Exclusive | Qiandama’s funder GenBridge sees ‘substitution’ in China’s retail downgrade, tepid growth

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GenBridge Capital founder Robert Chang, whose investments include the grocer Qiandama, says this trend presents ‘an unexpected opportunity’ for Chinese brands.

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A so-called substitution effect has kept China’s consumer sector resilient amid economic headwinds, according to GenBridge Capital founder Robert Chang Bin. Photo: AP

Wency Chenin Shanghai

Published: 10:00am, 17 Aug 2024Updated: 2:09pm, 17 Aug 2024

Mainland China’s consumer sector has proven to be resilient amid the slings and arrows of outrageous fortune – including the property crisis, elevated unemployment and weak consumption – as people switch their spending to more affordable goods in an economy where being frugal counts, according to venture capitalist Robert Chang Bin.

“This is what I call the substitution effect,” Chang, founder and managing partner of Beijing-based VC firm GenBridge Capital, told the South China Morning Post in a recent interview. GenBridge’s investments include the grocery chain Qiandama.

“When people opt out of a major purchase like real estate, which involves millions of yuan, they redirect their spending towards other categories – from hundreds of thousands on cars to tens of thousands on furniture, down to thousands on travel and hundreds on clothing,” Chang said. “For Chinese consumer brands, this presents an unexpected opportunity.”

His view reflects how the world’s second-largest economy continues to perform well below expectations, as it posted 4.7 per cent growth in the second quarter after recording 5.3 per cent growth in the first quarter.

Robert Chang Bin, founder and managing partner of venture capital firm GenBridge Capital. Photo: GenBridge Capital

China’s gross domestic product (GDP) grew by about 4 per cent year on year in July, according to Ding Shuang, chief economist for Greater China at Standard Chartered. This deceleration has prompted Ding and various investment banks to predict the country’s GDP forecast to fall below Beijing’s target of “around 5 per cent” this year.

Data released on Thursday by the National Bureau of Statistics show that property investment declined 10.2 per cent year on year in the first seven months of 2024, while retail sales eked out a 2.7 per cent increase last month.