By NATALIE MEYER

Global Business Journalism reporter

Part 2 of a 3-story special report

Consumer nationalism isn’t a new concept in China. And while it may have been stoked during COVID, it was particularly visible in the year before the pandemic.

In May 2019 CNBC published a report by Arjun Kharpal where he wrote that consumer nationalism was being promoted on Chinese social media as a way of standing up to U.S. technology brands. Some Chinese social media netizens wrote that they would buy Chinese brands over Apple products because, they claimed, the U.S. was “bullying” China’s tech giant Huawei.

During his Presidency, Donald Trump placed the Chinese company on a blacklist and threatened to block supply of key components by mandating American companies only sell to Huawei once they had been given a license from the U.S. government.

Netizens on Weibo, China’s Twitter platform, angrily responded by claiming Huawei “had been bullied by the U.S. so poorly recently,” and that they would throw their support behind the Chinese tech company by purchasing local rather than American tech products. One consumer’s comment written in Mandarin, showed particularly strong economic nationalist intent: “I’ve also decided to buy a Huawei Phone, and I will change my plan from buying an Apple Watch into a Huawei product,” he wrote, explaining that his choice was an “action to support Huawei.”

While China hadn’t officially blacklisted Apple, netizens on Weibo were unofficially endorsing one another to throw their collective weight behind their local tech competitor.

Jacques Penhirin, partner at international management consulting firm Oliver Wyman, is based in Greater China and monitors Chinese consumer behavior for retail and consumer goods. In an interview with Jing Daily, Penhirin said that while appeal for imported goods is still strong in China, electronics is an area where Chinese brands have made a “very strong push." China’s increasing strength in various categories is the reason for decline in demand for foreign products like health supplements, cosmetics and beauty items over the past year, said Penhirin.

Consumer nationalism is a global trend during COVID

Australian KOL David Gulasi says Chinese consumers are currently thinking: “Why do we want to buy all of these foreign products, when we can buy our own?”

Educator turned entrepreneur Gulasi is a foreigner whose career revolves around understanding Chinese consumer behavior.

“I became a KOL, got over 11 million social media followers [and] converted that into 11 million consumers with my agency,” says Gulasi.

When asked if geopolitical tensions were reason enough for Chinese consumers to shift their preference from foreign to local brands, Gulasi nods in agreement:

“I think yes, and I don’t think it’s only happening in China. I think it’s happening in every country. Now there’s not only nationalism in China – there’s also nationalism in Australia. In China as well - people want to have a jumpstart to their economy.”

Gulasi says he doesn’t see a massive change in consumer behaviour. “For some reason it didn’t really change much [about] Chinese consumer behavior, like the way people thought it would have.”

Why buy global when you can support local?

Economic revival has been a significant reason behind increased consumption of domestic products in China and other countries during the global health and economic crises brought on by COVID.

Chinese social media influencer Alistair Bayley, 27, says that consumer nationalism in China has helped to keep local businesses afloat amid the pandemic:

“There was a big trend in restarting [local] economies [during the pandemic]. There would be a lot of products where fruits and vegetables would be sold directly from the farm [to consumers] to kickstart the recovery of an impoverished village for example. There were so many [instances of this] – cherries when they were in season, oranges is happening now, mangoes, coconuts. All of these kinds of things [agricultural products].

“The local government would subsidize the products so that consumers could buy them at a lower price, and then use that to try and kickstart the economy in that region. There was a lot of that sort of thing directed at Hubei province after they came out of lockdown in mid-April.”

Aside from government incentives aimed at kickstarting local economies, Chinese brands have recently earned a greater consumer base through improving product quality, packaging and marketing.

Bayley says that one of the main categories that has seen the greatest shift in Chinese consumer purchasing behavior from foreign to local, is cosmetics. He credits this to Chinese brand investment in developing their brand design, brand identity and packaging, which were areas that more established Western brands traditionally performed better in.

Chinese brands now “also invest a lot more into social media marketing, and generally making themselves much more present in the public view,” says Bayley. “China really is stepping up now – they do have the means to get down the price of the product itself and use that to their advantage because they can get the volume to make sure that they still make money.”

Strategic product development and marketing steps taken by Chinese brands have even allowed them to sell more of the same product, while investing significant money in influencer promotion instead of improving product quality.

Bayley references how Chinese cosmetics brand Perfect Diary recently collaborated with the Australian artist and actor Troy Sivan, in promoting their latest eye shadow pallets. Not only did the brand engage an international KOL to gain the attention of a certain consumer demographic in China, but they also worked with Discovery Channel photography to create animal-aesthetic pallets, says Bayley. He adds that foreign competitor brands like MAC or Makeup Forever, which have products that are comparable in quality, would retail at prices at least twice that of Perfect Diary.

The strengthening of the “Made in China” brand

Alongside the desire to support the local economy is a growing awareness amongst the Chinese population that Chinese-made products are something to be proud of and shouldn’t be viewed as being inferior in quality to foreign goods. On Chinese social media this realization generated pro-nationalist dialogue in 2020, with netizens voicing their support that Chinese brands should be able to justify their high prices in the same ways that foreign brands have for decades.

Alistair Bayley says that consumer nationalism in China has helped to keep local businesses afloat amid the pandemic.

Bayley describes one of the most recent instances of this and how it played out on the web:

“A couple of months ago there was a Chinese livestream where Li Jiaqi, one of the two top e-commerce live streamers, was advertising a Chinese makeup line and there were comments [from netizens watching the stream] saying, ‘Why is this product so expensive? It’s only Chinese,’ and things like that.

And he [Li Jiaqi] came out saying, ‘why does everyone always expect that Chinese products have to be cheap? Chinese products have branding as well, Chinese products have quality as well. Chinese products in so many ways are sometimes better than Western products and are also more suited to Chinese people.’ When that happened, it became the number one trending topic on Weibo the next day. Because it was something that a lot of people felt aligned with their values, like ‘Why are we diminishing the value of our own products?’”

Bayley explains that the change in perception of Chinese products has significantly affected how he and other KOLs market products in China. While in the past, a product’s country of origin would be highlighted in marketing if it were foreign, and not mentioned if the origin was China, now it is the reverse, says Bayley.

“There is a really popular saying at the moment for both fashion and Chinese-made products which is 国潮 (中国潮流), so it’s ‘Chinese fashion’ or ‘Chinese trend.’ Brands like Huaxizi, Judy Doll and Perfect Diary [will] very gladly embrace that they are a Chinese brand and use 国潮 to describe themselves.”

Prior to the coronavirus, foreign brands were able to enjoy the prestige of having their products viewed by Chinese consumers as a fashion accessory. Their origin was woven into the design story of the brand and could be used to demonstrate quality assurance and high-end products.

Bayley describes how foreign KOLs would previously have been able to leverage the country in which a product was made or sourced as a marketing ploy, but now they tend to remove that aspect of the brand story:

“For example, we once sold a face mask that was from a small Melbourne brand that sold skincare products. Originally it could be something along the lines of ‘Melbourne itself is kind of like the Paris of Australia, there are so many cultural alleys, there’s a really nice vibe in the city, [and] it’s gorgeous with the scent of coffee wafting through the streets.’ And you’d create this sort of idyllic scenery around the idea of Melbourne and use that to raise an audience’s expectations of how much this product has cost [and] how much it’s worth. Whereas now...it tends to be much more driven along the lines of the product itself, rather than the brand.”

While increased product quality, investment in brand design and packaging, greater marketing and promotion, and heightened nationalism have all been seen to influence consumer demand to some degree, it is the relationship between those factors that Bayley believes is the most important reason for this shift:

“The reason why it’s so noticeable now is because we are seeing an increase in nationalism, especially within Chinese youth, at the same time that we are seeing brand identity and that level of marketing become mainstream in Chinese products as well. And so the fact that both of those things are happening hand-in-hand I think is increasing the speed with which we see these changes...and is making it into a much more significant force to be reckoned with.”

With China producing high quality products which rival Western products in some categories and exceed them in others, Chinese consumers have realized that Chinese brands are making products worth purchasing. While “Made in China” was once synonymous with very affordable products, this is no longer the case in every industry.

“The era of Chinese products being the cheap alternative is definitely at an end,” says Bayley. “And I think that means it’s going to be quite an uncomfortable time for foreign brands who were relying on that difference as a selling point for their products. There is going to have to be a lot of adjusting to that in the market."

There are a number of reasons why China’s demand for domestic products has gained popularity in recent years and during COVID in particular. From marketing to consumer confidence, here are six of the major factors that have strengthened Chinese consumer nationalism since the outbreak of the pandemic:

Six major drivers of Chinese consumer nationalism during COVID-19

Stronger marketing campaigns

With the outbreak of the pandemic came lockdowns both in China and around the world. Once this had been lifted, restrictions like social distancing and enforced wearing of face masks remained in place to protect the health and safety of the community. Out of necessity and as a means of self-soothing, consumers not just in China but around the world became more health conscious and focused on their diet, exercise regime and physical and mental wellness.

In China, reports such as Abigal Ng’s CNBC article published on Singles’ Day in November 2020, highlighted that foreign brands had been particularly hard hit by the pandemic. This trend was first obvious at a short-term level amongst cosmetics brands during the first quarter of 2020, as Chinese consumer demand fell due to a reduced need for color makeup, wrote Ng. The foreign cosmetics and skincare brands which best pivoted during this time were those that created new scenarios for their consumers.

Prioritizing self-care rituals was the fresh angle used by brands to convince consumers to continue purchasing (Ng 2020). Avène updated their Tmall marketing, with a new focus on soothing skin infections caused by constant use of face masks, while KOLs were used by SkinCeuticals to endorse the importance of quarantine skincare.

This period was when local Chinese brands in the makeup industry really took centre stage. Realizing that they had a captive audience who were engaging more with social media during lockdown, Chinese brands Perfect Diary and Colorkey seized the opportunity to release high value, low cost products which ended up going viral. Livestreaming became more of a go-to option for Chinese brands to engage with their audience and sell to consumers.

The competition stakes are now even higher in the industry. Ng writes that 84 percent of beauty brands now feature livestreams on their Tmall stores, according to Garner’s Digital IQ Index: Beauty China. International brand MAC Cosmetics joined the livestream craze during COVID, by getting 64 of their makeup artists to compete against one another in creating looks aligned with set themes, all while streaming themselves.

High consumer confidence in China

According to Penhirin, Chinese consumer confidence in “Made in China” products is the primary reason why demand has shifted from imported to domestic goods. He did however acknowledge that nationalistic sentiment may be a contributing factor.

Using Apple as an example, Penhirin explained how international brands that are renowned for their high quality are increasingly choosing to make their products in China.

Consumer confidence in Chinese brands, said Penhirin, is something that “has been strong sales figures in 2020 and the pandemic is consumers’ “need to spend” and their current inability to travel, according to Luo. A survey run by Oliver Wyman found that consumer confidence in China remains high, in spite of the pandemic.

“They see the rest of the world struggling, but Chinese consumers are very confident in the strength of the Chinese economy,” said Penhirin.

Chinese businesses learn lessons from the pandemic

The pandemic has reframed consumer perceptions globally around wants compared to needs. Brands and households were both hit hard by the pandemic disruptions to business-as-usual, causing a reduction in consumer spending on non-essential items during the early stages of the outbreak and lockdown.

Although China has recovered well compared to many economies around the world, the lessons learned by consumers during this period will not be forgotten as quickly.

Chinese social media has helped marketers to see what messages are resonating in the Chinese market post-COVID. Marketing focused on “rational spending, eco-consciousness and nationalism are thriving,” according to a 2020 report by Jane Li that was published in the World Economic Forum website. Businesses would be wise to bear in mind that they are now selling to “a public who just experienced fear, trauma and paranoia” and they expect product campaigns to reflect this sensitivity.

Consumer spending contributed 58 percent to China’s growth in 2019 says Li, but by 2020 consumers were less trigger ready with purchases. According to one study, 51 percent of Chinese said they would work harder to earn more, while 41 percent said they would prepare for future crises by reducing their spending.

In the same article, Li highlights the story of a Beijing-based photographer Chloe Ni, who made simple adjustments to her daily spending habits to be more cost-conscious amid COVID. Shifting from trips to the coffee shop every second day to brewing her own cup at home, Chloe said these micro-behavioral changes in her consumer behavior were important cost saving decisions she made during the pandemic.

When she needed equipment for her company, she shifted from purchasing new to instead looking on Xianyu, an online marketplace that sells second-hand items. For workers like Chloe in the service sector, COVID disturbed their normal work routines almost overnight, forcing them to pivot their business and cut their spending to financially survive lockdowns.

But as COVID numbers have dwindled in China, the Chinese government has been hopeful that consumers would engage in “revenge shopping,” or making up for lost time by engaging in costly retail therapy to reboot the economy. A term coined around 1976 when Chinese consumer purchases surged after Mao Zedong’s Cultural Revolution, “revenge shopping” has had a resurgence in public dialogue and has been trending on social media in China since the outbreak of COVID.

Unfortunately for the Chinese government and industries, another Chinese term is also trending on social media: 断舍离, which translates to “break away” and encourages minimalistic consumerism.

“I used the lockdown period to clean out my flat and throw away lots of clothes and expired items. I’ve decided not to buy any more clothes and skincare products for the rest of the year,” wrote one user in Mandarin on Zhihu, the equivalent of Quora in China.

“Brands are facing a bigger challenge in addressing the cutback on spending, and they ought to learn how to build relationships with consumers in the post-virus era,” said Gao Ming, managing director of luxury practices and senior vice president at Ruder Finn Group’s Greater China office.

Gao says that while consumer demand for some luxury products may be revived, “revenge spending won’t become a mainstream phenomenon.” Chinese consumers are increasingly opting for frugality in the post-COVID era.

National pride in China’s success with COVID management

“Disasters regenerate a nation” (多难兴邦) wrote former premier Wen Jiabao in Mandarin on a classroom blackboard in Beichuan in 2008. The city was the epicenter of the Sichuan earthquake that same year. Premier Wen’s words embody what scholars like Chenchen Zhang refers to in his 2020 article published in Made in China Journal: “disaster nationalism” – “a particular mode of messaging and emotional mobilization that the propaganda machine deploys in times of crisis."

Both the Sichuan earthquake and COVID pandemic provided Chinese people with an opportunity to focus on social cohesion at a national level and work together on a collective crisis. State media shared stories about individuals’ heroic self-sacrifices; from medical professionals who travelled to Wuhan at the start of the pandemic, to those that checked temperatures at airports, railway stations and other locations around the country.

On social media, “Thank You, Every Ordinary Chinese Citizen” (谢谢每一个平凡的中国人) racked up more than 570 million views and became a trending hashtag on Weibo after People’s Daily launched a campaign of the same name on their channel.

Regardless of criticism leveled at the methods used by the Chinese government in overcoming the virus, China has managed multiple new outbreaks of the virus far more effectively than countries like the U.S., the U.K. and Canada.

“It comes as no surprise that a hostile international environment boosts nationalism,” writes Zhang, who describes how international power dynamics between global superpowers had “a significant role in how Covid-19 has become an impetus for nationalism.”

Donald Trump's anti-China rhetoric contributed to an increase in consumer nationalism in China. (Photo from Chinese Foreign Ministry)

Competitive consumer nationalism with the U.S.

The outbreak of COVID-19 hit at a point of tension in the China-U.S. relationship, following former President Trump’s blacklisting of Chinese companies.

In February 2020 the South China Morning Post published an article by Pearl Liu, citing the ongoing trade war and boycotting of Chinese goods during the pandemic as the primary factor in driving a shift in Chinese consumer sentiment.

By May 2020, Karen Yeung wrote an article for the same news organization and quoted Apjit Walia, an analyst at Deutsche Bank, as saying that coronavirus was “fueling mistrust among consumers in China and the United States about each country’s products” and that there was building “momentum for a decoupling between the world’s two largest economies.”

According to one survey run by Deutsche Bank’s big data platform dbDIG, 35 percent of Chinese said they actively not purchase American products, while 41 percent of U.S. citizens said they would avoid goods that were made in China.

A 2021 article in the Fudan Journal of the Humanities and Social Sciences agreed with the competitive nature of COVID nationalism and how this was exacerbated by “U.S. scapegoating of China,” resulting in “hits to economic performance.”

Ample product supply, perceived safety of local goods and foreign support of China

In June 2020, marketing consultancy China Skinny developed a report for a foreign client looking to understand the influence of COVID-19 on Chinese consumer behavior and perceptions.

China Skinny worked with a partner to run a survey with close-ended questions to investigate what factors had fuelled Chinese domestic demand, what behavioral adjustments consumers had made after the outbreak, whether consumers demonstrated more purchase intent towards local or imported products, and what factors influenced consumers when they were deciding on imported purchases.

Of the 820 people (33 percent male, 67 percent female) surveyed across Beijing, Shanghai, Chengdu and Guangzhou, the primary drivers behind the domestic swing in consumption were found to be the adequate supply of products (said 55.3 percent of total respondents) and the perception that they were safer than foreign goods during COVID (said 47.5 percent of total respondents).

Closely behind these factors were “support for China” (45.9 percent), “relatively cheaper” (43.6 percent), “closer to my needs” (42.1 percent) and “quality is better” (30.2 percent), with drivers like “family/friend recommendation,” “better design,” “KOL endorsed” and “no reason/like trying” said to have influenced consumer preferences to a lesser extent. A growing sense of nationalism was evidenced by the survey respondents rating their support for China as the third top reason for purchasing a certain country’s product over another. However, while geopolitical tensions were shown to have a strong impact on the purchase intent of consumers, the survey responses indicated that consumer engagement had a positive mitigating effect.

Graphic by Natalie Meyer from China Skinny data

Product origins which Chinese respondents showed most positive purchase intent towards included (from most to least): China, New Zealand, Japan, Germany and Russia. Products from the U.S., Canada, U.K. Thailand and Australia scored lowest in terms of geopolitical influence on purchase intent. According to the report, the “propensity to feel personally affected by geopolitical affairs and adjust consumption accordingly appears to get strong with age, indicating that perhaps younger consumers are not so nationalistic.”

The survey highlighted a definite swing towards domestic consumption, with 44 percent saying they would be more likely to buy local Chinese products in general, as opposed to 16 percent who said they intended to buy more imported.

From a perspective of safety, Chinese consumers showed a preference to purchasing fresh products like meat, seafood, dairy, fruit and honey locally due to their belief that these would be fresher and have less chance of carrying traces of COVID. When it came to wine, cosmetics and health supplements, consumers voted in favour of purchasing foreign products over domestic ones.

Disruptions to global supply chains have been felt by both businesses and consumers in China, as represented by Chinese consumers rating access to and supply of a product as the top factor in influencing their purchases during COVID.

Opportunities in a post-COVID world

“I don’t think COVID really changed much in China, although it changed everything abroad,” says Gulasi. “Patriotism has always been big in China.”

Chinese people are proudly and publicly supportive of their culture, their country and their government’s management of COVID. This doesn’t mean that opportunities in China have diminished for foreign brands. But it does mean that competition has become more fierce and that factors like health and safety have gained renewed importance.

“Globalization was good for the time being and now we need to get back and build our foundation [in our own countries] again,” he says.