Threats to China’s Economy

What they buy

Numbers associated with China’s economy are important to those of us who market products to their consumers. We have a vested interest in their health and happiness – which is the reason we spend so much time watching their economic activity.

Having established that, there are concerns about which we should be aware.  Actions by both the US and the Chinese governments affect consumers. Things to watch for…

  • US interest rates are on the way up. An increase will likely strengthen the dollar against the yuan, which will weaken growth in China.
  • US trade restrictions, as promised by the current government, will have a disruptive effect on both sides of the Pacific i.e. new restrictions on solar panels
  • Tightened regulations in China, financial and environmental, are likely to effect the construction sector, which is a major employer.
  • Too much debt in the Chinese economy is another challenge that will require some years to unwind.
  • Geo-political: Should the North Korea situation worsen in any of many different ways, the economies of both the US and China will be affected.

Source: Bloomberg

Grand Marketing Marriage; Angry Birds – NFL

Angry NFL

When sitcoms begin to age, they attempt to sustain their ratings by adding big star guest appearances. So it is interesting to note that Rovio Entertainment’s Angry Birds franchise has, in an effort to extend its life, teamed with the NFL to offer a time-limited Super Bowl special. Jerseys for all 32 NFL teams will be available in-game and a new ‘Quarterback’ bird will be introduced. These features will be available thru the game on February 4th.

In a world where Superbowl is the biggest advertising dollar, it is clever marketing to bring the NFL into your brand for their big event – they’ll promote your product.  Source: The Drum

Chinese GDP Holds Steady in a Good Way

China GDP Q417

 

As reported by the government, China’s GDP for the fourth quarter of 2017 remained the same as the prior quarter and right in the center of a two year run, which averaged 6.79. These data are consistent with the other industrial and consumer numbers we have reported giving them credibility.  Sources: Trading Economics; National Bureau of Statistics, China

Tectonic Economic Shifts Coming

Top 5 Economies

 

A fifteen year projection by the Centre for Economics and Business Research sees the crossover time for the Chinese economy to take the world lead from the US is 2032. The shuffling also sees India powering into the top 3 world economies in ten years. The balance of the western domination also flips in the ten year time frame when 3 of the top 5 economies will be Asian. Look east young man.  Source: Bloomberg

Reaching into the Crib

Mobile Uage Patterns

According to Cisco’s “Global Mobile Data Traffic Forecast,” a 700% increase is expected by 2021. While the number implies universality, there is a generational aspect to mobile usage at present. Millennials are more likely engaged with a mobile device than are baby boomers. That’s today. By 2021, one would expect that generational distinctions will even out as boomers are buried and the post-millennial generation will be raised with mobile pacifiers – a way for advertisers to reach into the crib and stroller.  Source: MarketingLand

China Begins 2018 with 1.16 Billion Mobile Subscriptions

Carrier Data -Dec2017

According to data from the three Chinese telecommunications companies, mobile subscriptions end 2017 and begin 2018 with 1.16 billion subscribers. The twelve months of 2017 averaged a gain of 7.2 million subscriptions. As we have noted in the past, 2017 was a transition year from a vastly expanding market in 2016 when the monthly average was around 20 million subscribers to 2017, a year that was essentially a replacement market – old smartphones being switched for new smartphones. Sources: China Mobile, China Unicom, China Telecom

Ad Spending to Increase in spite of some Counter Indicators

Ad Spend Forecasts 2018

These data convey several stories. The obvious is that ad spend is expected to grow overall, and the digital portion is expected to grow more than twice as fast as the overall number.

Also, obvious is that the two big players, Google and Facebook, are playing in their own sand box – they dominate digital advertising with an 84% share of the market.  Likewise, social media and video are expected to grow substantially.

Less obvious, aside from leaving 16% of the market to others, the giant “duopoly” lacks the transparency the market is now demanding. Further, they have little penetration into China. Those two things open a door.

Another pressure on ad spending is weakness in key sectors – consumer package goods, auto, telecom and retail. Jonathan Barnard, head of forecasting and Zenith, said, “From a brand growth point of view, this is the situation in which companies should be spending more rather than less [on advertising]. But from a pragmatic accountant’s point of view, you can see why they’re finding it difficult to cut top-line revenues and increase marketing costs.”   Source: AdExchanger

China’s Service Sector Screams

Service Sector Index - Jan-18

 

China’s service sector screamed into January with almost a 4% jump, the largest since February 2016, putting the Index well above the forecast of 51.8 – so much for the experts. Coupled with December’s gains on the industrial side, the Chinese futures are looking bright according to the purchasing executives from the hundreds of companies surveyed for these indexes. Translation: consumers are likely to remain in a spending mood.  Source: Markit Economics

China Moves on Pollution

Bsijing Pollution

With China’s economic turn-around over the last decade or two has come a level of air pollution that recalls “a foggy day in London town” and the perennial cloud over Pittsburgh, Pa. Both are gone after years of pollution control measures. Now China, the world’s leading carbon polluter is taking a clear step toward fixing their problem. Last month the government began the long-term process of reducing emissions by establishing what will be the world’s largest market to trade carbon credits among polluters. To start, the market will cover only the state-dominated power sector, which is responsible for half of the country’s pollution.  Assuming the kinks are worked out and the market does as intended, the concept will be expanded to the larger economy.

Added to China’s investment in alternative fuels, especially solar, the big ship of China’s state appears to be trying to turn around its emissions mess.  Source: New York Times

Programmatic on the Move in Europe as well as the US

Euro Marketers

A vast majority of European marketers from both brands and agencies intend to spend more on programmatic buying while a mere majority believe that programmatic buying will be the dominate force in TV advertising in five years. And as we have noted in recent blogs, the intention to bring programmatic buying in-house is strong, particularly among agencies. On these subjects both US and European marketers appear to think alike.  Source: ExchangeWire