As part of its Domestic Circulation strategy, which aims to strengthen the domestic economy, China is also focusing on stimulating demand from Chinese consumers and strengthening Chinese brands. The COVID epidemic has shown that domestic demand is not as strong as thought after all. It is foreseeable that the central government will shift its focus from supply-side to demand-side reforms and investments. China will pursue different policy approaches at different levels in 2021 to expand domestic demand and promote consumption.
As part of this change in strategy, the intention is to boost consumption by supporting the brand building of Chinese companies. To implement the new strategy, state TV broadcaster CCTV recently launched the Good Products China Plan together with the Good Products China Brand Building Office. It plans to build an online platform with docking sales channels to help Chinese brand companies adapt to the new situation.
The demand generation strategy is also an opportunity for Chinese OEM companies to transform and build brands themselves. For example, Chinese toothbrush factory Shuguang, which used to be an OEM supplying foreign brands such as Johnson & Johnson and Walmart, sold its products domestically under its own brand Jian after the epidemic-related slump in orders from the US.
We expect that due to massive government support, there will be more and more Chinese OEMs competing with the foreign brands with their own brands. The challenge is obvious: these companies produce products with the same quality as foreign brands, but do not contain brand premium, and thus can quickly capture the Chinese market. Foreign brands should now adjust their brand strategy and brand positioning.
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