By The Straits Times | Created at 2025-01-19 09:06:32 | Updated at 2025-01-19 12:27:38
3 hours ago
BEIJING – Before Supreme opened its first China store in Shanghai in March 2024, there were concerns that the New York-based skate brand was late to the game in China and would have issues enticing consumers, having missed the streetwear heyday.
As it turns out, they need not have worried.
Young Chinese – among them resellers – queued for hours at the door on opening day and stocks were sold out almost instantly, even though prices at the Shanghai flagship were said to have been the highest of all Supreme outlets worldwide.
In 2025, China is counting on more of the same. Policymakers are hoping that new stores, launches and technologies will encourage people to loosen their purse strings as the nation grapples with sluggish domestic demand and an urgent need for consumption-driven growth.
China’s economy met its annual growth target of 5 per cent in 2024, according to official data released on Jan 17.
Since mid-December 2024, Chinese media and local government reports have increasingly used the new economic buzzword summarising this push: “shou fa jing ji”.
Loosely translated as “first-time economy”, it refers to an economic model where brands – both domestic and international – release new products, business models, technology or services for the first time in China to generate excitement. It is sometimes referred to as debut economy.
The hope is that this would shore up domestic consumption by mobilising the large Chinese market and stimulating sales.
But doubts have been raised about the long-term effectiveness of the first-time economy to boost consumption, with some analysts dismissing it as China’s latest desperate attempt to salvage its beleaguered economy amid global uncertainties.
Mr Neil Thomas, a fellow on Chinese politics at the US-based Asia Society Policy Institute’s Centre for China Analysis, said he sees the first-time economy push as “one of many experiments” by Beijing to help boost consumption at the margins.
It is a consumption policy that will have limited effectiveness because it focuses on upgrading firms’ offerings rather than increasing consumers’ disposable incomes, which is the key issue, said Mr Thomas.
While a more fast-paced and innovative consumer culture could encourage more spending, it is not at the scale that is required to achieve a structural rebalancing towards consumption across the Chinese economy, he added.
“That would likely require rising incomes, better social services, improving growth prospects and a resurgence in consumer confidence.”
Consumer confidence plummeted in end-2022 and has yet to recover due to a combination of job insecurity, a prolonged property slump, persistently high youth unemployment rates and tariff threats from US President-elect Donald Trump.
Compounding the problem is a weak social security system, which has some Chinese feeling that they have to squirrel their money for rainy days instead of spending.
What Beijing is trying to do with first-time economy is to boost consumption without unleashing market forces or fundamentally altering the investment-leaning structure of its current economic programme, which focuses on industry, manufacturing and technology, said Mr Thomas.
In December 2024, the first-time economy model was highlighted by China’s leaders at the Central Economic Work Conference as an area to “actively develop” in 2025, alongside other areas such as the ice and snow economy, silver economy and marine economy. The high-level annual meeting outlines China’s economic priorities and strategies for the year ahead.
Local officials, such as those in Beijing, Shanghai and the provinces of Guangdong and Jilin, have also incorporated first-time economy into their 2025 plans, with proposals to go beyond just opening first retail stores to staging first exhibitions and offering innovative value-added services and more.
Shanghai, for instance, has been consistently wooing international brands to open their first China, or Asia, store in the city since 2015. A total of 1,173 first stores opened in the city in the first 11 months of 2024.
Beijing, too, saw American fashion brand Tom Ford’s first flagship store in China and Swiss luxury watchmaker Jaeger-LeCoultre’s flagship store that features an art deco cafe in 2024.
In recent weeks, Chinese media has caught on, saying that first-time economy taps the nation’s changing consumption patterns, where more Chinese are seeking out novel and exclusive consumption experiences.
For instance, when Chinese chain Luckin Coffee simultaneously launched four new outlets in Lhasa in its first foray into Tibet in May 2024, people queued for up to an hour to get a taste. In July 2024, the same thing happened when Quanjude, a Beijing-based restaurant chain famous for its roast duck, opened in Lhasa.
To further ignite domestic consumption, the Chinese government recently expanded an already massive government-subsidised trade-in programme of everyday goods such as refrigerators, computers and smartphones.
Mr Bo Zhengyuan, a partner at research consultancy Plenum in Shanghai, said he interprets first-time economy as a call for private companies to innovate and “fill in the blanks” in the market, such as when driverless taxis took to the roads in Wuhan or when autonomous flying taxis take off in future.
“The underlying message is for these companies to be bold and be innovative, rather than just pushing out new products or hitting their key performance indicators,” he said.
Dr Chen Bo, a senior research fellow at the National University of Singapore’s East Asian Institute, said that first-time economy may generate short-term benefits for individual companies and cities but its long-term effect is limited as it merely shifts consumption from one product or city to another.
On the macro level, increasing disposable incomes, improving social security in terms of pension, unemployment and healthcare systems, and ensuring overall economic health are still needed to strengthen consumers’ confidence to spend, said Dr Chen, who was formerly an economics professor at Wuhan’s Huazhong Univerity of Science and Technology.
But he noted that it is too early to dismiss first-time economy as insignificant as it aligns with China’s overarching strategy of pursuing innovation through production and consumption.
“Under current circumstances, China is willing to try any means that can promote consumption and first-time economy is simply one of the many approaches we are exploring,” he added.
But Asia Society Policy Institute’s Mr Thomas said the problem with banking on newness to stimulate consumption is people may gravitate towards new brands and products but there is no guarantee that they will become regular or even repeat consumers.
“What is new today will seem old tomorrow,” he said.
- Michelle Ng is China Correspondent at The Straits Times. She is interested in Chinese foreign policies, property trends, demographics, education and rural issues.
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