China: Top five ride wave of economic turbulence

There was no change at the top for leading brands in China, despite a tumultuous year rocked by stock market crashes, currency devaluation and stalled economic reforms. 

The standing of the top five brands in China remains unchanged this year from last year’s rankings. Samsung retains top spot with Nestlé, Chanel, Apple and Sony following suit.

But while brand rankings are unchanged, 2015 was certainly one of change for the world’s largest economy, as the country transitions from an investment-intensive, export-led model of growth to one driven by consumption and innovation.

Chinese stocks suffered an unprecedented summer crash that wiped out 43 percent, or US$5 trillion, of their value at one point. That was followed by an abrupt 2 percent currency devaluation in August that sent shock waves through global markets.

Reforms seen as crucial to Beijing’s efforts to turn around a slowing economy, such as a modern stock-listing system and lighter capital controls, have stalled.

Concerned that its ageing population could pose a threat to the country’s economic development, the Communist Party leadership in October ended its longstanding one-child policy, declaring that all married couples would now be permitted to have two children.

Citizens are worried about the state of the economy, heavy pollution, massive corruption, labour unrest, land grabs, ethnic tensions, and increasingly harsh restrictions on traditional and new media.

Worried about this growing challenge, the government launched an unprecedented crackdown in July that resulted in the arrest or interrogation of about 230 rights lawyers, legal assistants and activists.

Amid this uneasiness, Nielsen noted that Chinese consumers seemed to be holding up despite the volatility, with retail spending remaining strong in the last quarter of 2015. This is partly because China’s services industry is growing at a clip, helping offset the deterioration in the manufacturing, construction and housing sectors.

However going into 2016, slowing economic growth—which fell to 6.9 percent last year, its lowest rate for more than two decades—could eventually affect citizens' spending plans and consumption, which has been the main bright spot of China’s economy over the past two years.

The luxury segment has begun to feel the impact of this volatility, and brands have already started closing stores in China.

According to a Bain & Company report, Gucci closed five stores in China, Burberry closed two outlets, and Prada closed four in 2015, due to collapsing demand.

Louis Vuitton, closed six stores and opened two new stores in China in 2015, and in 2016 announced the closure of two additional stores located in Shanghai and Shanxi.