China slowdown a challenge for UK retailers

China has long been lauded for its huge retail sales potential.

Its rapidly expanding middle class and increasingly urbanised population are a ripe market for international and luxury brands.

Sales of consumer goods rose 10.6% last year, while online sales shot up by a third.

But on a macro level, China has taken a turn for the worse. Growth of the wider economy slowed and global markets panicked after the government stepped in. In August, it devalued the yuan by 4% and wiped 10% off the value of two-thirds of Chinese listed companies.

With consumer confidence hit, the slowdown has stung luxury retailers, such as Burberry, Louis Vuitton and Hugo Boss, which all announced falling sales in the country for 2015.

So far in 2016 there has been no respite from the bad news.

In January, the National Bureau of Statistics of China reported that for the full year 2015, GDP grew 6.9%, down from 7.3% in 2014, representing the economy’s weakest growth in 25 years.

Some analysts fear growth rates could be much lower than official statistics suggest. Goldman Sachs has predicted that the yuan could slide a further 6% in the next 12 months.

Other suggest that thanks to the vast 1.4 billion Chinese population, the fact the economy is still growing – albeit at a muted level.

Commentators suggest that retailers that are not backing out other Chinese expansion plans, they are changing the way they set up their infrastructure in China.

(This is an extract from the Drapers article “Into the dragon’s den of Chinese retail” which can be viewed HERE)