search
Only on Eduzaurus

Analysis of Economical Situation in China

Download essay
Need help with writing assignment?
74
writers online
to help you with essay
Download PDF

As the biggest developing country across the globe, China has achieved great success in its economy development over the past decades. Nowadays, it is even coming after USA to gradually take over the position of the world’s largest economy. China also has the largest retail and consumer market second only to the U.S. and it is continuing to grow to an even larger scale. To study the future trend of cold chain retail sales, it is of primary importance to look at the total retail sales of the country. The following combo chart depicts the moving trend over the period from 2009 to 2016.

It can be clearly seen that China has experienced an overall drastic increase in total retail sales of consumer goods over the past years, from ¥13,267.84 billion RMB in 2009 to ¥33,231.63 billion RMB in 2016. The amount is nearly tripled. At the same time, the year on year growth is always above 10% with a peak time seen in 2010, one year after the economic crisis. The growth figures afterwards were slowing down but still kept steadily at a level of more than 10%, and such a trend is believed to be maintained for the coming years according to the National Bureau of Statistics of China (2017).

Essay due? We'll write it for you!

Any subject

Min. 3-hour delivery

Pay if satisfied

Get your price

In comparison, the total retail sales of the USA is illustrated in the following chart. And USA on the contrary cannot have the high growth figure as China as its market is well developed to an efficient and mature stage. If China can keep its current growth rate, it can pass over USA to become the country of the most retail sales. It already did pass the USA in 2016 if given the exchange rate of USDCNY is 6.6, but it still has a much higher retail sales per capita than China as China has around a 4 times larger population base. Above all, China’s potential of further retail growth in the coming years is still magnificent. People should still hold optimism over future retail escalations.

When it comes to the online retail sales, an almost same pattern can be observed from the figures. It reveals that China’s total online retail sales was 1,187 billion RMB in 2012, which was then enlarged dramatically to 5,155.6 billion RMB in 2016, growing averagely at around 40% year by year. This means that the online retail scale of China was nearly doubled every year in the last couple of years. The compound annual growth rate for China’s developed competing economy bodies such as USA and EU were 10% and 10.5% respectively for the period 2012 to 2017, reaching roughly about 2,442 billion RMB and 1,337 billion RMB separately (Forrester Research, 2013). The comparison shows the increasing speed of China’s retail market is breath-taking. Such a result can provide valid evidence for China’s stronger than ever online retail growth, given its total retail sales has gradually come to a steady period. This further means that China’s retail sales in the future will be significantly driven by those retail sales through online channels. Or in other words, China’s retail market will experience a transformation of declining sales from stores of bricks and mortars and boosting sales from online omnichannles. The landscape of the retail market is changing. This is evidenced by the next part of this research concerning the development of mobile retail sales.

The boost of the mobile retail market is even more drastic. The figures disclosed by CNNIC indicate this. In 2012, there is barely any retail sales achieved through mobile markets, with only 100 billion mobiles sales in 2012. This figures was kept being doubled in the following 3 years until reaching 2,100 in 2015. From 2016 to 2018, the growth rate was coming down to a lower level, but the mobile retail sales were still growing at a rate above 34%. In 2018, the total mobile retail sales rose to 5,500 billion yuan with still a 22% growth rate. It seems to keep this momentum for the coming years although it might be slower than priors. If combining the online retail sales combo chart and the mobile retail sales combo chart, it is easy to discover that in 2012, the 100 billion volume of mobile retail sales accounted for only around 10% of the total online retail sales. While in 2016, the figure was up to 3,400 billion, took up almost 66% of the total online retail sales. This can be seen as a valid prof of the transformation of the online retail market structures from internet-placed orders to mobile-place orders. And the convenient access of people to mobiles will probably drive the online retail sales to an even higher level in the coming years. Therefore, on the supply side further concerning the mobile retail market, the expansion of the future online retail sales will continue as mobiles users are increasing.

From the previous analysis, it can already be concluded that on the supply side, the overall retail market is expanding rapidly. Then in order to study the future developing trend of the retail market, it is necessary to also analyse the demand side. The current surge of supply side alone cannot be evident enough to ensure its continuous future growth. Only if when the demand side also increases to require higher supplies, the market will expand further. The urban household data illustrate the China’s domestic household construction which can further demonstrate the changing trend of the groups of major consuming power. We can see that in 2012 the upper middle class and the lower middle class together account for 68% of the total urban household whilst in 2022, the middle class will take up 76% in total. Since it is assumed that the middle class can represent the major power of the current society and make up the main online retail customers, such a change in the urban household construction can well indicate that the online retail market have the potential to be enlarged. In addition, as the online retail market evolves to a relatively mature stage, the goods sold through online channels will probably not be recognised as cheap and “low quality” wholesale products. More and more bespoke and personalized goods will come to be tradable online. This means that the affluent group of people will also spend money purchasing from online. The urban household consumption of China as shown in the following bar chart demonstrate the consumption of each household group. And in 2022, the total consumption of the upper 3 groups will rise to 95% from 88% in 2012.

Source: Deutsche Bank; McKinsey & Co

However, among all of the online retail sales, only an extremely small part of goods purchased were those that need to be transported through refrigerated supply chains. In 2013, the online retail sales was 1,892 billion yuan whereas the online retail sales through cold chain was only 13 billion, less than 1%. This percentage though became heavier and heavier from 2013 to 2018, ascribed to the much faster growth of the sales figures through cold chain logistics. In 2018, this figure would come to 3.7% approximately (206.63 billion of cold chain retail sales and 5155.6 billion of online retail sales). As the growth rate is gradually staying flat at a rate of above 40%, and the growth of the online retail sales stays at more than 20%, It is ought to see in the coming years, that the retail sales through cold chain logistics would take up a higher and higher percentage of the total online retail sales.

Source: International Trade Administration

This scorecard table is made to showcase the cold chain competitiveness of the middle income economies including Brazil, China, and many major developing countries. From the five main pillars (i.e. Government/Regulatory, Labour Force, Infrastructure, Demand/Business Factors, and Industry Interest) that make up the scorecard, we can see that China’s highest scores are from the last two pillars, and its total score is only 0.3 lower than Malaysia, the country with the highest score. In comparison to Malaysia, China’s weak points stem more from factors contained the former three pillars. And it is known to all that these low scores are due to China’s generally immature legal frameworks, corruption issues, less investment in labour force, and thus the overall less skilled labour force. However, these are factors that can be tackled by investing more to improve. And that is probably why their low scores are mitigated the its extremely huge domestic market size and the industry’s interest of investing, contributing to the high total score in the end. As long as Chinese retailers make their plans to invest in cold chain infrastructures, the less developed condition in China will no longer be this market’s weakness. Instead, it reflects the great potential of the market and retailers would enjoy more and more marginal benefits continuously as long as they overcome the initial heavy investment period.

Overall, this research has been devoted to overviewing the current status and the future developing trend of the cold chain logistics market of China. Such research is carried out from two sides, one from the supplying side and one from the demanding side. Firstly, from the supplying side I analyse the development of the total retail market, the online retail market, the mobile market, and the cold supply chain market. I find that they are increasing at a surprisingly high speed than the developed peer countries.

Therefore no matter the boost of total retail market or the emergence of the online retail market, cold chain logistics have the valid ground and are facilitated to rapidly grow. The supplying side provided stimulus for the cold chain infrastructures, whereas on the demanding side, customers also raise requirements for the cold supply chain to develop further. The change of the consumption power due to the higher percentage of China’s future middle class and affluent class of people do have the incentive to buy more products that need to be delivered to home through cold chain logistics.

This research will provide meaningful indications for the refrigerated retailing industry and the retailing industry should be notified that cold chain logistics can be a highly generative area to invest in which in turn will help enlarge their scale. However further research efforts need to be devoted to dealing with potential factors that may hinder the development of the domestic cold-chain logistics, e.g., the immature legal framework, the lack of patent or intellectual protection, and the low quality of the labour force. Many advisory authorities are trying to analyse the hinders. China Economic Review (2016) pointed out that imbalanced cold-storage standards, overly conducted inspections, long return period of investment in cold-chain logistics, and lack of execution ability have significantly discouraged the Chinese retailers to update their distribution networks by incorporating cold-chain supply business. Actions need to be taken accordingly. After all, retailers should realize the potential opportunities and always get prepared for investing the cold-chain logistics immediately when there is positive political motivations signalling a good timing.

Disclaimer

This essay has been submitted by a student. This is not an example of the work written by our professional essay writers. You can order our professional work here.

We use cookies to offer you the best experience. By continuing, we’ll assume you agree with our Cookies policy.

Want to get a custom essay from scratch?

Do not miss your deadline waiting for inspiration!

Our writers will handle essay of any difficulty in no time.