Consumption seen boosting economic vigor

FMCG, entertainment, catering, tourism, aviation and more may shine in 2023

In 2023, China will continue to expand domestic consumption, and sectors such as tourism, catering, entertainment and aviation are expected to benefit from the relaxation of COVID-19 prevention and control measures, government officials and industry experts said.

According to the latest projection by financial services provider Goldman Sachs, consumption will become a main driver of economic vitality, and the annual growth of consumption is expected to be 7 percent this year, while China's GDP growth is expected to reach 4.5 percent. The unemployment rate is expected to decline and average incomes are likely to improve in 2023.

UBS predicts China's GDP growth will reach 5 percent this year, if investment in infrastructure is strong, and manufacturing and consumption sectors show resilience.

The views are echoed by Zhu Guangyao, former vice-minister of finance, who expects China's economy will achieve better growth and sustain healthy development this year, with a GDP growth rate of 5-6 percent.

Despite the pandemic exerting pressure on consumer spending, some sectors such as fast-moving consumer goods and those related to public social benefits have been given a boost by the growth of new trends and support of favorable policies.

Looking back on 2022, China's FMCG sector showed resilience with 3.6 percent year-on-year growth in the first three quarters. For the first time since 2020, it exceeded the country's GDP growth in the second and third quarters, according to joint research released in December by Bain & Company and Kantar Worldpanel Greater China.

In particular, packaged foods and household-related product sales saw growth during the first three quarters due to COVID-19-led stockpiling and heightened health and hygiene concerns. Overall, China's FMCG market demonstrated some buoyancy in rough waters, signaling that there is hope for the months and years ahead, Bain & Company said.

"The year 2023 is likely to remain volatile, resuming some of the trends we have witnessed in 2022 while seeing improvement in other areas. However, we do see a gradual optimization of COVID-19 measures taking place in China, bringing back some consumer confidence," said Derek Deng, a partner at Bain& Company.

"There are other fundamental reasons to be optimistic as well. China's FMCG sector has demonstrated remarkable resilience in the first three quarters, as both brands and consumers have honed their adaptability to changing circumstances. If companies can keep their fingers on the pulse of consumer needs and remain nimble, they can chart a path toward healthy performance," Deng said.