the previous
03:53five-year plan, this time, there's a specific mention of inbound tourism as one of the policy
03:59objectives. And there's actually a numerical target to it as well. So China is targeting
04:05150 billion US dollar in tourism receipts by year 2030. So if you take last year's 131 billion as
04:12base, that roughly equals to 3% annual growth for the next five years. But given that the numbers
04:18we're seeing right now, that seems quite a reachable target. So definitely a policy priority. And I think
04:24they're continuing to make the access even easier. You know, the visa-free transit program,
04:30visa-free visit program, as well as making the apps easier to navigate payment system easier. So
04:35that will be kind of an ongoing process, which we think will support this sector to grow.
04:40I mean, obviously, it's good to get to see the foot traffic and the people coming in.
04:43What about, you know, in terms of the average spend, right? How do you increase the value of how much
04:49they're buying, right? Yeah. I mean, is there any way that, you know, what brands or China can really
04:54do? Yeah, I think affordability kind of is one of the attraction factor why people want to come to
05:00China, right? Because there's estimates on visitors, what's the average daily spend that you spend across
05:05Asian economies. So in China, that number is around 120 US dollar per day, which is 10% cheaper than
05:12Korea, 20% cheaper than Japan. So the affordability is sort of like an attraction point, right? But China does
05:19want to kind of move from volume recovery to value creation, right? So I do think for that to happen,
05:25kind of what we already talked about, which is, are, you know, these visitors more open and more
05:30kind of, you know, willing to purchase Chinese goods, which we are thinking is happening, because
05:35China is no longer just a manufacturing hub. But there's also increasingly the cultural meaning
05:39and unique design attached to the products, which we think are going to continue to drive this value
05:44creation. Yeah, I like one of the graphics you have here, which is the big Mac index,
05:47relative to Switzerland, right? It's, it's more than, it's about 40% what it costs to be in
05:53Switzerland. So I guess the basic question for me is why, why should we care from an economist
05:59perspective, from an investor perspective? How does it, why does this matter to us?
06:03Yeah, I do think kind of, as I mentioned in the beginning, this is, you know, a really important
06:08time where you're still seeing overall demand fairly sluggish. But these kind of global consumers
06:14are showing up in a way that will provide the incremental support to the services sector,
06:18which is labor intensive, as well as domestic retail sector, which we're seeing that they're
06:22increasingly making purchases.
Comments