China’s economy is rebounding as the country emerges from three years of strict pandemic-related lockdowns, fueling a surge in consumer spending.
As China dismantled its zero-COVID policy and reopened its borders in January, economic forecasts swiftly rose. In February, the U.N. and International Monetary Fund raised expectations for China’s economy from 3% growth in 2022 to 5.2% in 2023. Major financial institutions including Morgan Stanley and Goldman Sachs have also lifted their estimates on China's economic growth and the subsequent bump to global GDP.
China’s advertising market is expected to roar back to 6.3% growth in 2023 following a 0.6% decline in ad revenue the prior year, according to GroupM’s December forecast.
In a new report, “China Spotlight 2023,” GroupM is advising its global clients to “seize the opportunity” early as Chinese consumers who have saved money during lockdown look for ways to spend it.
“[Chinese] people had money, but had no place, no time and [they] were not in the mood to spend it. But in these recent two months, consumer confidence is coming back. We need to take this time to tell our global brands to reconnect with Chinese consumers,” Zod Fang, head of GroupM Knowledge and Data Center at GroupM China, told Campaign.
WPP’s media investment arm said it is witnessing more Chinese money flowing both domestically and overseas, particularly in e-commerce, media and entertainment, and big-ticket purchases such as automotive and luxury goods.
For example, auto sales reached 5.1 billion yuan (US$762 million) in December 2022, up 8.1% from December 2019, according to data from the National Bureau of Statistics. Meanwhile, exports of Chinese-manufactured electric vehicles have spiked to record levels in recent months.
In e-commerce, GroupM said it has witnessed a large influx of Chinese sellers on U.S. marketplaces like Amazon and Walmart, which relaxed its rules for third-party sellers last year, causing a flood of supply.
Increases in Chinese exports are being supported by overseas advertising, GroupM said. Temu’s Super Bowl debut (below) this year sent a strong signal of China’s growing interest in U.S. consumers. The U.S. shopping app is owned by Chinese e-commerce giant Pinduoduo.
“We certainly can't ignore the pace at which things are starting to pick up this year across both China and the U.S. and international markets, as Chinese manufacturers and companies advertise abroad,” said Kate Scott-Dawkins, GroupM's global president of business intelligence, who co-authored the report with Fang.
“I'm confident other markets may see more spending [from Chinese companies] soon,” added Fang.
China is the second-largest ad market behind the U.S. Together, the two countries accounted for 55.5% of global ad revenue in 2022, per GroupM’s estimates.
Amid growth in consumer and business spending in China, geopolitical challenges related to the war in Ukraine and tensions between the U.S. and Chinese governments remain a concern and are continuing to impact the global economy, GroupM noted in its report.
It said a number of product categories including semiconductors, telecommunications and aerospace “will remain challenged” in 2023.
“[Geopolitics] is having an impact on everyone,” said Scott-Dawkins. “It's important to ensure that we're keeping an eye on the health of the market, the trends of the market, and that we're presenting all the available information we have with the caveat being that we're not consultants in this space of geopolitics.”