6 experts from China and Australia weigh in on Chinese consumer behavior amid COVID era tensions


By NATALIE MEYER

Global Business Journalism reporter


Part 3 of a 3-story special report


When it comes to China’s international business relations, there is no lack of self-proclaimed “experts.” People who have never visited China, conducted business in China, or even studied Chinese economic issues draw sweeping – and frequently damning – conclusions that poison the well of global discourse.


It turns out that the Chinese proverb “两只耳朵一张嘴” (“You have two ears and one mouth, and you should use them in those proportions”) is one that few of these “experts” live by.


Fortunately, there are many professionals in China and around the world who have dedicated their careers to understanding bilateral and multilateral trade relations. These “China hands” study each other’s languages and cultures before passing quick judgment. Most have worked in China and abroad. And their perspectives are often more nuanced and balanced than the self-proclaimed experts who tend to wield excessive authority in political and journalistic discourse.

Global Business Journalism reporter Natalie Meyer discussed Chinese consumer behavior from six experts from China and around the world.

To achieve a well-rounded understanding of China’s international trade and commerce, I have called upon six professionals spanning foreign affairs, academia and commercial industries to share their insights on Chinese consumer nationalism in the age of COVID-19 and its implications for foreign brands. While there is no clear consensus amongst these professionals on the current strength of Chinese nationalism, their general agreement is that prejudices and nationalism unleashed during the pandemic have not had a clear impact on consumer choices in China.


Dr. Maggie Jiang of the University of Western Australia and Dr. Hang Min of Tsinghua University speak about their experience and observations in the academic field. I-Lyn Loo of the Department of Primary Industries and Regional Development in Western Australia shares her views, as do Luke Pegrum of the Australian Embassy in Beijing, Nick Coyle of the Australian Chamber of Commerce (AustCham) in Beijing and Lily Wu of the Australian Trade and Investment Commission (Austrade) in Shanghai.


Here are their thoughts:

Dr. Maggie Ying Jiang


Director/Associate Professor, Confucius Institute and Business School at the University of Western Australia


Dr. Jiang is an expert on consumer nationalism. Having already written two books on the topic, she is frequently invited to speak on her research at various business organizations.


Jiang says she has observed an increase in nationalistic consumer behavior in China since the outbreak of the pandemic:


“There have certainly been more obvious, I think, and more frequent cases showing that Chinese consumers are more nationalistic in deciding what to buy at the moment. I think there are two categories: one category is people who say they want to buy local, but they don't act [that way]. In other words, they still purchase Western or Japanese products. But there's another category who are really, really strongly against the idea of foreign brands.”


From Jiang’s perspective, the driving force behind stronger demand for domestic goods is proud recognition that China has been able to manage the recurring virus outbreaks better than many countries:


“I think the COVID-19 period has certainly strengthened the Chinese nationalistic sentiment in China given [that] the performance of containing COVID 19 has been pretty effective - at least according to Chinese citizens’ observation,” says Jiang. “It has been very effective in China, so that certainly helps strengthening the nation's pride.”


Having closely studied nationalistic consumer behavior in China over the past decade, Jiang believes it is currently at a significantly negative point for foreign businesses:


“I think to me the nationalistic sentiment in China at the moment is at a very high level,” says Jiang. “It's certainly not healthy or how it should be developed.”


As an international scholar in cross-cultural communication and public relations, Jiang explains the importance in differentiating between the actions of individuals and groups or organizations:


“We need to have a separation between the people, the government and business, so in the current circumstances a lot of people are using the wrong logic.”


Jiang explains that disagreement or dissent should be targeted at the group or individual responsible, rather than treating one person’s opinion as being representative of their collective countrymen:


“If you're not happy with a particular governmental organisation, then you express your anger to that particular governmental organisation. You don't then attack a person just because this person is related or has engaged with the particular organisation, so I think people are using the wrong logic here, which is sad,” says Jiang.

Dr. Hang Min


Dean for International Development of the School of Journalism and Communication at Tsinghua University


China has already entered the “post-COVID era,” according to Dr. Hang Min, tenured professor at Tsinghua University.


The situation in China “is pretty okay,” resulting in a big increase in the quantity of products being sold domestically, says Hang.


It’s not surprising then that she says she has received a number of inquiries from friends and the media about foreign businesspeople who are now keen to sell products to China even while most countries are still in the throes of the pandemic.


“I think the reason is because the market situation currently in China is pretty stable and the trend is increasing as well, so there is market potential. A lot of business investors actually still have very strong interest in the Chinese market. They want to find trading opportunities or business opportunities in the Chinese market,” says Hang.


An associate professor of media management and economics at Tsinghua, she believes that the primary motivator for foreigners to enter the market is the current virus situation in their home countries. These same reasons are causing Chinese consumers to think twice about purchasing international products, she says.


“I think it’s simply because of the risk of COVID [and] because there have been a lot of reported cases from items shipped from outside China that were found to be infected.”


Amongst the Chinese industry sectors that have become stronger during COVID, Hang highlights the bio-chemical industry which has focused heavily on developing protection against the virus in the global race to find a vaccine:


“I think this is a very important opportunity for the national pharmaceutical or biochemistry industry to develop. A lot of biochemical companies in the industry have developed very quickly during this period of time because of the huge market demand and also because of the government’s support,” she explains.


Hang mentions two more reasons as being influential in shifting Chinese consumer purchases: convenience and suitability.


“The reason for such [an] increase [in domestic consumption] can be that it’s more convenient for the Chinese consumers to buy national brands, it's safer and also it’s better tailored to Chinese consumers and the Chinese market.”

Luke Pegrum


Senior Public Diplomacy Officer, Australian Embassy


“I haven’t seen a customer sentiment shift against them [foreign products],” says Australian diplomat Luke Pegrum.


With new tariffs on products from many of Australia’s primary export industries since the COVID outbreak, it’s been a challenging year for Australian export businesses in the wine, barley and seafood industries amongst others.


According to Pegrum however, the change in tariffs isn’t reflected in a souring of Chinese consumer sentiment against Australian products.


“If you are selling wine it's been pretty bad, but if you're still here [and] you've got a stockpile here of Australian wine that you've already imported, it's still selling strongly,” he says.


Pegrum notes that some Australian businesses are concerned about which industry may be affected next by possible tariffs, causing them to temporarily “chuck it [selling to China] in the ‘too hard’ basket at the moment” due to the perceived risk in heightened costs.


“People are very careful and concerned about widening bans and Chinese trade restrictions,” explains Pegrum.


Certain niche industries like Australian rock lobster have also had a particularly challenging year during COVID, given the decreased demand for fresh produce amid concerns that it may be carrying traces of the virus. For products like seafood, extended periods of time in customs place them at risk of losing their freshness. However, the current trade restrictions enforced by the Chinese government are a safeguard to the health of everyone in China, given the “practical and tangible” reasons to be concerned of COVID traces, says Pegrum.


Living in Beijing for the past few years, Pegrum has observed Chinese consumer behaviour in China’s capital over a reasonable period of time. He says that he hasn’t seen consumers engaging in nationalistic consumer behaviour in Beijing (a tier one city), but rather purchasing products based on their individual merits:


“They're [Beijing residents are] more concerned about quality products than they are about sort of nationalistic sentiment, but I guess if you get out into second [or] third tier cities I think there's [maybe stronger] national sentiment.”


The increasing strength of China’s domestic goods is a strong factor in shifting consumer demand from global to local products. Pegrum comments that he still sees the social prestige given to consumers of imported products, however Chinese brands are on the rise in the same sense, he says.


“Chinese brands are improving so you do see that certain Chinese products are definitely gaining more prestige than they [previously] had. I think most people don't see a deep decline in quality between buying a Huawei top of the range phone versus an Apple iPhone because the Chinese product has improved so much.”


In Pegrum’s opinion, Chinese companies like Huawei and Xiaomi are much more effective than foreign brands when it comes to marketing to their customers in China.


“Plus they are far better on price than Apple and they do quite well, but I don't think that [has] got anything to do with COVID,” adds Pegrum.


When it comes to fresh produce like beef, he describes the supply and demand impact on the price. With international product processing becoming more complicated due to the need for ensuring food safety amid COVID, it’s become more challenging to import certain items, causing their availability to decrease and per item price to increase, he says.


“It's more of a result of COVID restrictions for food, I guess,” says Pegrum. “But I think [also] a bit of an effort to protect local markets as well [and] prioritizing domestic producers over imported stuff at the moment, so that is then having an impact.”

I-Lyn Loo


Primary Industries Trade Manager at the Department of Primary Industries and Regional Development in Western Australia


“I am the Department of Primary Industries and Regional Development (DPIRD) lead for agri-food, fisheries and beverages exports from Western Australia globally,” says I-Lyn Loo.


She also Chairs the Food and Agriculture subcommittee of the Australia China Business Council Western Australia (ACBC WA) and is the DPIRD representative on ACBC WA.


Loo says she has noticed a shift in Chinese consumer demand and behavior over the past year:

“Chinese consumers’ behaviour has changed in China as a result of COVID, with all the social restrictions. Especially early on during the pandemic in China with the restaurants required to close and the lack of tourism.”


The first exporters to see a reduction in demand were those whose products primarily enter China through the channel known as Hospitality Restaurants and Cafes, says Loo. One of the key products impacted at this time was Western Rock Lobsters, as they are typically ordered as celebration dishes.


“Our industry here was gearing up for Chinese New Year celebrations in China and the [usual] huge demand,” but unfortunately due to COVID-19 and the timing of the restrictions, restaurants in China had to shut amid the New Year period. This resulted in “a significant reduction in demand for our Western Rock Lobsters,” says Loo.


Loo says that other products like wine, which have dual or multiple entry channels [such as retail alongside Hospitality Restaurants and Cafes], were less affected by COVID-19 restrictions in China early on in 2020. Although hospitality venues were impacted during the initial lockdowns, consumers were still able to access wine through retail channels.


Loo says that other major trends amongst Chinese consumers during the pandemic have included the increased uptake of digital services and e-commerce, as well as increasing consumer interest in nutrition, nutritional benefits and health.


“From my perspective, Chinese consumers are still partial to Australian products but these products may face other barriers in entering the Chinese market,” says Loo. Such barriers are currently impacting Western Australia’s exports of agri-food products such as barley, lobsters and wine, she adds.


“Consumer nationalism? I don’t think so – I haven’t heard anything [about that] especially at the consumer level.”

Nick Coyle


Chief Executive Officer (CEO) and Executive Director of the Australian Chamber of Commerce (AustCham) in Beijing


On a day-to-day basis, Nick Coyle describes his role as supporting Australian businesses, through advocacy, providing information as a Chamber and also connecting people with other businesses and government bodies on the ground.

“We do a lot of work with Chinese government bodies, especially at a local level, and then we do a lot of work with the Australian Embassy in Beijing.”


When asked if companies have said that doing business has become more difficult in China since COVID, he says no: “I would say in Australian contexts the difficulties have been around some of the tariff changes, particularly in the wine industry.”


The Australian wine industry has experienced a “fairly catastrophic drop in demand” due to a tariff-induced price hike, according to Coyle. The wines most affected are those at the middle and lower end of the market:


“I think the lowest tariff is about 107 percent, with some companies paying up to over 200 percent,” he says. “The very top end, where consumers are willing to absorb those tariffs, is a slightly different story, but certainly [at] the middle and lower end it's had a devastating effect.”


Aside from wines at the high end of the market, which may be able to absorb the tariffs, Coyle says he sees distributors not being willing to buy products from the lower price end of the Australian wine range. And rather than local Chinese wines posing a threat to their market share, products from other countries are getting substituted in.


“If you walked into a Hyatt or anywhere that you could buy wine and you see a moderately priced Australian wine for 100-150 RMB, [with] many other competitors from Chile and Argentina and Europe and South Africa and other places all around at a similar price point, well now the price of that wine that was 150 RMB is maybe 250RMB, giving you a wholesale tariff of at least 100% - it could be higher,” explains Coyle.


And with tariffs starting from “around 80-90RMB up to several hundred RMB” it’s only a matter of time before “products from other countries are going to get substituted in,” he says.


Joining the Chamber in 2013, Coyle has had close to eight years of experience and oversight on Australia’s international trade with China.


Chinese consumer demand for Australian products is still strong he says, and for the product areas he has monitored during this period, he “wouldn’t say COVID has affected the demand.” For most Australian businesses interested in exporting to China, Coyle’s on-the-ground insights are positive and welcoming news and in contrast to stories covered by Western media.


In terms of competitors, he points out that Australian products are generally not threatened by China’s domestic goods taking over market share as the two don’t share the same traditional strengths in many areas.


“The main competition for the higher end quality beef in China is not going to come from the domestic beef producers particularly. It’s going to come from the US, Canada, Europe and those sorts of markets,” he says.


From a geopolitical standpoint, export businesses may be concerned that Chinese consumers will shift their product preference, dependent on where the current tensions lie. Reassuringly for them, Coyle says he “hasn’t seen that being the case,” but rather he still thinks that “consumers make the choice of what they want to buy on the basis of whether they think it's a good product at a price that they are willing to pay.” So far Coyle says he doesn’t see “[that those sorts of atmospherics] seem to have affected consumer choices in any significant way.”


“It's really substitution from other markets, from other countries that pose the biggest threat in the domestic [Chinese] market” rather than consumers losing their appetite for Australian products, he says.


Lily Wu


Education Manager, Australian Trade and Investment Commission (Austrade) Shanghai


Lily Wu is a manager at the Australian Trade and Investment Commission (Austrade) in Shanghai, where her role is to promote Australian international education in Mainland China.


According to Wu, there “still remains a strong interest in the China market” for Australian education providers, because “they appreciate Chinese students’ contribution to them, the international community and Australian society.”


However, she says that Australian education providers have commented that they have found it more difficult to sell to China as a result of COVID.


Wu believes that COVID-restrictions have impacted the effectiveness of Australian education providers when it comes to reaching consumers.


“Sole online marketing is not a highly effective way to promote education to potential students who need in-person communication and consultation to help their important decision making,” says Wu. “International education is a huge investment for a family and their children.”


Before the pandemic, remote learning was a nice-to-have offering for universities who were appealing to increasingly travel-hungry domestic and international students. As long as they had a Wi-Fi internet connection, students could get their degree or qualification while multitasking with travel or doing a working holiday in some exotic location. Since the pandemic, the importance of online education has skyrocketed and it is now considered an essential mode of study especially given lockdowns and border restrictions.


But there really is no substitute for in-person classes and after months of tuning in to remote lessons, students are craving the opportunity of being in a physical classroom with their peers and lecturers.


“Online delivery is not a preferred way of learning for [Chinese] students,” says Wu.“[They] are keen to have the real campus experience overseas.”


Australia and China’s respective international borders are currently closed to foreign students due to the risk of imported cases of COVID. However, there are many countries around the world who have maintained relaxed border entry policies amid the pandemic, or like the U.S., have recently reopened for international students.


“From the international education perspective, Chinese demand for overseas international education is expected to recover gradually as the pandemic eases and borders reopen in major overseas study destinations,” says Wu. “For example, the U.S. has resumed its student visa processing for Chinese students and announced new travel policies enabling their return to the U.S. later this year. The UK has also opened the border to welcome the return of Chinese students,” she adds.


The need for international arrivals to quarantine is another factor affecting students’ decision around study abroad destinations in 2021. Chinese students were reportedly the least willing to quarantine, according to research on international student sentiments during COVID that was done by IDP Connect and UUKi.


When it comes to the current geopolitical tensions between Australia and China, Wu acknowledges some Australian international education providers are worried the bilateral relationship may also impact demand.


In light of this and other factors, a trend which has gained momentum over the past year is that Chinese students are increasingly choosing to pursue higher education in their own country. China’s strong performance in managing subsequent outbreaks of COVID cases domestically has caused a rise in local demand for education and increased consumer confidence in China’s products.


These days Chinese students don’t even have to travel abroad to complete face-to-face classes at leading international universities: they now have a choice of studying Chinese university courses, international courses or a blend of the two, all while staying on their home soil.


“China itself is an increasingly popular and safe choice for Chinese students in the target demographic for international education, as evidenced by the growing range of joint institutions and programs, and more bilingual schools under the umbrella of the transnational education delivery (called TNE). TNE can be the best option for Chinese families which have a strong will to pursue an internationally recognized quality education for their children within a controllable/manageable environment in terms of personal safety, time and geographical proximity, closeness of personal network and cost effectiveness.”


When asked if domestic Chinese education has become stronger than its international competition during COVID, Wu said China has been making significant investments in its higher education sector, with many Chinese universities improving their position in the global rankings.


Fortunately for providers of international education, Wu says that a lot of opportunity still remains:

“In comparison with China’s giant population, the top quality educational resources available are still far below Chinese demand.”

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