China Consumer

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China Consumer: Measuring the recovery path
Introducing our consolidation framework: What is unique

in China and how we can play (as of Jul 7)
In our previous trackers and recovery path framework, we highlighted industry Michelle Cheng
+852-2978-6631 |
consolidation as a key driver for short-term recovery and long-term growth for michelle.cheng@gs.com
Goldman Sachs (Asia) L.L.C.
various consumer categories including F&B, restaurants, spirits, sports, and home
Lincoln Kong, CFA
appliances. In this note, we compare the market size and consolidation status in +852-2978-6603 | lincoln.kong@gs.com
China vs Japan. We introduce our consolidation framework in which we divide 13
Sho Kawano
sub-sectors into four buckets based on growth profile and consolidation status and +81(3)6437-9905 | sho.kawano@gs.com
Goldman Sachs Japan Co., Ltd.
identify the key drivers for more or less consolidation going forward. Accordingly, we
Simon Cheung, CFA
look into the opportunities for existing market leaders vs potential new players. +852-2978-6102 |
simon.cheung@gs.com
In addition to other factors that affect consolidation such as regulations and capital Xufa Liao, CFA
+86(21)2401-8902 | xufa.liao@ghsl.cn
requirement, we found that the premiumization trend and channel/supply chain Beijing Gao Hua Securities Company
Limited
structure have impacted the consolidation status in China which could lead to a
Nicolas Yi
different market share landscape vs other markets. Since the COVID-19 outbreak, +86(21)2401-8922 | nicolas.yi@ghsl.cn
Beijing Gao Hua Securities Company
market leaders have further gained shares as they offered more discounts to drive Limited
faster sales recovery/inventory digestion and gave financial support to distributors to Christine Cho
+852-2978-1255 | christine.cho@gs.com
get trough the challenging time, while consumers tend to choose quality brands. Goldman Sachs (Asia) L.L.C.
Fei Fang
What’s new this week? +852-2978-1383 | fei.fang@gs.com
Data: Weekly appliance online/offline sales; Jun monthly protein price, raw milk Ronald Keung, CFA
+852-2978-0856 | ronald.keung@gs.com
price, Moutai wholesale price, Macau GGR; May monthly China retail sales, online Goldman Sachs (Asia) L.L.C.
2aeb9e8b174644998c7303f5a989d953
sales, parcel delivery volume, HK retail sales, HK tourist visits, Swiss watch import, Cathy Chen, CFA
+852-2978-6621 | kaiqi.chen@gs.com
passenger traffic from major Chinese airlines, Chinese outbound travel, washing Goldman Sachs (Asia) L.L.C.
machine/refrigerator/AC domestic shipments, baijiu/beer production, dairy Sara Steiner

+81(3)6437-4059 | sara.steiner@gs.com
production volume, wine import volume. Goldman Sachs Japan Co., Ltd.
Yuqing Li
Company results/comments: Restaurant (Haidilao profit warning, Gourmet Master +852-2978-7347 | yuqing.li@gs.com
monthly), Sports (Nike, Pou Sheng monthly), HK retail (Chow Tai Fook, Luk Fook, Sa
Sa), Snacks (Want Want).
Key findings: 1) Concerns of a 2nd COVID-19 wave impacted dine-in and shopping
mall traffic in Beijing and certain travel-related spending; 2) Staples 2Q20 sales
recovery was strong and better than expected. 3) Government continues to support
the recovery by issuing a new round of consumption coupons and stimulus policies.
Goldman Sachs does and seeks to do business with companies covered in its research reports. As a result,
investors should be aware that the firm may have a conflict of interest that could affect the objectivity of this
report. Investors should consider this report as only a single factor in making their investment decision. For Reg AC
certification and other important disclosures, see the Disclosure Appendix, or go to
www.gs.com/research/hedge.html. Analysts employed by non-US affiliates are not registered/qualified as research
analysts with FINRA in the U.S.
For the exclusive use of Jennifer Wu (jennifer.wu@carlyle.com) at The Carlyle Group Inc.
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Goldman Sachs China Consumer: Measuring the recovery path
Table of Contents
Key findings 3
Our consolidation framework 6
What is new (local vs global) 15
Our recovery framework 17
High frequency data by companies and sectors 20
Policy updates 25
Disclosure Appendix 33
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8 July 2020 2
Key findings
1) Introducing our consolidation framework
To better analyze the opportunities for further consolidation, we compare different

categories’ current market size and the top 5 players’ market share vs those in the
Japan market. Accordingly, we look into the growth opportunities and the sustainability
of the existing players. For example, sportswear has healthy market growth potential
while the top players’ market shares are relatively high vs other markets; but the
mono-brand offline retail format and consumers’ premiumizing demand should continue
to support the highly consolidated market landscape. Beer has slower industry growth
but consolidation has been clearly driving leaders’ growth due to consumers’ trading up,
M&A, and leaders’ greater resources to invest in price competition and support
distributors during COVID-19. On the other hand, apparel, cosmetics, foodservice,
beverage and snacks could remain relatively fragmented vs other markets as online
platforms are strong and consolidated to support some new entrants.
n Bucket 1: Market leaders can benefit from solid industry growth and market share
gains. Playing the existing leaders could enjoy the trend, like Moutai, Yili and Nike.
n Bucket 2: Market growth is solid but could also see some new players. Identifying
whether the existing players can be sustainable is critical. But M&A or multi-brand
strategies could drive company share gains as we saw in the cosmetics space.
n Bucket 3: Market growth is not fast but existing players may enjoy market share
gains like CRB, Midea.
n Bucket 4: Market growth is slow and there are also new players which might erode
the leaders’ market shares.
Exhibit 1: Summary of our four bucket consolidation framework
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More
Bucket 3: Low growth categories consolidation Bucket 1: High growth categories
with still high consolidation status with still high consolidation status
vs other markets vs other markets
Home Spirits Sportswear

Beer
appliance
Jewellry Dairy
Low growth High growth

Bucket 4: High growth categories Bucket 2: High growth categories
with still high consolidation status but more fragmented
vs other markets vs other markets
Beverage Snacks Cosmetics Foodservice
Home furnishing
Apparel Condiment
/Home fashion
Less
consolidation
Source: Euromonitor, Goldman Sachs Global Investment Research
8 July 2020 3
2) Concerns about a second COVID-19 wave impacted dine-in/shopping mall traffic

in Beijing, and potentially travel
Beijing upgraded its emergency response to COVID-19 from level III to level II on June
16 and introduced various social distancing requirement again after a double-digit daily
increase in newly reported cases related to the Xinfadi Wholesale Market since Jun 11.
Haidilao table turns in Beijing fell to >2x vs >3x in May. In addition, the recovery path for
travel-related consumption is likely to be impacted due to the extension/tightening of
travel restrictions and quarantines. Yum China also see a slow recovery of stores in
tourist spots and transportation hubs. Huazhu Hotels management see negative impact
on their operations due to resurgence of the pandemic in Beijing since late June
(potentially having c.10% impact to nationwide RevPAR) which may pose some
challenges in 3Q.
Exhibit 2: Government re-imposed strict controls to avoid a second wave of COVID-19

Government latest policy summary
Announcement date Province, City Policy details

- The Ministry of Transport announced on June 24 that inter-provincial tourism passenger transportation would continue to
24-Jun Nationwide
be suspended during the Dragon Boat Festival and thereafter until further notice
- The outdoor part of the tourist area will be opened with 30% capacity limit, and the indoor part of the tourist area
(including karst caves) will be temporarily closed
23-Jun Beijing
- Beijing travel agency's inter-provincial travel businesses are suspended. Only traveling services within Beijing for Beijing
residents is available, and people from medium and high-risk areas are not accepted for group tours
- Restrict large group gathering during Dragon Boat Festival period: From Jun 24-25, group gatherings and street vendors
20-Jun Harbin, Heilongjiang are not allowed in the central street area.
Hong Kong will allow groups of up to 50 people to gather starting on Jun 19 as coronavirus restrictions in the city continue
16-Jun Hong Kong
to be eased by the government.
- China’s customs authorities started testing all shipments of imported meat for the coronavirus
16-Jun Customs - China suspended poultry imports from a Tyson Foods Inc. plant where hundreds of employees tested positive for Covid-
19.
16-Jun Liaoning - Require people who have been to high risk areas of Beijing since May 30 to quarantine 14 days
- Travellers from designated areas of Beijing and other high risk areas are required to be quarantined for two weeks
- Strengthen monitoring and disinfection of key districts such as farmers' markets and "night economy"; Limit the
16-Jun Shanghai population size in the night market within 2,000;
- Raw food and perishable food are not allowed to be sold
- Require people who have been to Beijing, or stay in Beijing for over 12 hours since May 30 to quarantine 14 days
16-Jun Heilongjiang - Strictly control the entries into Beijing and advise people not to arrange travels to Beijing
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- Beijing upgraded its emergency response to COVID-19 from level III to II starting Jun 16:
1) People from the medium- and high-risk neighborhoods and relevant people from the Xinfadi farm produce market are not
allowed to leave Beijing. Other people who need to leave the city must have negative results of the nucleic acid test taken
within seven days. People entering the city from overseas will be put under medical observation at designated places, and
undergo nucleic acid tests.
2) Control the number of people dining in; Ensure 1 meter distance between people and tables; Stop banquet group dinner
3) Preventive measures are strictly enforced in farmers' markets, restaurants, and canteens. Employees in those places
16-Jun Beijing must wear masks and gloves.
4) Indoor sports and entertain venues will be closed. Libraries, museums, art galleries and parks must now limit capacity.
Venues of cultural entertainment, swimming pools and gyms will remain closed.
5) Temperature checks are required at the entrance of shopping centres, apartment compounds, office buildings, retail
shops.
6) Companies were told to encourage working from home. Classes are moved online for primary and middle school
students, and class resumption of college students should be suspended
7) Interprovincial group tours will be suspended as well as in-city transportations including ride-sharing and taxi services.
Source: Xinhuanet, China Daily, SCMP
3) Sales recovery for staples were even stronger
We turned positive on the dairy sector and expected a strong sales recovery from 2Q20,
with accelerated consolidation and rising liquid milk consumption due to increased
health consciousness. Sichuan Teway’s 1H20 earnings pre-announcement also showed a
solid beat.
8 July 2020 4
4) Continuous government stimulus packages to drive consumption recovery
Various local governments (i.e Hunan, Sichuan) and Alipay started another round of
consumption coupon issuance from July to stimulate the recovery. In addition, the
Shenzhen government also introduced a new policy with 20 measures to further drive
the consumption recovery.
For findings from previous reports, please see: China Consumer: Measuring the
recovery path: Fueling the recovery via new 618 strategies, promoting street vendors
and consumption repatriation (as of Jun 8)
We would like to thank Henry Chow, Alpha Wang, Cecilia Tang, Ning Wang, Jiun Im,
Longjin Li, and Timothy Zhao for their contributions to the data collection and analysis in
this report.
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8 July 2020 5
Our consolidation framework
Consolidation status: China vs Japan

We use Japan as a reference here given it is a relatively mature consumption market in
Asia. In terms of market size potential, we believe sportswear, cosmetics, foodservice,
condiment, home furnishing, spirits and dairy can still show structural growth in the
China market. From a consolidation perspective, sportswear in China is ahead of Japan
while spirits, cosmetics, dairy and appliance are roughly in-line with Japan.
Exhibit 3: Market size vs consolidation status in China vs Japan
125 Mobile phone(14.1)

(X axis 1.1x; Y axis 13.2)
Jewelry (5.8)
(X axsis 0.5x; Y axis 11.6x)
104 102 After school tutoring (9.0)

(X axis 0.8x; Y axis 10.8x)
10.0x
XY=3
Highly fragmented, Highly dominated,
9.0x
Less market potential (Market share story) 172 Less market potential
8.0x
Legend Subsector Name
China / Japan Market size
7.0x (product of
Expansion Potential (x)=
Mkt size X axis & Y axis)

172 Spirits (6.0) ($bn)
6.0x Apparel (1.2)
5.0x 317 Auto (2.3)

54 Consumer appliance (Major) (4.0)
4.0x
129
717 Restaurant (2.0) 46 Sportswear (4.5)
3.0x
HF/Hfa (0.7) 93 62 Dairy (3.1)
93 Beer (1.8)
2.0x XY=3
5045 Cosmetic (1.2) Highly dominated,
83 Snacks (0.9)
1.0x High market potential
Highly fragmented, Softdrinks (0.6)
(Market growth story)
0.0x
High market potential (Market share/Market growth story)
0.0x 0.2x 0.4x 0.6x 0.8x 1.0x 1.2x 1.4x 1.6x 1.8x 2.0x
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Notes: (1) Categories which expansion potential is based on volume; mobile phone, auto. (2) Categories which consolidation potential is based
on company share rather than brand; cosmetics, beer, soft drinks, dairy, snacks, auto. (3) Categories which consolidation potential is based on
volume share; mobile phone, auto. (3) After school tutoring includes top 3 companies
By looking at market share shifts over the past 10 years, we found that sportswear,
appliance, dairy, spirits, after-school tutoring, apparel and home furniture showed decent
increasing market shares for the top 5 players. But the leaders have been changing
significantly for some sectors like apparel and after-school tutoring.
8 July 2020 6
Exhibit 4: Changes in leaders’ market shares, 2019 vs 2010
100.0
1 92.2
2010 2019
90.0
% market share of top 5 brands in China
80.0
5 70.7
70.0 4 65.5 64.5
63.3
4
60.0 3 57.3
54.6
51.5
50.0 2 47.4 48.2
44.9
2
39.9
40.0 No. of companies in 3 37.2
top 5 for both 2010 & 2019 33.4 34.4
4 30.2
30.0 26.9
4 4
18.9 19.4
20.0 17.6 16.9
15.5
1 2
10.0 4
3 5.5 5.69
4 3.5
2.3 2.6 2.5 1.3
0.0
$717bn $129bn $317bn $104bn $50bn $102bn $172bn $83bn $45bn $524bn $62bn $54bn $46bn $93bn $125bn
(2.1x) (2.2x) (1.9x) (3.4x) (1.7x) (2.4x) (1.6x) (2.0x) (2.6x) (1.5x) (2.1x) (1.7x) (2.4x) (2.0x) (4.7x)
Market size in 2019 (Market size multiplier vs. 2010)
Notes: (1) Categories using company share; cosmetics, soft drinks, dairy, snacks, auto (2) Categories using volume share rather than
value; auto, mobile phone (3) after-school tutoring is top 3
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8 July 2020 7
Exhibit 5: Top 5 players in 2019 vs 2010

China Market share (%) China Market share (%) Japan Market share (%)
Apparel Rank Brand 2010 Rank Brand 2019 Rank Brand 2019
1 Metersbonwe (Shanghai Metersbonwe Fashion & Accessories Co Lt 0.8 1 Uniqlo (Fast Retailing Co Ltd) 1.4 1 Uniqlo (Fast Retailing Co Ltd) 11.9
2 Semir (Semir Group Co Ltd) 0.7 2 Heilan Home (HLA Corp Ltd) 1.3 2 Shimamura (Shimamura Co Ltd) 4.6
3 Jack & Jones (Bestseller A/S) 0.7 3 adidas (adidas Group) 1.2 3 GU (Fast Retailing Co Ltd) 2.6
4 Li Ning (Li Ning Co Ltd) 0.7 4 Nike (Nike Inc) 0.8 4 Mizuno (Mizuno Corp) 1.6
5 adidas (adidas Group) 0.6 5 Balabala (Semir Group Co Ltd) 0.8 5 Cross Plus (Cross Plus Inc) 1.3
Top 5 total 3.5 Top 5 total 5.5 Top 5 total 22
Cosmetics Rank Brand 2010 Rank Brand 2019 Rank Brand 2019
Company share 1 L’OrØal Groupe 14.1 L’OrØal Groupe 14.6 1 Shiseido Co Ltd 18.5
2 Shiseido Co Ltd 6 EstØe Lauder 6.1 2 Kao Corp 12.2
3 Procter & Gamble 5.8 Shiseido Co Ltd 5.4 3 KosØ Corp 10.3
4 Mary Kay 4.1 LVMH 4.2 4 Pola Orbis Holdings Inc 5.8
5 Amway Corp 3.4 Procter & Gamble 4.1 5 DHC Corp 2.9
Top 5 total 33.4 Top 5 total 34.4 Top 5 total 49.7
Beer Rank Brand 2010 Rank Brand 2019 Rank Brand 2019
Company share 1 China Resources Holdings Co Ltd 20.8 1 Anheuser-Busch InBev NV 17.9 1 Asahi Group Holdings Ltd 38.3
2 Tsingtao Brewery Co Ltd 17 2 China Resources Holdings Co Ltd 17.3 2 Kirin Holdings Co Ltd 27.7
3 Anheuser-Busch InBev NV 13.5 3 Tsingtao Brewery Co Ltd 14.1 3 Suntory Holdings Ltd 14
4 Beijing Yanjing Brewery Co Ltd 9.9 4 Carlsberg A/S 8 4 Sapporo Holdings Ltd 11.4
5 Carlsberg A/S 4.3 5 Beijing Yanjing Brewery Co Ltd 7.2 5 Anheuser-Busch InBev NV 1
Sportswear Rank Brand 2010 Rank Brand 2019 Rank Brand 2019
1 Li Ning (Li Ning Co Ltd) 12 1 adidas (adidas Group) 20.2 1 adidas (adidas Group) 13.5
2 Nike (Nike Inc) 11.3 2 Nike (Nike Inc) 19 2 Nike (Nike Inc) 10.8
3 adidas (adidas Group) 9.5 3 Anta (Anta (China) Co Ltd) 11 3 Mizuno (Mizuno Corp) 9.9
4 Anta (Anta (China) Co Ltd) 8.2 4 Skechers (Skechers USA Inc) 6.8 4 Asics (Asics Corp) 6.9
5 361 Degrees (361 Degrees International Ltd) 7.2 5 Li Ning (Li Ning Co Ltd) 6.3 5 The North Face (VF Corp) 3.9
Top 5 total 48.2 Top 5 total 63.3 Top 5 total 45
Mobile phone Rank Brand 2010 Rank Brand 2019 Rank Brand 2019
Volume share 1 Nokia (Nokia Corp) 33.3 1 Huawei (Huawei Technologies Co Ltd) 29.8 1 Apple Inc 54.2
2 Samsung (Samsung Corp) 18.1 2 Oppo (Guangdong OPPO Mobile Telecommunications Corp Ltd 21.3 2 Hon Hai Precision Industry Co Ltd 13.3
3 Motorola (Lenovo Group Ltd) 6.7 3 Vivo (Vivo Communication Technology Co Ltd) 20.2 3 Sony Corp 9.3
4 Huawei (Huawei Technologies Co Ltd) 6.3 4 Xiaomi (Xiaomi Corp) 12.1 4 Huawei Technologies Co Ltd 5
5 ZTE (ZTE Corp) 6.3 5 iPhone (Apple Inc) 8.8 5 Samsung Corp 4.7
Restaurant Rank Brand 2010 Rank Brand 2019 Rank Brand 2019
1 KFC (Yum! Brands Inc) 1.2 1 KFC (Yum! Brands Inc) 1.1 1 McDonald’s (McDonald’s Corp) 2.1
2 McDonald’s (McDonald’s Corp) 0.5 2 McDonald’s (McDonald’s Corp) 0.5 2 Sukiya (Zensho Holdings Co Ltd) 0.9
3 Pizza Hut (Yum! Brands Inc) 0.2 3 Starbucks (Starbucks Corp) 0.4 3 Gusto (Skylark Group) 0.8
4 Dicos (Ting Hsin International Group) 0.2 4 Hai Di Lao Hot Pot (Sichuan HaiDiLao Catering Co Ltd) 0.4 4 Starbucks (Starbucks Corp) 0.8
5 Little Sheep (Yum! Brands Inc) 0.2 5 Pizza Hut (Yum! Brands Inc) 0.2 5 Akindo Sushiro (Akindo Sushiro Co Ltd) 0.8
Spirits Rank Brand 2010 Rank Brand 2019 Rank Brand 2019
1 Feitian Moutai (Kweichow Moutai Co Ltd) 6 1 Feitian Moutai (Kweichow Moutai Co Ltd) 12.9 1 Kuro Kirishima (Kirishima Corp) 7.1
2 Wu Liang Ye (Sichuan Yibin Wuliangye Distillery Co Ltd) 5.2 2 Wu Liang Ye (Sichuan Yibin Wuliangye Distillery Co Ltd) 6.7 2 Iichiko (Sanwa Shurui Co Ltd) 7
3 Jian Nan Chun (Sichuan Jian Nan Chun (Group) Co Ltd) 1.7 3 Blue Classics (Yanghe Group) 3.7 3 Takara (Takara Holdings Inc) 6.6
4 Guojiao 1573 (Luzhou Laojiao) 1.4 4 Jian Nan Chun (Sichuan Jian Nan Chun (Group) Co Ltd) 1.9 4 Black Nikka (Asahi Group Holdings Ltd) 3.5
5 Blue Classics (Yanghe Group) 1.2 5 Er Guo Tou (Shunxin Agriculture) 1.7 5 Kakubin (Suntory Holdings Ltd) 3.4
HF/Hfa Rank Brand 2010 Rank Brand 2019 Rank Brand 2019
1 IKEA (Inter Ikea Systems BV) 0.8 1 IKEA (Inter Ikea Systems BV) 1.4 1 Nitori (Nitori Co Ltd) 14.3
2 Luolai (Luolai Lifestyle Techonology Co Ltd) 0.5 2 Oppein (Oppein Home Group Inc) 0.9 2 Panasonic (Panasonic Corp) 2.5
3 Oppein (Oppein Home Group Inc) 0.4 3 Suofeiya (Suofeiya Home Collection Co Ltd) 0.9 3 IKEA (Inter Ikea Systems BV) 1.6
4 Mendale (Hunan Mendale Home Textile Co Ltd) 0.4 4 Luolai (Luolai Lifestyle Techonology Co Ltd) 0.4 4 MUJI (Ryohin Keikaku Co Ltd) 1.4
5 Fuanna (Shenzhen Fuanna Bedding & Furnishing Co Ltd) 0.4 5 Mendale (Hunan Mendale Home Textile Co Ltd) 0.4 5 Toshiba (Midea Group Co Ltd) 1.1
Top 5 total 2.5 Top 5 total 4 Top 5 total 20.9
Consumer appliances (major) Rank Brand 2010 Rank Brand 2019 Rank Brand 2019
Volume share 1 Haier (Haier Group) 22.8 1 Haier (Haier Group) 30.6 1 Panasonic (Panasonic Corp) 23
2 Midea (Midea Group Co Ltd) 11.6 2 Midea (Midea Group Co Ltd) 14 2 Hitachi (Hitachi Ltd) 15.4
3 Galanz (Guangdong Galanz Group Co Ltd) 5.1 3 Little Swan (Midea Group Co Ltd) 5.7 3 Sharp (Hon Hai Precision Industry Co Ltd) 11.2
4 Little Swan (Midea Group Co Ltd) 4.1 4 Galanz (Guangdong Galanz Group Co Ltd) 3.7 4 Toshiba (Midea Group Co Ltd) 9.1
5 Xinfei (Konka Group Co Ltd) 3.8 5 Robam (Hangzhou Robam Industrial Group Co Ltd) 3.3 5 Rinnai (Rinnai Corp) 6.4
After-school tutoring Rank Brand 2010 Rank Brand 2019 Rank Brand 2019
1 New Oriental Education & Technology 0.49 1 TAL Education Group 2.91 Nagase Brothers Inc 4.7
2 Xueda Education Group 0.49 2 New Oriental Education & Technology 2.14 Meiko Network Japan Co Ltd 4.1
3 TAL Education Group 0.32 3 OneSmart International Education 0.64 Riso Kyoiku Co Ltd 2.5
Jewelry Rank Brand 2010 Rank Brand 2019 Rank Brand 2019
1 Chow Tai Fook (Chow Tai Fook Jewellery Group Ltd) 6.8 1 Chow Tai Fook (Chow Tai Fook Jewellery Group Ltd) 7.1 1 Cartier (Richemont SA, Cie FinanciŁre) 7.7
2 Lao Feng Xiang (Lao Feng Xiang Co Ltd) 4.5 2 Lao Feng Xiang (Lao Feng Xiang Co Ltd) 6.9 2 Tiffany & Co 7.4
3 Lao Miao (Shanghai Yuyuan Tourist Mart Co Ltd) 3.1 3 Lao Miao (Shanghai Yuyuan Tourist Mart Co Ltd) 3 3 Bvlgari (LVMH Moºt Hennessy Louis Vuitton SA) 3.4
4 Ming Jewellery (Zhejiang Ming Jewelry Co Ltd) 1.6 4 Chow Sang Sang (Chow Sang Sang Holdings International Ltd) 1.3 4 As-me Estelle (Estelle Holdings Co Ltd) 2.6
5 Chow Sang Sang (Chow Sang Sang Holdings International Ltd) 0.9 5 Chow Tai Seng (Chow Tai Seng Jewellery Co Ltd) 1.1 5 4 C (Yondoshi Holdings Inc) 2.2
Dairy Rank Brand 2010 Rank Brand 2019 Rank Brand 2019
Company share 1 China Mengniu Dairy Co Ltd 17.8 1 Inner Mongolia Yili Industrial Group Co Ltd 24.5 1 Meiji Holdings Co Ltd 16.7
2 Inner Mongolia Yili Industrial Group Co Ltd 15.8 2 China Mengniu Dairy Co Ltd 20.3 2 Megmilk Snow Brand Co Ltd 14
3 Hangzhou Wahaha Group Co Ltd 9.8 3 Bright Food (Group) Co Ltd 3.7 3 Yakult Honsha Co Ltd 8.5
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4 Bright Food (Group) Co Ltd 4.7 4 Shijiazhuang Junlebao Milk Co Ltd 3.3 4 Morinaga Milk Industry Co Ltd 7.2
5 Want Want Holdings Ltd 3.4 5 Hebei Yangyuan Zhihui Beverage Co Ltd 2.8 5 Ezaki Glico Co Ltd 2.8
Snacks Rank Brand 2010 Rank Brand 2019 Rank Brand 2019
Company share 1 Mars Inc 6.2 1 Mars Inc 5.1 1 Lotte Group 7.6
2 Want Want Holdings Ltd 4.6 2 Want Want Holdings Ltd 3.9 2 Meiji Holdings Co Ltd 5.7
3 NestlØ SA 2.8 3 PepsiCo Inc 3.4 3 Calbee Foods Co Ltd 5.7
4 Inner Mongolia Yili Industrial Group Co Ltd 2.7 4 Mondelez International Inc 2.8 4 Morinaga & Co Ltd 5.4
5 Mondelez International Inc 2.6 5 NestlØ SA 2.4 5 Ezaki Glico Co Ltd 5.1
Soft drinks Rank Brand 2010 Rank Brand 2019 Rank Brand 2019
Company share 1 Ting Hsin International Group 14.3 1 Coca-Cola Co 8.6 1 Coca-Cola Co 21.9
2 Coca-Cola Co, The 12.2 2 Ting Hsin International Group 6.7 2 Suntory Holdings Ltd 17.7
3 PepsiCo Inc 6.5 3 Yangshengtang Co Ltd 5.7 3 Asahi Group Holdings Ltd 10.5
4 Hangzhou Wahaha Group Co Ltd 6.1 4 TC Pharmaceutical Industry Co Ltd 5.2 4 ITO EN Ltd 8.6
5 Guangzhou Pharmaceutical Holding Ltd 5.8 5 Uni-President Enterprises Corp 4 5 Kirin Holdings Co Ltd 8.1
Auto Rank Brand 2010 Rank Brand 2019 Rank Brand 2019
Company share 1 Volkswagen 10 1 Volkswagen 14 1 Toyota 31.6
Volume share 2 Changan 7.7 2 Toyota 6.8 2 Honda 14.2
3 SAIC-General Motors-Wuling 6.6 3 SAIC-General Motors-Wuling 6.6 3 Suzuki 13.7
4 General Motors 6.5 4 Honda 6.3 4 Nissan/Mitsubishi 13.2
5 Hyundai/Kia 6.4 5 Nissan/Mitsubishi 6.2 5 Daihatsu 12.9
Key drivers for consolidation

We summarize a few key factors (both positive and negative) that impact our
expectations for consolidation in different consumption categories. In China, we think
the channel/supply chain structure and consumers’ trading up could specifically
impact the consolidation path.
1. Government policy: License approval, regulation changes, ESG requirement, etc.
8 July 2020 8
Consolidation could be higher if more regulatory approvals are needed.
2. Capital requirement: Higher capital requirement for manufacturing facilities (capex),

R&D, marketing, brand building, etc could imply higher entry barriers and thus higher
consolidation.
3. Channel/supply chain: Layers of distribution channels, online vs offline mix, channel

consolidation status/bargaining power, retail format, supply chain landscape, etc. For
instance, the strong and consolidated e-commerce platforms in China could imply more
fragmented markets for certain categories as entry barriers for smaller players are lower
than leveraging offline channels; platforms also like to maintain the diversity of the brand
portfolio to maintain their bargaining power.
Exhibit 6: The higher consolidation of e-commerce platforms in Exhibit 7: Same for restaurant industry where the deeper
China could imply more fragmented markets for certain categories penetration of delivery and high consolidation of delivery platforms
E-commerce penetration % of total retail market (China vs. US, 2019) provide lower entry barriers for smaller players
Food delivery as % of total restaurant consumption (China vs. US, 2019)
E-commerce penetration Food delivery penetration

30%
16%
14%
Food delivery as % of restaurant

25% 23% 14%
as % of total retail market
Others 12% Others

20% Ele.me +
Top 3 player Star.Ele, Top 3 player
consumption
10% 4%
Top 2 player Top 2 player
15% 13%
JD.com, Top 1 player 8% Top 1 player
7%
10% 6%
Walmart, Meituan,
4% 9%
Alibaba, eBay, 1% 2%
5% 1%
10% Amazon, 2%
5%
0% 0%
China United States China United States
Source: Euromonitor, iResearch, Data compiled by Goldman Sachs Global Investment Research Source: Euromonitor, Trustdata, iResearch, Data compiled by Goldman Sachs Global Investment
Research
4. Consumer behavior change: Consumers’ increasing demand for quality products
2aeb9e8b174644998c7303f5a989d953
(premiumization) favors selective leaders and should continue to drive consolidation for
specific sectors.
How will the consolidation trend evolve by sector?

Bucket 1: High growth categories with still high consolidation status vs other markets
n The dairy sector has high consolidation and is expected to deliver high growth
going forward. The lagged behind cold chain infrastructure and logistics vs. the
growing health awareness and diversified protein intake have made UHT products
most suitable for Chinese markets, especially in lower tier cities, which also created
the foundation for a highly consolidated dairy market in China if a company has
advantage in branding and strong control over its distribution network. During
COVID-19, we observed stronger demand for dairy, with leaders growing at double
digits since May. Leaders have accelerated share gains, as raw milk suppliers and
distributors are more conservative in selecting partners to ensure stable and quick
turnaround of cash flows. In addition, Yili and Mengniu, with strong capital balance,
are able to provide financial support for upstream partners, and offer more discounts
to clear inventories when the retail end faced adverse shock from the COVID-19
8 July 2020 9
outbreak post Chinese New Year. Most of the inventory in CNY have been cleared in
1Q and discounts have returned to a normalized level.
n Spirits: China’s spirit sector has relatively similar consolidation compared with
Japan. We think the key drivers of consolidation is brand recognition and
consumption upgrade. As consumers trade up, large and well recognized brands
tend to benefit more and gain market share. Compared with small brands, large
brands can afford more A&P to increase consumer awareness. Our analysis shows
that high end brands (Moutai/Wuliangye) were least hit by COVID-19 related demand
weakness, and the first to recover, in terms of end demand and wholesale price.
n Sportswear: China sportswear has relatively higher consolidation compared with
US/Japan. Similar to other markets, high capital requirement in terms of
investments in new technology/material R&D to drive continuous new product
launches, and marketing/endorsement leads to a higher entry barrier for new
brands. During COVID-19, leading brands have conducted aggressive markdowns
and gave additional support to distributors to drive faster sales recovery and clear
their inventories, which helps further market share gains. Specifically in China, the
mono-brand offline retail format is unique in China, fitting into brands’ DTC strategy
globally and cap the smaller brands’ expansion given it requires wide and deep SKUs
and scale. Besides, consumers’ trading up will drive global brands’ market share
gains. We think Nike and Adidas will continue to dominate the market with some
international brands increasing presence to capture the premium demand in top tier
cities. Domestic leaders including Anta and Li Ning are also positioned well to offer
better value products while smaller domestic brands will be squeezed out.
Bucket 2: High growth categories but more fragmented vs other markets
n The condiment sector has low consolidation with Haitian as the clear leader. The
sector is expected to deliver steady ASP and volume growth, driven by the
increasing penetration and diversified category growth outside soy sauce. In more
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recent years, there has been no such period of intense competition. We believe
limited price sensitivity, sticky brand preference, low industry concentration will still
remain the key theme of the sector in favor of condiment leaders. During COVID-19,
Haitian and Jonjee have been impacted heavily by the decline in restaurant sales,
but offset by significant rise in retail demand. Both players use discounts to grab
share from regional small players aggressively and are aiming to achieve their 15%
sales growth annual target.
n Foodservice: China’s foodservice market is much more fragmented vs Japan. While
selective market leaders are gaining shares thanks to consumers’ increasing quality
concern and landlords tend to work with strong brands with better financial support
especially post COVID-19, we think it will be relatively less consolidated vs other
markets as consumers demand for diversified cuisines and the strong 3rd party
aggregators also offer lower entry barriers for smaller new entrants.
n Cosmetics: China’s cosmetics market remains less consolidated that Japan, South
Korea or USA, in terms of top 5 company share by retail sales. While the entry
barrier to cosmetics is generally low and consumer loyalty to specific
8 July 2020 10
brands/products (esp. for mass cosmetics) may be largely affected by

recommendations from other consumers/KOLs and online promotion, we believe
industry leaders with a solid understanding of consumer/channel trends and high
investments into A&P and R&D would enable sustainable higher-than-market sales
growth. The Regulations on Supervision and Administration of Cosmetics published
in June 2020 and to be effective from 2021 will also place higher requirements on
cosmetics product registration, safety and marketing. In the meantime, we are
positive on the market share gain potential for domestic brands in the mass
cosmetics market, thanks to their strong capabilities in penetrating the
faster-growing online e-commerce and offline CS (cosmetics specialty) channels.
MNC market share in China’s mass cosmetics market has declined from over 70%
in 2010 to c.45% in 2019, compared to only 10-15% in Japan/South Korea in 2019.
n Home furnishing/Home fashion: This category has relatively lower consolidation
compared with Japan (market share of the top 5 brands; 4% in China vs 21% in
Japan, 2019). However, market consolidation is progressing (2.5% to 4% between
2010-2019), and we believe this trend will continue in the future. The top 5 players
have not changed much in the past years, aside from Suofeiya and Oppein
expending their market share (respectively 0.1% to 0.9% / 0.4% to 0.9% between
2010-2019). The majority of new properties sold in China are skeletons without fitting
furniture, hence Suofeiya and Oppein with wealth of financial resources could
capture the market by providing customizable kitchen cabinets and wardrobes.
However, there is a growing trend of more furbished properties in new property
markets, which has provided these companies with additional revenue channel via
developers. We consider this to be the long term growth avenue for these
companies. Moreover, we believe that home fashion products will drive growth for
brands like IKEA and Nitori.
Bucket 3: Low growth categories with still high consolidation status vs other markets
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n The beer sector has high consolidation but is expected to deliver low growth going
forward. Leaders grew through M&A of regional small players and used aggressive
price competition to gain market share in the past decade. The industry has
gradually shifted from pure pricing competition to premiumization. During COVID-19,
leaders provided support to distributors including discounts, moving goods in the
restaurant channel close to expiry date to retail channels, as well as financial
support. Most of the inventories have been cleared already by April; in addition, as
mass restaurant channel has returned to positive growth yoy, demand for mass end
beer also grew strongly. Other on-premise channels remained in negative territory
but have continued to improve on a mom basis. Most players with dominant market
share in regional market and higher sales portion from mass to mid end have
recorded strong volume growth in Apr/May, including CRB, Tsingtao, and Zhujiang.
n Jewelry: China’s jewelry market is more consolidated than other markets and we
believe higher gold/premium consumption leads to this as consumers tend to
choose quality brands while fashion jewelry are popular in other mature markets.
Leading brands like CTF are aggressively expanding into lower tier cities via
aggressive store expansion in the recent years while global luxury jewelry brands
8 July 2020 11
are also actively tapping into China markets to capture the premiumization and
consumption repatriation demand.
n Home appliance: Economies of scale, brand value and extensive distribution
network form the key competitive advantages of leading durable companies.
Economies of scale enables leading firms to achieve a better profit margin and thus
leaders can gain shares from small players through price competition. Given the
characteristic of high value and long service life of durable goods, consumers tend
to choose quality brands. An extensive channel also differentiates leaders and
smaller brands. Although channel advantage is weakening as emerging online
platforms help smaller brands reach wider customers, we have seen that leaders are
gaining share after COVID-19 leveraging their brand and capital advantages. Leaders
such as Gree and Midea gave credit support and price discounts to alleviate cash
flow pressure and clean inventories of distributors.
Bucket 4: Low growth categories and more fragmented vs other markets
n Beverage sector: The beverage market has seen almost no ASP growth or product
mix upgrades in the past 10 years. There are bright spots in some sub-segments
(such as water and energy drinks), but overall soft drinks companies are seeing
limited bargaining power. We believe this is due to the fact that consumers’
preferences are changing quickly for the new products and the product lifecycle has
shortened in recent years. Hence, this has led to an even more fragmented market.
During COVID-19, demand was hit heavily due to low outdoor traffic, and recovery
depends on weather and control of COVID-19 situations. Major players including
Tingyi and UPC were hit by the adverse shock and likely delivered negative sales
growth in 1H20.
n The snacks sector has low concentration and delivers mid single digit sales growth
driven by fast product innovation, premiumization and healthy snack concepts.
Online channel continues to take share, driving the industry growth. Nevertheless,
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the low entry barrier, wide use of OEM structure, frequent adoption of copy-cat
model by emerging brands have led to aggressive price competition. There are also
signs of new industry leaders from online channels (e.g. Three Squirrels, Be &
Cheery, Bestore) with deep understanding of young consumers, leading pace in
product innovation and strong brand power; low price strategy is the typical
strategies of such players in order to gain share aggressively. Traditional offline
players such as Dali have accelerated the pace of new product launches in response
to the competition, and differentiated through their own factory model with an
emphasis on quality control.
n Apparel: China’s apparel sector has relatively lower consolidation compared with
Japan (market share of top 5 brands; 5.5% in China vs 22% in Japan, 2019). Market
consolidation is progressing (3.5% to 5.5% between 2010-2019), but we think it will
still be relatively fragmented especially for non-sportswear categories. We think
China’s strong apparel online penetration, consolidated e-commerce platform, and
integrated textile manufacturing cluster offer a favorable environment for small new
entrants thanks to fast reaction to fashion trends and lower channel costs. The top 5
players have changed drastically in the past years, where brands such as
8 July 2020 12
Meterbonwe, Semir and Jack & Jones with top 5 market share in 2010 experienced
declining shares and fell from the top 5 brands in 2019. Meanwhile, Uniqlo now
occupies no.1 market share at 1.4%, despite not having much presence in 2010.
Sportswear brands such as Nike and Adidas have also expanded their market share,
as the prevailing athleisure theme erodes some casual/fashion market (this only
accounts for their apparel sales, which is c. 28% of total sales in Greater China for
Nike FY5/2020). We believe that the COVID-19 situation has helped Uniqlo and
sportswear brands to gain market share further, as consumer preferences shift
towards easy-fit, comfortable and casual clothing due to people staying home more.
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8 July 2020 13
Exhibit 8: Factors leading to different consolidation trends by sector

Four bucket consolidation framework
Structural drivers
Cateogry Sector Government policies Capital requirement Channel/supply chain Consumer behavior change
License, ESG R&D, capex, A&P online vs offline, retail format
(+) High R&D, A&P spending
(+) Leaders supporting distributors
(+) Mono-brand store format cap
Sportswear or giving more discount to drive (+) Premiumization
smaller brands' expansion
faster sales recovery and inventory
digestion
Bucket 1: (+) Most big brands spend
High growth + high Spirits considerably on A&P to increase (+) Consumption upgrade
consolidation consumer awareness
(+) Deep dairy farm relationship,
Branding investment
(+) Promotion of domestic self (-) More direct to consumers
Dairy (+) Leaders support upstream (+) Health consciousness
sufficiency ratio channels
suppliers and give discount to clear
inventories
(-) Strong and consolidated 3rd
party aggregators to support
(-) Low initial capex for small scale smaller players' delivery business
players (+) Landlords prefer to work with (+) Demand for quality brands for
Restaurants (+) Stricter food safety control (+) Increasing capex/OPEX needed companies with better financial food safety concern
for digital and supply chain strength (-) Diversified local cuisines
investments (+) Companies with stronger
supply chain mgmt to maintain
service and manage costs better
(+) Premiumization
(+) High A&P and R&D needed for (-) Higher penetration in terms of
Bucket 2:
sustained sales growth makeup steps and number of
High growth + low (+) Stricter regulations on product (-) Online livestreaming sales
Cosmetics (-) Low initial capex for small scale products used
consolidation registration, safety and marketing intensifies brand competition
players (-) Digitalization and rapid
preference shifts
(+) Cost benefits due to economies (+) Leaders with extensive

(+) Premiumization
Furniture of scale distribution network and more
(+) Demand for quality brands
(+) High R&D spending online resources
(+) More discounts to squeeze

smaller players (-) Diversified consumer tastes,
Condiments
(+) high capex needed and long vary by region
cycle for sauces
(+) M&A over smaller players, high
pricing competition
(+) Leaders' supporting distributors (-) More diverse channel, niche
Beer
or giving more discount to drive category emerging
faster sales recovery and inventory
digestion
(+) Leaders supporting distributors
(+) Leaders with extensive
Bucket 3: or giving more discount to drive
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distribution network
Low growth + high faster sales recovery and inventory
Appliances (-) Strong online penetration (+) Demand for quality brands
consolidation digestion
supports smaller new entrants,
(+) Cost benefits due to economies
esp. for small appliances
of scale
(+) Investment in branding
especially for premium jewelry (+) Leading brands leverage strong
(-) Increasing demand for non gold
Jewelry (-) More global brands entering procurement, quality control, FC
products and daily wear products
China by leveraging their strong mgmt system to expand
branding and resources
(-) Strong online penetration and
consolidated online platforms
Apparel support smaller new entrants (-) Demand for diversifed fashion
(-) Low R&D and branding costs
(Non-sports) (-) Strong textile industry cluster in designs
China supports smaller brands' fast
reaction to market trend
Bucket 4: (+) High A&P spending
(-) CVS and online channel
Low growth + low (-) Big players cross category (+) Health consciousness
Beverages emerging, traditional channel
consolidation competition (-) Changing consumer preference
advantage shrink
(+) Support over distributors
(-) Low manufacturing entry barrier

(+) High discounts to clear (-) Diversified consumer tastes,
Snacks (-) Online popping up
inventory vary by region
(+) Support over distributors
Drivers that are unique in China are highlighted in red.
Source: Goldman Sachs Global Investment Research
8 July 2020 14
What is new (local vs global)
F&B: Noodles continued the strong growth led by premium noodles, further
accelerating from the 1Q20 trend. Beverage returned to positive growth in May, with
traffic gradually back to normal. The Beer sector accelerated the growth since April, and
recorded double-digit production volume growth in May, as most of the inventory was
cleared in Mar/Apr and mass end restaurants have returned to positive growth, which is
beneficial for regional players and CRB; the night life channel also gradually improved on
mom basis. The dairy industry recorded mid-single-digit growth, but Yili and Mengniu
have gained share and are likely to achieve over mid-teens sales growth in 2Q. We
upgraded Yili and Mengniu to Buy (on CL) and Buy, respectively.
Restaurant: The rising number of reported cases in Beijing in June impacted the dine-in
business, evidenced by Haidilao’s table turn dropping from >3x in May to >2x in June.
Haidilao issued a profit warning – although the sales decline was better than our
expectation, we expect earnings to remain under pressure. Besides, with controlled
capacity offered in various tourist spots and a modest improvement in domestic travel,
stores around transportation hubs and tourist areas are recovering slowly. A shorter and
delayed summer break will also impact the coming peak season performance, which is
also commented by our Hotel Analyst Justin Kwok’s comment on Huazhu’s earnings
review.
Sport & Apparel OEMs: We believe Nike’s latest result is a positive read-across for the
China sportswear market, with an improving sales trend and gradual normalization of
inventory levels by the end of Jun-20, but a mixed read-across for OEMs, given factory
purchase orders were cut by 30% for the Fall and holiday seasons. While there is some
noise about an offline recovery and spending power, we think brands’ and distributors’
active inventory management is critical to drive continuous sales and discount
improvement, on top of consumers’ increasing health consciousness. But margin trends
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will be mixed in 1H20, and we believe Li Ning will stand out and still see modest margin
expansion.
HK retailer: HK&Macau retail sales continue to be weighed on by muted tourist

spending as Hong Kong has further extended the mandatory quarantine for Macau and
mainland China visitors to August 7: CTF/LF/Sa Sa reported an 80%/70%/73% SSS
decline in Apr-May, with marginal improvement into Jun. Rental reductions from
closures and renewal cuts remain aggressive, which should facilitate a stronger margin
recovery once the situation bottoms out. Mainland China has been a bright spot with
CTF’s SSSG recovering to -15.4% yoy during Apr and May and Luk Fook recording
-60%/-20% yoy for self-operated/licensed shops, both seeing a steady mom
improvement into Jun. FY21 guidance on store expansion into lower tier cities remains
intact for CTF/LF, implying mid-long term share gain potential, in our view.
Cosmetics: As online channels become more important to cosmetics brands to drive

sales growth in China, a number of Tmall Partners (TPs, third-party e-commerce
operation specialists) are in the process of IPO application, including Lily & Beauty
(A-share IPO approved by CSRC in June), Ruoyuchen (A-share IPO approved by CSRC in
8 July 2020 15
July), UNQ Holdings (HK IPO application filed in June). As mentioned in our prior report
The Rise of Chinese Beauty Brands, working with TPs has enabled many local and MNC
brands to achieve fast online sales growth, but several companies and brands that have
established stronger in-house online operation capabilities have reduced their reliance
on TPs, in the form of either taking online operations back in-house (e.g. Dr.Yu under
Shanghai Jahwa) or revising cooperation models (e.g. L’Oreal). We see local cosmetics
player leading the transition, e.g. close to 90% of local cosmetics brands have taken
ownership of Tmall flagship stores as of Aug 2019 vs. over 50% for MNCs.
Travel & Leisure: Over this past Dragon Boat Festival (Jun 25-27) holiday, China’s
domestic travel saw further improvement, reaching 48.8mn travelers (-49% yoy), vs.
-61%/-53% during the Ching Ming and Labor Day holidays on April 4-6 and May 1-5,
respectively, according to the Ministry of Transport. Premiumization continues with a
several-fold increase in bookings for customized travel packages offering 4- or 5-star
hotel rooms. Hainan is the most popular destination with the fastest recovery rate in
travel bookings for June/July, back to ~90% of the 2019 level.
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8 July 2020 16
Our recovery framework
We summarize a few key factors (both positive and negative) that impact our
expectations for a short-term recovery and long-term growth opportunities in different
consumption categories. More details can be found here.
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8 July 2020 17
Exhibit 9: Factors leading to varying recovery paths

Cateogry Sector Timeframe Government policy Demand Supply Digital
Industry consolidation, competitive
Purchasing power, consumer behavior
Stimulus, social distance, landscape, changes in distribution Online channel, data analytics,
Details changes, difference in demographic
environmental restrictions channel, changes in supply chain operating efficiency ehancement
group/income level
logistics
(+) Stay home consumption, lower tier
(+) Industry consolidation, supply
cities, premium categories (+) Diversifed online channel
ST (+) Social distancing, stimulus policies chain, distribution channel
(-) low income consumers, on-premise (-) Higher investment cost
Bucket 1: Food & other (-) Slower channel expansion
channels, school delay
Limited staples/nece
Impact ssities (+) Health Consciousness,
(+) Industry consolidation, simplified
LT Premiumization (+) Omni-channel, data analysis
distirbution
(-) Reverse in Stay-home consumption
(+) Lower tier cities, premium
categories (+) Industry consolidation, supply
(+) Stimulus policies (-) Weak spending power (esp low chain, distribution channel (+) Diversifed online channel
ST
Beverage & (-) Social distancing income consumers), on-premise (-) Inventory, lower production (-) Higher investment cost
beer channels, gifting, school delay, less utilization
travel
(+) Policy on baby formula (+) Health Consciousness, (+) Industry consolidation, simplified
LT (+) Omni-channel, data analysis
(-) Prolonged social distancing Premiumization distirbution
Stimulus policies: (+) for general
(+) Premium categories (+) Supply Chain
ST demand but (-) for EV (+) Online channel
(-) Weaker spending power (-) Imported parts distruption
Bucket 2:
Luxury auto
V shape
(+) ESG
LT (+) Private car ownership (+) Digitalized operating system
(-) Development of used car by tax cut
(+) Health/Hygiene consciousness,
(+) Stimulus policies younger generation (+) Industry consolidation, supply
ST (+) Delivery, mobile ordering
(-) Social distancing (-) Weaker spending power, weaker chain
tourist spending, family customers
Fast food
(+) Stricter food safety standards (+) Demand for more experiences, chain (+) Data anaylsis, Digitalized operating
LT
(-) Prolonged social distancing premiumization (-) Strong capital market support to system
new concepts
(+) Stimulus policies (+) Industry consolidation
ST (-) Weak spending power (+) Online channel
(-) Social distancing (-) Inventory
Spirits
LT (-) Prolonged social distancing (+) Premiumization (+) Online channel
chain, distribution channel
(+) Health consciousness, younger
(+) Stimulus policies generation, premium categories, South (+) Supply chain, distribution channel (+) Omni-channel, diversifed online
ST
(-) Social distancing & East areas (-) Inventory, slower expansion channel
Sports (-) Weaker spending power
(+) Health consciousness, sports (+) Industry consolidation, supply
(+) Stimulus policies, Global sports (+) Omni-channel, diversifed online
LT participation, kids/women chain, distribution channel
events in China channel, data analysis
consumption, premiumization (-) New international brands
(+) Stimulus policies including "Go (+) Online channel
Rural" (+) In-home consumption, weather (+) Industry consolidation, distribution (-) Lower ASP and margins for online
ST
(-) Restrictions in furnishing/ (-) Weaker spending power network sales, low entry barrier for smaller
Home
appliance installation players
(+) Health consciousness, property (+) Industry consolidation, Supply (+) Online channel
LT (+) New efficiency standards
Bucket 3: project completion cycle chain localization in overseas market (-) Lower ASP for online channel
U shape (+) High end (shifting from outbound),
(+) Less competition from outbound
(+) Stimulus policies Short-haul trips
ST destinations (+) Digitalization and E-Travel
(-) Social distancing, travel ban (-) Low income, older generation
(-) Capacity constraint
(absence of group tours)
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Travel (+) Industry consolidation (i.e. Travel
(+) Domestic and self-driving nearby
agencies)
travel (+) Diversified and direct marketing
LT (-) Prolonged social distancing (-) Knock-on effect in product
(-) Mass psychology towards travel, campaigns
distribution should travel agencies go
recovery in outbound travel
out of business, higher operating costs
(+) Less competition as visa policies
(+) Pent-up demand esp. by to elsewhere take time to resume,
(+) Travel ban relaxation
ST VIP/premium mass players limited substitue esp. for mass-market
(-) Social distancing
Macau (-) Weaker spending power as casinos elsewhere are of smaller
Gaming scale
(+) Infrastructure investments (+) More cautious expansion overseas
LT (-) Demand for long-haul travel (-) Online gaming being deregulated
(-) Prolonged social distancing (-) Junket liquidity/capital impacted
(+) Sports/functional demand
(-) Weak spending power and brands'
ST (-) US/China trade tension chain
destocking, Non-China areas recover
(-) Price competition
more slowly
Apparel OEM (+) Industry consolidation, integrated
production model, diversified
ESG: (+) for industry consolidation but (+) Health consciouness
LT production bases (+) Automation
(-) for costs (-) Less spending on physical goods
(-) Decentralized supply chain leading
Bucket 4:
to higher costs
L shape
(+) Stimulus policies, relaxation on
(+) FC model in China
ST travel ban (-) Hard luxury hit more
(-) Fixed rental cost in HK
(-) Social distancing
HK jewelry (+) Distribution channels (lower tier
retailer cities)
(-) Consumption repatriation back to (+) Premiumization
LT (-) Competition (from international (+) Online sales, data analysis
China (-) Less spending on physical goods
brands in China, and other
destinations for HK)
(+) = positive impact; (-) = negative impact; ST = short-term; LT = long-term
Source: Goldman Sachs Global Investment Research
8 July 2020 18
Exhibit 10: Our 2021 sales estimates are now 2-20% lower than our forecasts before the COVID-19 outbreak for most sectors except
durables
GSe sales growth yoy
2021E changes,
yoy growth yoy growth 2021E vs now vs before
Sector 1Q20 2Q20E 3Q20E 4Q20E 2019 2020E 2021E 2019 COVID-19
F&B -1.7% 0.7% 5.2% 4.7% 2.4% 3.6% 3.6% 7.4% -3.1%
Condiments 1.7% 14.7% 19.2% 20.4% 15.3% 12.7% 17.5% 32.5% -3.5%
Dairy 0.5% 7.6% 12.2% 10.3% 13.0% 0.8% 10.6% 11.5% -2.4%
Beer -33.3% -5.0% 5.2% 5.3% 3.1% -7.6% 11.4% 2.9% -7.8%
Spirits -5.2% 3.8% 24.9% 33.3% 16.5% 14.5% 18.9% 36.1% -6.2%
Restaurants -32.1% -3.1% -1.9% -0.4% 19.3% -2.1% 28.3% 25.6% -8.0%
Sportswear -18.7% 0.9% 14.8% 17.4% 30.9% 5.4% 26.1% 33.0% -3.5%
Apparel/footwear OEMs -8.2% -12.9% -21.3% -16.9% 6.8% -10.8% 14.6% 2.2% -10.3%
HK Jewlery (China biz) -45.5% -15.3% 8.7% 16.2% 11.7% -3.5% 11.4% 7.4% -12.8%
Durables -28.6% -4.4% 11.5% 15.0% 6.1% -2.2% 9.4% 6.9% 1.4%
Auto -40.8% 4.0% 12.0% 14.0% -7.6% -2.9% 11.0% 7.8% -5.0%
Macau GGR -60.6% -95.7% -60.4% 6.4% -3.4% -52.7% 98.1% -6.3% -20.2%
Chinese outbound travel to Asia destinations -70.0% -93.6% -34.0% 16.6% 0.3% -49.5% 82.3% -8.0% -19.7%
Average -26.3% -15.3% -0.3% 11.0% 8.8% -7.3% 26.4% 12.2% -7.8%
Data compiled for each sector is limited to companies under our Mainland China, Hong Kong and Macau coverage
Source: Company data, Goldman Sachs Global Investment Research
Exhibit 11: F&B, spirits and condiments have been relatively less Exhibit 12: We expect sportswear, restaurants, jewelers, and
impacted with stronger rebound potential; beer, meanwhile, has durables to recover from 2Q, and luxury, Macau, and leisure &
been dragged down by restaurant sales travel to recover from 3Q, while apparel/footwear OEMs are likely
Aggregate revenue growth yoy for companies under spirits, dairy, beer, to continue to face challenges in 2H due to declining overseas
F&B and condiments demand
Aggregate revenue growth yoy for companies under sportswear,
apparel/footwear OEMs, durables, restaurants, jewelery, outbound
travel, Macau GGR and luxury
Spirits Dairy Beer F&B Condiments 50%

50%
40% 25%
30%
0%
20%
2Q16
3Q16
4Q16
2Q17
3Q17
4Q17
1Q18
2Q18
3Q18
4Q18
1Q19
2Q19
3Q19
1Q20
1Q16
1Q17
4Q19
2Q20E
3Q20E
4Q20E
10%
-25%
0% Sportswear
Apparel/footwear OEMs
1Q16
2Q17
4Q17
2Q18
3Q19
1Q20
2Q16
3Q16
4Q16
1Q17
3Q17
1Q18
3Q18
4Q18
1Q19
2Q19
4Q19
2Q20E
3Q20E
4Q20E
-10% -50% Restaurants
2aeb9e8b174644998c7303f5a989d953
Durables
-20% HK Jewelery (China biz)
-75% Chinese outbound travel to Asia destinations
-30%
Macau GGR
-40% Luxury (APAC, ex Japan)
-100%
Source: Company data, Goldman Sachs Global Investment Research Source: Company data, Goldman Sachs Global Investment Research
8 July 2020 19
High frequency data by companies and sectors

Exhibit 13: Home appliance, sportswear and auto returned to Exhibit 14: Digital/online remains strong and looks set to drive
positive growth in May while the restaurant sales recovery improvement
remains relatively slow still at a 15% yoy decline yoy growth
yoy growth
40% 45%
35%
20%
25%
0% 15%
Jul 18
Aug 18
Aug 19
Jan-Feb 18
Mar 18
Sep 18
Nov 18
Apr 18
Oct 18
Sep 19
Nov 19
Oct 19
Dec 18
Jan-Feb 19
Mar 19
Apr 19
Jul 19
Dec 19
Jan-Feb 20
Mar 20
Apr 20
May 20
May 18
May 19
Jun 18
Jun 19
5%
-20%
Jun 18
Aug 18
Jun 19
Sep 18
Aug 19
Sep 19
Jul 18
Nov 18
Jul 19
Nov 19
Apr 18
Oct 18
Dec 18
Apr 19
Oct 19
Dec 19
Apr 20
Jan-Feb 18
May 18
May 19
May 20
Mar 18
Jan-Feb 19
Mar 19
Jan-Feb 20
Mar 20
-5%
Home appliances and video equipment retail sales -15%

-40% Sportswear: Pou Sheng cFX sales growth
Restaurant sales yoy growth (above designated size)
-25%
China vehicle sales growth
Baijiu YTD accumulated production yoy China total retail sales Online sales Parcel delivery volume
-60%
Source: CEIC Source: CEIC
2aeb9e8b174644998c7303f5a989d953
8 July 2020 20
Exhibit 15: Company dashboard – Staples

Growth yoy
Sector Local/Global brand Company name 1Q19 2Q19 3Q19 4Q19 Jan 20 Feb 20 Mar 20 Apr 20 May 20 Jun 20 1Q20 2Q20E 3Q20E 4Q20E 1Q20 yoy Jun20 vs May20, ppts
Local Yili sales 17% 9% 10% 17% -11% 18% 14% 11% -11% New !
Dairy Mengniu sales 16% 16% 14% 14% 7% 7% 12% 12% New !
7%
Global Nestle Asia, Oceania and Africa organic sales 3% 3% 3% 4% -5% -5%
Local WH Group (Shuanghui) sales -1% 15% 28% 49% 47% 37% 4% 1% 47%
Tingyi instant noodle sales 4% 8% Double digit up 15% 7%
Uni-President China instant noodle sales 3% -1% 14% 3%
Dali Foods sales -4% -1% 2% 7% New !
Tingyi beverages -4% 7% -4% -4%

F&B UPC beverages 1% 1% -6% 1%
Dali beverages -2% -3% -21% 4% New !
Angel Yeast sales 12% 17% 13% 15% 16% 17% 13%
Global Orion China sales in local currency -5% 4% 2% 13% 53% 2% 14% 12% 1% 2%
Ezaki Glico China sales in local currency 17% 11% -7% 3% 3% 3%
Hershey China chocolate retail sales -27% 4% 8% 12% -45% -45%
Local Yanjing Brewery sales 5% -3% 1% -1% -42% -42%
CR beer sales 6% 0% -26% -35% -10% 4% -35%
Beer Tsingtao Brewery sales 11% 7% -2% 5% -21% 3% 3% 4% -21%
Global ABI China sales 8% 7% -0% -3% -34% -44% -8% 9% 9% -44%
Carlsberg Asia organic net sales 15% 14% 14% 5% -12% -12%
Local Haitian sales 17% 16% 17% 15% 7% 10% 16% 18% 7%
Condiment
Jonjee condiment 15% 15% 14% 19% -4% 19% 22% 22% -4% New !
Local Swisse overall sales -1% 4% -23% 0% 2% -3% 18% 20% 2% New !
Health suppmts
By Health sales 0% 0% 13% -5% -5%
Local Kweichow Moutai sales 22% 11% 13% 13% 13% 16% 22% 18% 13%
Wuliangye Yibin sales 27% 27% 27% 23% 15% 16% 22% 18% 15%
Yanghe Brewery sales 14% 2% -21% -37% -15% -12% 25% 54% -15%
Spirits
Global Pernod Ricard Asia & RoW (cFX) sales 4% 12% 0% 6% -26% -26%
Remy Cointreau China value depletions +Strong dd +Solid dd +Solid dd +Solid dd
Treasury Wine Asia cFX sales 40% 7%
Personal care Local C&S paper 26% 20% 10% 14% 8% 16% 16% 21% 8%
2aeb9e8b174644998c7303f5a989d953
8 July 2020 21
Exhibit 16: Company dashboard – Discretionary (restaurants, food retail, sportswear)

Growth yoy
-40% to -50% during CNY for
Global KFC China SSSG 5% 5% 3% 3% -20% -12% -11% -5% -2% 3%
stores in operation -11%
KFC China cFX system sales growth 11% 12% 10% 10% -15% -15%
-40% to -50% during CNY for
Pizza Hut China SSSG 1% 1% 1% 0% -20% -12% -31% -12% -5% -0%
stores in operation -31%
Pizza Hut cFX China system sales growth 3% 4% 3% 1% -38% -38%
McDonald’s China comparable sales positive positive positive positive -mid-teens -20% -20%
-78% -64%
-20% -25% to -35% -10% to flat
3% 6% 5% 3% (-90% in mid- (-42% by Mar- -35% -50%
(by May 21) (mgmt) (mgmt)
Starbucks China SSSG Feb) end) -50%
c.-100% for c.-50% for c.-30% for c.-20% for
Local -2% -1% -55% -27% 4%
Xiabu Xiabu China SSSG dine-in dine-in dine-in dine-in -55%
Xiabu revenue growth 27% 27% -25% 23%
Beijing down
2x average 3.5x table to 2.5-3x, 50-
3.25x table
tableturn; turn; c. 73% of 60% of last
5% -2% -100% turn; c. 65% of -63% -26% -8% New !
c.40% of last year’s year’s level;
normal level
normal level level 3.5x in other
Haidilao SSSG areas -63% 0%
Restaurant Haidilao revenue growth 65% 58% -35% 29% New !
+1% for the
-14% -11% 0% 0% - low-mid teen - low-mid teen c.-10% c.-10% -18% -3% 3% 3% New !
first 20+ days
Gourmet Master China SSSG -18%
Gourmet Master China cFX revenue growth -12% -10% -1% -1% -8% -33% -21% -16% -15% -21% -3% 2% 5% -21% New !
Ajisen China SSSG 5% 6% 9%
Ajisen Group SSSG 5% 7% 7% -56% -56%
Ajisen China revenue growth 8% 12%
Saizeriya Shanghai SSSG 8% 13% 10% 10% -71%
-35% yoy in February-June
Saizeriya Guangzhou SSSG 4% 0% 3% 6% -73%
(Gse)
Saizeriya Beijing SSSG 7% 8% 5% 3% -85%
-30% in the
15% 13% -36%
first few days
Saizeriya Shanghai revenue growth of Apr (decline
narrowing
10ppt weekly
-2% -1% -43%
in SH/GZ)
Saizeriya Guangzhou revenue growth
Saizeriya Beijing revenue growth 10% 0% -32%
Local Sun Art SSSG -2% -0%
Food retail
Global Wal-Mart China SSSG 0.4% 3.0% 3.7% 3.5% 12% 12%
c.70% of the
c.20% of the c.50% of the -10-20%
Strong in the budget, Sequentially DD (mgmt) DD (mgmt)
Local Anta retail sales (incl. e-com & kids) +Low teens +Mid teens +Mid teens +High teens original original -20% to -25% (mgmt) New !
first 3 weeks implying improved 8% (Gse) 12% (Gse)
growing target growing target -12% (Gse)
c.20% drop -25%
Li Ning SSSG +mid teens +mid teens +high teens +low 20s
Offline
declined high Offline high-
Offline SD
40s initially but teen decline,
Li Ning retail sales (incl. e-com) +low 20s +low 20s +low 30s +mid 30s Minimal impact growth, online -high teens -1% 13% 18% New !
narrowed to online SD
>20%
20s in 2H growth
March -18%
Xtep SSSG +low teens +low teens c.10% +low teens
Xtep retali sales >20% >20% c.20% >20% 20% -80% -40% -20-25% -23%
361 retail sales (Adult) +lsd +lsd +lsd +lsd -25-30% -28%
361 retail sales (Kids) +lsd +hsd +hsd +hsd -25-30% -28%
Global Pou Sheng SSSG 8% 4% 6% 2% -33% -33%
Pou Sheng sales 20% 19% 22% 19% 25% -82% -35% -11% 8% -25% -2% 9% 14% -25% New !
Fila/other brands under Anta Group retail sales 65-70% 55-60%
Sportswear c.70% of the 2Q20 positive;
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C.30% c.30%
budget, 1H20 flattish
Fila under Anta Group retail sales c.70% c.60% 50-55% 50-55% -MSD (mgmt) (mgmt) New !
implying (mgmt)
32% (Gse) 32% (Gse)
c.10% drop 8% (Gse) -15%
NIKE owned
stores return
Nike China (cFX) sales 24% 22% 27% 23% +DD growth -4% 1% 5% (GSe) 7% (GSe) New !
to positive
growth -4%
Sequentially
Sales turned
recover in the
Adidas China (cFX) sales 16% 14% 11% 18% -80% positive in -58% flattish (mgmt)
first three
May
weeks of April -58%
Skechers China 13% 12% 20% 23% -47% -47%
Sales in direct
stores back to
Asics China -22% 19% 4% 17% -4% -14%
yoy growth
since May 4 -14%
8 July 2020 22
Exhibit 17: Company dashboard – Discretionary (apparel, luxury, cosmetics, durables)

Growth yoy
Local Heilan Home sales 5% 10% 31% 20% -37% -37%
Semir Garment sales 64% 36% 19% 2% -34% -34%
Global H&M China revenue cFX 16% 8% 8% 1% -24% -24%
Apparel brands
-30% since
Sales decline Sales decline
Sales declined March 22;
Uniqlo China SSSG 2% 8% -1% -4% Strong 10-40% 0-10%
80% yoy Sales declined
(mgmt) (mgmt)
40% yoy
low teens to
Local Chow Tai Fook China SSSG 9% 11% -7% 2% -49% -20% -low teens HSD decline -50% -25% 0% 5% New !
(mgmt) -50% 3%
Flattish or
slightly
Chow Tai Fook China retail sales growth 24% 24% 4% 17% -42% -3% -41% New !
positive
(mgmt) -41%
Slightly less
Chow Tai Fook HK SSSG 1% -11% -42% -35% -59% -80% than 80% -65% -60% -20% 3% New !
decline -65% 0%
Sequentially
c.-40% yoy -60% for direct stores; improved for
Luk Fook Mainland China SSSG 2% -7% -25% -12% -37% -41% -20% 10% 10% New !
RSV -20% for licensed stores licensed
shops -41%
Improved
slightly mom (-
Luk Fook Hong Kong SSSG -6% -10% -13% -27% -53% -70% (-90% for Macau) 60-70% for HK -60% -30% 5% 5% New !
and -80% for
Macau) -60%
Luxury Chow Sang Sang Mainland China SSSG 1% -4% -45%
Chow Sang Sang Hong Kong SSSG 2% -25% -44%
Offline traffic -60% for
E-com sales
-70%-80% SSSG since late E-com sales recovering stores open;
Global Pandora China (cFX) sales 15% 10% -8% -18% back to flattish -20% -10% -10%
Jan down 30% yoy slowly, still -64% incl temp
yoy growth
down 30%; closures -60%
Richemont Mainland China (cFX) sales 18% 20% -2% 25% -60% 40% 25% 25% -60% New !
Growth
Most brands’
accelerating
growth turned
LVMH Group AxJ (cFX) organic sales 17% 18% 12% 11% with some -32% -20% -12% 30%
positive in 2H
larger brands
March -32%
>50% yoy
Gucci APAC (cFX) underlying growth 35% 23% 18% 14% -32% -55% -10% 35% -32%
Gucci APAC (cFX) SSSG 35% 23% 18% 22% -32% -32%
Burberry APAC comp store retail sales 2% 9% 4% 2% -35% -15% -10% 15% -35%
YTD sales back to positive
-DD (+30%
Burberry Mainland China comp sales positive mid teens high teens mid teens growth yoy since beginning of
before 25 Jan)
April
c.-60% in 1H
Local Sa Sa HK/Macau SSSG -4% -11% -29% -35% -33% -79% -73% (Apr 1 to Jun 14) -58% -34% 6% 19% New !
Mar -58%
Sa Sa total sales -7% -11% -21% -28% -63% -34% -5% 2% -63%
Shanghai Jahwa sales 5% 9% 3% 8% -15% -15%
Global LG H&H China beauty-related sales 39% 30% 35% 62% -6% -6%
Sequentially Sequentially
Amorepacific China sales +msd +lsd +lsd +lsd -30%+
improved improved -30%
2aeb9e8b174644998c7303f5a989d953
In-store sales
Cosmetics Mainland down 20% yoy
China prestige (mainland
Shiseido China/HK revenue in local currency 19% 22% 14% 21%
brand sales China down
up 40% yoy 14% and HK
down c.50%) -20%
Strong yoy On a positive
Positive Expect strong
growth of trend for April -3.7% (+6.4%
growth in double-digit
L’Oreal Asia Pacific LFL sales growth 23% 25% 23% 31% online sales of at 5%-10% in in mainland
mainland growth in
skincare/make mainland China)
China sales in China
up in Feb China -4%
positive order
Local Suofeiya -5% 12% 2% 8% c.-30% -80% to -90% c.-30% -36% 5% 12% 16%
growth -36%
AC shipment
Midea organic sales 7% 7% 6% 7% -10% to -20% c. -40% c.-22% -23% -4% 2% 14%
up 10.5% yoy -23%
AC shipment
Qingdao Haier organic sales 10% 8% 5% 4% -10% to -20% c. -35% c. -20% -10% -10% 1% 7%
down 33% yoy
-10%
Durables AC shipment
Gree Electric sales 2% 10% 0% -6% c. -10% c. -50% c. -40% -49% -16% 7% 16%
down 19% yoy
-49%
-52% in
physical
Sales flat Sales down Sales down 60-
Global MUJI China SSSG -5% 2% 3% 4% stores; -45% if
(Gse) 80% (Gse) 70% (Gse)
including e-
com -45%
Daikin China sales 2% 3% 4%
8 July 2020 23
Exhibit 18: Sector dashboard

yoy growth
Jan-Feb Jan-Feb Jan-Feb vs 3M prior,
Mar 18 Apr 18 May 18 Jun 18 Jul 18 Aug 18 Sep 18 Oct 18 Nov 18 Dec 18 Mar 19 Apr 19 May 19 Jun 19 Jul 19 Aug 19 Sep 19 Oct 19 Nov 19 Dec 19 Jan 20 Feb 20 Mar 20 Apr 20 May 20 Jun 20 Jun 20
18 19 20 ppts
Retail China total retail sales 10% 10% 9% 9% 9% 9% 9% 9% 9% 8% 8% 8% 9% 7% 9% 10% 8% 8% 8% 7% 8% 8% -21% -16% -8% -3% New !
Online sales 36% 34% 31% 30% 30% 29% 29% 28% 27% 25% 25% 20% 21% 22% 22% 22% 21% 21% 21% 20% 20% 20% 3% 6% 9% 12% New !
Online
Parcel delivery volume 31% 30% 26% 25% 24% 27% 26% 24% 25% 24% 29% 22% 23% 31% 25% 29% 29% 29% 25% 23% 22% 24% -10% -16% 0% 23% 32% 41% New !
Apparel brands Apparel & footwear retail sales 8% 15% 9% 7% 10% 9% 7% 9% 5% 6% 7% 2% 7% -1% 4% 5% 3% 5% 4% -1% 5% 2% -31% -35% -19% -1% New !
Sportswear Sportswear: Pou Sheng cFX sales growth 16% 21% 17% 14% 23% 25% 17% 33% 19% 29% 18% 20% 19% 10% 25% 23% 22% 30% 15% 18% 19% 21% -19% 25% -82% -35% -11% 8% New !
Cosmetics retail sales 7% 16% 11% 3% 1% 0% 1% 0% -1% -1% -5% 7% 13% 7% 16% 22% 9% 14% 15% 7% 18% 13% -14% -14% -14% -11% 4% 13% New !
Hong Kong jewelry, watch, gifts retail sales 21% 24% 25% 24% 28% 17% 21% 2% 3% -3% -5% -3% -3% -12% -3% -17% -24% -47% -40% -43% -44% -37% -59% -41% -79% -75% -77% -70% New !
China jewelry sales 3% 20% 6% 7% 8% 8% 14% 12% 5% 6% 2% 4% -1% 0% 5% 8% -2% -7% -7% -5% -1% 4% -41% -30% -12% -4% New !
Swiss Watch China import value 33% -7% 11% 6% 4% -0% 19% 17% 24% 15% -10% -2% 3% -6% 81% 2% 16% 14% 26% 18% -6% 49% -22% 7% -52% 11% -16% -55% New !
Discretionary Luxury
Swiss Watch Hong Kong import value 28% 10% 43% 30% 40% 27% 15% -3% 11% 10% 1% -1% 0% -4% -7% -27% -1% -13% -5% -30% -27% -21% -33% -25% -42% -41% -83% -69% New !
Passenger traffic from 4 major Chinese airlines, int’l 7% 19% 21% 17% 19% 13% 13% 9% 10% 11% 12% 15% 11% 11% 14% 12% 11% 9% 9% 5% 5% 3% -1% -84% -92% -99% -98% New !
Passenger traffic from 4 major Chinese airlines, domestic 8% 13% 13% 9% 12% 10% 11% 6% 10% 6% 6% 11% 2% 1% 6% 6% 9% 7% 7% 4% 1% 0% -11% -88% -71% -68% -51% New !
Furniture retail sales 9% 11% 8% 9% 15% 11% 10% 10% 10% 8% 13% 1% 13% 4% 6% 8% 6% 6% 6% 2% 7% 2% -34% -23% -5% 3% New !
Home appliances and video equipment retail sales 9% 15% 7% 8% 14% 1% 5% 6% 5% 13% 14% 3% 15% 3% 6% 8% 3% 4% 5% 1% 10% 3% -30% -30% -9% 4% New !
Durables Air conditioner domestic ex-factory shipment volume 25% 21% 23% 20% 17% -5% -20% -15% -24% -13% 5% 3% 3% 8% -3% -8% -12% 1% 8% 1% 0% -2% -47% -34% -67% -56% -32% -0% New !
Washing machine domestic ex-factory shipment volume 7% 6% 7% -0% 5% 2% -3% -4% 2% 1% 2% -2% -5% -4% 8% 7% -2% 3% -4% -3% 2% -1% -26% -9% -52% -19% -13% -1% New !
Refrigerator domestic ex-factory shipment volume -7% 2% -10% 1% -1% -8% -5% -6% -3% 6% -5% -2% -2% -6% 1% -3% -4% 3% -1% 4% 5% 16% -31% -18% -47% -22% -3% 0% New !
Restaurant Restaurant sales yoy growth (above designated size) 7% 10% 7% 5% 8% 6% 8% 7% 5% 4% 6% 8% 8% 5% 7% 8% 7% 8% 7% 6% 8% 6% -40% -47% -28% -15% New !
Auto China vehicle sales growth 5% 4% 9% 4% -3% -7% -7% -13% -13% -18% -19% -10% -12% -17% -12% 5% -5% -10% -6% -6% -5% -3% -41% -21% -78% -40% -5% New !
Dairy Milk powder import volume rolling 3m 17% 10% -9% 4% 0% -2% -7% 0% 6% 21% 48% 40% 29% 36% 33% 29% 17% 16% 14% 14% 22% -6% -3% New !
Raw milk price -2% -2% -1% -1% -1% -1% 0% -0% 1% 1% 2% 4% 4% 3% 3% 5% 6% 8% 8% 8% 8% 7% 6% 7% 6% 5% 2% 1% 1% 1% -2%
Dairy production volume 9% 5% 3% 7% 12% 13% -18% -8% 5% 11% New !
Live hog price -19% -32% -33% -28% -15% -10% -5% -3% -3% -7% -11% -18% 27% 48% 49% 46% 48% 67% 96% 162% 173% 157% 203% 191% 215% 158% 123% 97% 97% 97% -9% New !
Pork retail price -17% -20% -26% -27% -17% -12% -5% 1% 2% -2% -5% -9% 8% 30% 41% 38% 45% 56% 76% 126% 150% 127% 155% 143% 167% 141% 112% 86% 75% 75% -19% New !
Chicken retail price 4% 4% 4% 4% 5% 5% 6% 4% 3% 2% 2% 3% 5% 5% 6% 6% 5% 6% 12% 18% 27% 24% 19% 21% 17% 19% 19%
F&B
Staples Whilte feather broiler wholesale price 55% 9% 9% 33% 26% 24% 13% 19% 43% 52% 31% 10% 32% 39% 34% 9% -3% 10% 16% 33% 5% -3% -29% -26% -31% -12% -13% -14% -19% -19% -6% New !
Lamb whoesale price 19% 19% 18% 18% 19% 19% 19% 17% 14% 15% 16% 17% 12% 10% 10% 11% 14% 15% 19% 19% 17% 12% 8% 9% 8% 12% 13% 12% 12% 12% -0% New !
Beef wholesale price 6% 6% 6% 6% 6% 6% 7% 8% 8% 8% 9% 9% 8% 6% 6% 7% 8% 11% 16% 16% 18% 17% 16% 16% 15% 17% 18% 18% 17% 17% -1% New !
Beer production volume 1% 3% 6% 2% -2% -2% 1% -4% 1% 2% 2% 4% 1% -6% -3% 5% -5% -4% 3% 4% 2% 17% -40% -22% 8% 15% New !
Moutai wholesale price, qoq 1% 1% 2% 6% 3% 1% 2% -6% 3% 0% 0% 3% -3% 6% 0% 5% 8% 10% 2% -6% 2% 0% 0% 2% -2% -12% 13% 0% 8% 8% 8% New !
Spirits
Baijiu YTD accumulated production yoy 8% 7% 7% 7% 6% 3% 2% 4% 2% 2% 1% -1% 0% 1% 0% 2% 1% 1% -2% 1% 1% -1% -17% -16% -12% -10% New !
China wine import volume, rolling 12m 22% 23% 24% 22% 16% 11% 8% 2% -0% -4% -7% -13% -19% -20% -20% -17% -16% -15% -14% -14% -12% -9% -12% -6% -10% -15% New !
Chinese outbound to HK 14% 10% 15% 11% 17% 8% 22% 4% 15% 26% 21% 19% 22% 5% 24% 10% -6% -42% -35% -46% -58% -53% -74% -54% -98% -99% -100% -100% New !
Travel & Chinese outbound to Macau 15% 10% 17% 9% 13% 8% 25% 6% 12% 15% 18% 20% 31% 14% 30% 20% 19% 5% 6% 2% -11% -14% -56% -15% -97% -96% -100% -99% New !
Leisure Chinese outbound to rest of Asia 15% 24% 30% 23% 25% 13% 7% 8% 6% 4% 7% 6% 10% 7% 14% 8% 14% 15% 20% 13% 20% 6% -39% 9% -83% -93% -98% New !
Macau GGR 20% 22% 28% 12% 12% 10% 17% 3% 3% 9% 17% -0% -0% -8% 2% 6% -4% -9% 1% -3% -8% -14% -50% -11% -88% -80% -97% -93% -97% -97% -3% New !
Source: Wind, CEIC, Federation of Swiss Watch Industry, Ministry of Agriculture, NBS, hesitan.com, Goldman Sachs Global Investment Research
2aeb9e8b174644998c7303f5a989d953
8 July 2020 24
Policy updates
Exhibit 19: Strict controls are still in place for high risk areas especially Beijing and northeastern regions to avoid the second wave of
COVID-19 (1)
Government policy summary

- As the coronavirus situation in Beijing stabilizes, the epidemic risk level has been lowered for most areas by Jul 5. (Only
6-Jul Beijing New !
one high risk area left)
30-Jun Hong Kong - Hong Kong extends mandatory quarantine for Macau and mainland China visitors to 7 August New !
- The Ministry of Transport announced on June 24 that inter-provincial tourism passenger transportation would continue to
24-Jun Nationwide New !
be suspended during the Dragon Boat Festival and thereafter until further notice
- The outdoor part of the tourist area will be opened with 30% capacity limit, and the indoor part of the tourist area
(including karst caves) will be temporarily closed
23-Jun Beijing
- Beijing travel agency's inter-provincial travel businesses are suspended. Only traveling services within Beijing for Beijing
residents is available, and people from medium and high-risk areas are not accepted for group tours
- Restrict large group gathering during Dragon Boat Festival period: From Jun 24-25, group gatherings and street vendors
20-Jun Harbin, Heilongjiang are not allowed in the central street area.
Hong Kong will allow groups of up to 50 people to gather starting on Jun 19 as coronavirus restrictions in the city continue
16-Jun Hong Kong
to be eased by the government.
- China’s customs authorities started testing all shipments of imported meat for the coronavirus
16-Jun Customs - China suspended poultry imports from a Tyson Foods Inc. plant where hundreds of employees tested positive for Covid-
19.
16-Jun Liaoning - Require people who have been to high risk areas of Beijing since May 30 to quarantine 14 days
- Travellers from designated areas of Beijing and other high risk areas are required to be quarantined for two weeks
- Strengthen monitoring and disinfection of key districts such as farmers' markets and "night economy"; Limit the
16-Jun Shanghai population size in the night market within 2,000;
- Raw food and perishable food are not allowed to be sold
- Require people who have been to Beijing, or stay in Beijing for over 12 hours since May 30 to quarantine 14 days
16-Jun Heilongjiang - Strictly control the entries into Beijing and advise people not to arrange travels to Beijing
- Beijing upgraded its emergency response to COVID-19 from level III to II starting Jun 16:
1) People from the medium- and high-risk neighborhoods and relevant people from the Xinfadi farm produce market are not
allowed to leave Beijing. Other people who need to leave the city must have negative results of the nucleic acid test taken
within seven days. People entering the city from overseas will be put under medical observation at designated places, and
undergo nucleic acid tests.
2) Control the number of people dining in; Ensure 1 meter distance between people and tables; Stop banquet group dinner
3) Preventive measures are strictly enforced in farmers' markets, restaurants, and canteens. Employees in those places
16-Jun Beijing must wear masks and gloves.
4) Indoor sports and entertain venues will be closed. Libraries, museums, art galleries and parks must now limit capacity.
Venues of cultural entertainment, swimming pools and gyms will remain closed.
5) Temperature checks are required at the entrance of shopping centres, apartment compounds, office buildings, retail
shops.
6) Companies were told to encourage working from home. Classes are moved online for primary and middle school
students, and class resumption of college students should be suspended
7) Interprovincial group tours will be suspended as well as in-city transportations including ride-sharing and taxi services.
- Beijing lowered its emergency response to the novel coronavirus epidemic from the second level to the third level starting
2aeb9e8b174644998c7303f5a989d953
from Jun 6:
1) Beijing will lift purchasing restrictions on plane and train tickets for people from the central province of Hubei, including
those from the provincial capital Wuhan, except for people from medium- and high-risk areas. Beijing will no longer require
permits for those entering the capital city from Hubei via highways.
2) People from Hubei Province, including those from Wuhan, will no longer need to quarantine for 14 days or go through
collective observation after arriving in Beijing. People entering Beijing from Wuhan will not need another nucleic acid test as
long as they have a test result proving their negative status. However, nucleic acid tests will still be required if they cannot
provide such proof.
6-Jun Beijing 3) Residential compounds will no longer need to take people's temperatures, although registration is still needed.
4) Companies that provide daily necessities and services can resume production under complete control and prevention
measures
5) In the tourism sector, Beijing will allow domestic group tours under proper conditions, except those from medium- and
high-risk areas. Inbound and outbound group tours will remain suspended.
6) Parks, tourist sites and public indoor venues can allow more visitors under strict prevention-and-control measures. Some
events, such as conferences, exhibitions, sports matches and entertainment shows, can also be held under strict prevention-
and-control measures, according to the municipal government.
7) Schools can resume classes in an orderly manner and masks will not be required for outdoor activities.
Source: chinanews.com, xinhuanet, china.org.cn, SCMP, Xinmin Evening News, www.gov.cn, www.shanghai.gov.cn, Bloomberg
8 July 2020 25
Exhibit 20: Reopening path has been bumpy

Government policy summary

1) The Hong Kong government extended social distancing rules by two weeks until June 18
2) The 14-day home quarantine requirements for people arriving from the mainland, Macau and Taiwan, which were to
2-Jun Hong Kong expire on June 7, have also been extended by one month to July 7
3) The 14-day home quarantine requirements for people arriving from places other than the mainland, Macau and Taiwan,
which were to expire on June 18, have been extended to September 18.
Three cities in two provinces (Shulan, Jilin and Shenyang) have reported an increasing number of new infections:
- Shulan: All villages and residential compounds were sealed off at noon on May 18. One person per household is allowed
out every two days for two hours to buy necessities. No one can enter or leave villages or compounds with suspected or
confirmed cases, with all supplies to be delivered by local stores.
18-May Northeastern provinces - Jilin: Transport services have been halted while residents are not allowed to leave the cities without a negative virus test.
- Shenyang: All citizens who returned from Jilin city since April 22 to be put under government-run quarantine for 21 days.
Schools that were scheduled to re-open have now been closed again.
18-Apr Hainan, Haikou - KTVs and internet cafes are permitted to open
- The epidemic prevention and control measures will be strengthened at major Chinese cities and key ports in response to
15-Apr Major Chinese cities
the rise of imported COVID-19 cases
- Close all border crossings with Russia to travelers, especially the highway port of entry in Suifenhe, has been enforced
since April 14
14-Apr Heilongjiang
- Harbin, the capital of Heilongjiang, tightened its rules by extending quarantine periods for certain visitors to 28 days
- Housing units in the city with confirmed and asymptomatic cases will also be placed under lockdown for 14 days
13-Apr Nationwide - Suspend the resumption of sports related contest in schools
- Travellers arriving in Beijing will be required to provide negative coronavirus test results when they check-in to hotels
- From late March, all international flights scheduled to arrive in Beijing are redirected to airports in other Chinese cities to
12-Apr Beijing go through customs clearance and quarantine.
- All of the 300 movie theaters in the capital remain closed. The authorities are still instructing offices to keep occupancy at
less than 50% of normal.
31-Mar Nationwide - Suspend the resumption of sports related contest/tournaments including marathon etc
30-Mar Nationwide - KTVs, fitness center and other crowded business shall stop operation till further notice
- Authorities in the central province of Henan shut down all entertainment venues and internet cafes on Monday after a
30-Mar Henan
cleaner in a library there was diagnosed with coronavirus.
- Langyashan Scenic Area in the neighboring Anhui province had received orders on Mar 29 from the local culture and
tourism bureau to shut down some of its indoor facilities.
29-Mar Anhui
- Fuyang, in Anhui province, issued a similar notice asking local entertainment venues and indoor swimming pools to remain
shut, or suspend operations if they had already resumed business.
- Ministry of Culture and Tourism ordered all entertainment venues nationwide that had resumed operations to temporarily
27-Mar Nationwide
close again
- China’s Film Bureau ordered all venues that had reopened to cease trading immediately after around 600 movie theatres
27-Mar Nationwide
out of the country’s some 70,000 screens had reopened since Mar 20
- The Shanghai Tower, Oriental Pearl Tower, Jin Mao Tower closed again starting from Mar 30 after reopening on Mar 12
27-Mar Shanghai - The Shanghai Ocean Aquarium and Madame Tussauds Shanghai have been temporarily closed from Mar 30
- Another 25 tourist attractions in Shanghai have been ordered to close their indoor sections from Mar 30
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27-Mar Sichuan, Chengdu - Chengdu authorities ordered karaoke venues and internet cafes to shut down again
Source: Chinanews.com, Xinhuanet, China.org.cn, SCMP, Xinmin Evening News, Bloomberg
8 July 2020 26
Exhibit 21: Local government stimulus packages – summary (1)
Category Province, City Policy details

General Plan for building the Hainan Free Trade Port (annouced on Jun 2):
- All imported goods allowed into Hainan will become exempt from import duties from 2025 with other various taxes (e.g.
consumption tax, VAT tax, etc.) also reduced to a simplified consumption tax scheme
Hainan
- During the transition period (i.e. 2020-2024), select merchandise imported (a "positive list" per the plan) for local retail
sales will be exempt from import duties, consumption tax and VAT tax across the whole province
- Annual purchase cap per person under the current offshore DFS policy will increase from Rmb30k to Rmb100k
- Ocean Park reopened on June 13 New!
- HK Disneyland reopened on June 18 New!
Hong Kong
- Announced on May 5, relax social distancing rules by allowing people to be in groups up to eight and reopen 8 types of
entertainment facilities including fitness centres and cinemas
Per guidelines issued by the State Council on May 8:
- Shopping malls, supermarkets, hotels, restaurants and other public places will be fully reopened on the premise of
implementing epidemic prevention measure
Mainland China - Outdoor places including parks, scenic spots and sports venues will be opened through appointments and with restrictions
on visitor number
- Indoor sites such as libraries, museums and art galleries, as well as entertainment venues like movie theaters and
arcades, may host meetings and exhibitions where necessary
Shanghai - Shanghai Disneyland theme park reopened to the public on May 11, 2020
- Nanjing Museum in east China's Jiangsu Province will host the main event on International Museum Day, which falls on
Jiangsu, Nanjing
May 18, according to the National Cultural Heritage Administration (NCHA)
- No quarantine requirement for beijing inbound travelers from domestic low risk area from April 29
- Guide and encourage travel agencies to develop short-distance tours
- Beijing WTown reopened on April 23 after closing for three months. Three hotels, more than 20 souvenir shops and many
restaurants have resumed business in the canal-laced resort town in the capital's suburban Miyun district. The scenic spot
is offering 20% off on ticket price and has upgraded its information system to enable mobile payments, self-service entry
and smart audio guides for travelers to minimize social contact.
Bejing - Beijing will resume the operation of group tour business and support travel agencies to develop miniaturized and
customized travel routes within Beijing.
- Beijing Municipal Bureau of Culture and Tourism encourages reopening of natural and cultural attractions (outdoor only)
before the end of April.
- As of April 27th, 83 scenic spots in Beijing have been reopened, including seven 5A scenic spots: Temple of Heaven,
Leisure/Travel Summer Palace, Old Summer Palace, Ming Tombs, Mutianyu Great Wall, Badaling Great Wall and Olympic Park. The
Forbidden City will also open during the Labor Day holiday.
Hubei - Lowered its novel coronavirus emergency response level from the highest to the second-highest starting May 2
- Opened 21 A-level scenic spots during Labor Day including Yellow Crane Tower
Hubei, Wuhan
- Opened 8 museum and memorial sites to public on May 18
- Offering no less than 50% discount on hotel accommodation and no less than 20% discount on food and beverage in the
Hubei, Xianning
scenic area during May 22 - Aug 31
Shandong, Jinan - 23 local tourist attractions offered half-price tickets and free-of-charge tourist activities during May 18th-22nd and 24th.
- Issued Chengdu's first tourist year card, the Golden Panda Card as of April 28. The first batch will distribute 20,000 cards
Sichuan, Chengdu include free admission to 22 scenic spots. Cardholders can also enjoy half-price tickets for peers, discounts on cultural and
creative products in the scenic spot, free parking, and free tourist guide in some scenic spots.
Sichuan, Zigong - The 26th Zigong International Lantern Festival will be officially resumed on April 30
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Chongqing - Offering 60k free tickets of 73 tourist attractions to citizens from Sichuan province for visits during May-Sep
- Guide and encourage travel agencies to develop short-distance tours
- More than 430 A-level tourist attractions reopened in Jiangsu Province by April 23, accounting for more than 70% of the
Jiangsu
total A-level tourist attractions in the province.
- Launched International Tourism Culture Festival on April 28 offering ancient town tours and night time activities
- As of April 23, 263 of the 421 A-level tourist scenic spots in Hubei Province have been reopened, with an opening rate of
Hubei more than 60%
- All transportations have been resumed with no obstacles to enter Wuhan on May 1st
- Proposed a 2.5-day weekend
Zhejiang
- 526 scenic spots in Zhejiang Province that can be booked on Ctrip, ranking the first nationwide
Jiangxi - Implementing a 2.5-day weekend in 2Q20
Gansu, Longnan - Requiring staff in administrative units to be off work from Friday afternoons into weekends
Hainan - Promoting discount month (quarter) for pre-departure DFS
Guizhou - 50% discount on all "A-level" tourist attractions until the end of 2020
Zhejiang, Hangzhou - Free entrance to nationally owned "A-level" tourist attractions that fit the epidemic control criteria
Zhejiang, Wenzhou - Free entrance to 54 tourist attractions from Mar 20 to Apr 30
Zhejiang, Shaoxing - Free entrance to 50 "A-level" tourist attractions from Mar 14 to Jun 30
Shaanxi, Xi'an - Subsidizing 30% of the orginal ticket price to private "3A-level" or above tourist attractions providing free entrance
Ningxia - 50% discount on all "A-level" tourist attractions for Hubei residents
Source: www.scmp.com, Xinhuanet, China Daily, China.org.cn, Yicai
8 July 2020 27

- Planning to ease restrictions for rural residents applying for urban household registration status; Cities with a resident population of less than 3
million should remove all barriers for rural residents to apply for urban household registration status, or hukou
Urbanization - For bigger cities, those with a resident population of more than 3 million, restrictions should be loosened for certain groups of people such as
migrant workers with stable jobs in cities and college students from rural area
- Directed local governments to promote basic public services, such as healthcare, education and housing, for people already living in cities without
an urban hukou and their family member
- Local government are issuing favorable policy to promote the street vendor business, including cities like Nanjing, Chengdu, Zhengzhou etc. Some
of the cities are loosening the restrictive policy and assigning specific areas for street vendors to sell.
- Budgeted RMB146.1 billion this year to fund local poverty alleviation efforts, aiming to eliminate poverty among all rural residents living below the
current poverty line and in all poor counties this year
Low income - Provided RMB800m worth of funds to support the poverty alleviation project in Hubei province
- Doubling temporary price subsidies from March to June, and including orphans and the jobless into coverage
- Expanding the coverage of social welfare to people affected by the virus outbreak
- Studying standard increase and coverage expansion of unemployment insurance
- Ensuring issuance of unemployment insurance and temporary living subsidies for migrant workers
- On June 1, PBOC unveils $60 billion plan to aid small business credit including using RMB 400bn of its relending quota to
purchase SME loans from qualified local banks
Mainland China
- Annouced on Jul 2, special local government bonds will be allowed to support small and medium-sized banks in
replenishing capital. New!
Hubei - Waiving 3 months' rental and reducing half of the rent in the next 6 months for SMEs that lease state-owned properties
- Extend the rental reduction/waive period from 2 months to 4 months and include restaurant, salons, and convenience
stores in the list eligible for the benefit.
- Waiving 2 months' rental or reducing half of the rent for SMEs that lease state-owned properties subject to business
Beijing
nature
- Providing up to RMB500k subsidies to shopping malls at designated size who reduce rentals for more than 50% of its
SME tenants for over 15 days
- Waiving 2-3 months' rental for SMEs that lease state-owned properties
- Increase the credit support of SMEs including targeting to increase the SME loans by over RMB100bn in 2020, extending
Shanghai
the terms of loans borrowed between Jun 1 and Dec 31 2020 and striving to achieved a yoy higher renewal rate on SME
loans. (Jul 2) New!
- Waiving Feb-Mar rental for eligible SMEs that lease state-owned properties
Guangdong, Guangzhou
- Providing subsidies to property owners to reduce rentals
- Waiving Feb-Mar rentals for SMEs that lease state-owned properties
Zhejiang, Hangzhou
- Waiving property taxes and land use taxes for property owners who provide at least 2 months of rent free
- Reducing 50%/100%/50% of rental in Jan/Feb/Mar for SMEs that lease state-owned properties
Shenzhen
- Providing financial support to property owners who reduce rentals during the virus period
- Annouced on May 26, the government has decided to extend subsidies and tax exemptions for NEV purchases by another
New Energy Vehicle two years to restore NEV production and sales. Restrictions on NEV contract manufacturing will be lifted in an orderly
(NEV) manner and the ministry will also step up the construction of charging facilities and enhance their interconnectivity.
- To provide Rmb3k on vehicle replacement with Guo-6 standard new vehibles from Mar to Dec in 2020
- To accelerate the implementation of the 100k extra car plate quota identified in Jun 2019 and to release additional quota
Guangdong, Guangzhou
as appropriate
- To provide Rmb 10k subsidies on new energy vehicle through usage process from Mar to Dec in 2020
2aeb9e8b174644998c7303f5a989d953
- To provide RMB5,000 subsidies on electric charging during the use of new energy vehicles
Autos Shanghai
- To provide RMB4,000 subsidies each for exchanging the old fuel car for new
Zhejiang, Hangzhou - Add 20k car plate quota in 2020
Jiangxi, Nanchang - Provide Rmb1k subsidy for new cars purchased during the epidemic period
- Rmb3k subsidy per vehicle for customers that (a) reside in Changsha, Zhuzhou, and Xiangtan, and (b) purchase Xiangtan-
Hunan, Xiangtan
produced Geely car models
Guangdong, Foshan - RMB2,000 - 5,000 subsidies on vehicle purchases
Hunan, Changsha - No more than RMB3,000 subsidies for each designated vehicle purchased
- Loosening restrictions on vehicle purchases
Zhejiang
- Formulating policies to encourage replacement of existing cars with new ones
Source: SCMP, Xinhuanet, China Daily, China.org.cn, Yicai
8 July 2020 28

- Announced series of policies to drive consumption on July 8 including:
1) Subsidies for designated appliance purchases at 10% of the selling price, capped at RMB1,000 per resident
2) Encourage home appliance companies to issue consumer coupons for laptops, tablets, 5G mobile phones, 4K and 8K TVs
as well as other smart digital products and energy-saving home appliances
3) Provide incentives for vehicle replacement (including NEV) and reduce the VAT for second-hand vehicles
Shenzhen New !
4) Provide up to RMB2m per company to support foreign trade enterprices to explore domestic channels and build
individual brands.
5) Introduce measures to accelerate the development of "night economy"
6) Propose to release the consumption power for catering and accommodation, develop new retail channels, and encourage
enterprises to set up sales headquarters in Shenzhen.
Shandong, Qingdao - Extended the period of "Qingdao millions consumption season" to continue doing sales promotions
- Authorities carried out a "Beijing shopping season" from June 6 both online and offline, with a total of RMB12.2 billion in
Retail Beijing coupons offered to citizens, including discounts on electric products, dining, tourism and agricultural products from Hubei
province, etc.
- Launched "5.5 shopping festival" with special events and promotions covering apparel, appliance, restaurants, e-com,
travel, auto, tech etc.
Shanghai
- More than 80% of the planned exhibition area has been booked for the third China International Import Expo (CIIE) slated
to take place in November. Fast Retailing Group will participate in the expo for the first time.
- Provided RMB100k reward to properties that attracted top international brands who signed more than 3-yr leases
- No more than RMB50k subsidies for retailers that held promotion activities for international top tier brands
Chengdu
- Up to RMB1million subsidies for restaurants that established its headquarters, central kitchen or logistic center in
Chengdu
Anhui - Implement a 2.5-day weekend in 2Q20
Nanjing - Implement a 2.5-day weekend in 2Q20
Gansu, Longnan - Require staffs in administrative units to be off work from Friday afternoon into weekend
- Up to RMB1million subsidies for restaurants that establish their headquarters, central kitchen or logistics center in
Chengdu
Sichuan, Chengdu - As announced on Jun 29, the government will strengthen support for local leading dining brands, nurture 100 local New !
catering enterprises, cultivate 22 gourmet brand enterprises above designated size and held 40 food festival events in 2020
Restaurants
- Commercial banks granted RMB5 billion credit supports for local restaurants; Applicants with good credit record can
Hubei, Wuhan New !
receive government's 100% reimbursement of interests (Jun 22).
- Providing up to Rmb10k insurance per head for consumers who dine in in designated restaurants
Jiangsu, Nanjing
- Providing business resumption insurance for restaurant companies and staff
- NBA is in talks with The Walt Disney Company about restarting its suspended season at Disney World in Florida in late July
NBA
Formula 1 - Formula 1's 2020 Chinese Grand Prix looks set to take place on October 4, which was originally slated for Apr 19
CBA - Announced on Jun 4, Chinese Basketball Association (CBA) league to resume 2019-20 season on June 20
- To launch a series of toursim and sports events for 6 months from July 1st especially those related to winter sports
Jilin province New !
- To distribute RMB10million of consumer coupons on fitness and sports activities
- Set up ten measures to support the development of the sports industry amid pandemic including bank credit support to
Hebei, Tianjin sports companies, extension of repayment terms, granting up to RMB10m credit facilities with lowest interest for key sports New !
Sports entities (Jul 2)
Sichuan, Chengdu - Announced 2021 Chengdu Summer Universiade are still on track
Qingdao, Shangdong - Budget RMB160 million of consumer coupons on fitness training
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Nanjing, Jiangsu - Budget RMB10 million of consumer coupons on fitness training and sports activities
- Budget RMB15 million of consumer coupons on fitness training and sports activities
Hebei province - Launched "Hebei Sports Consumption Season" since Jun 6, hosting various sports events and distributing RMB2m of
consumer coupons during the season. New!
- Budget RMB50 million of consumer coupons on fitness training and sports activities especially on winter sports. Giving
Jiangsu Province
supports to sports companies that had contribution to the anti-epidemic affair regarding subsidies, financing etc
Source: SCMP, Xinhuanet, China Daily, China.org.cn, Yicai
8 July 2020 29

Sichuan, Chengdu - Organizing a series of activities including shopping festivals and food festivals
- Launched "Consumption Promotion Months" and a series of night-time activities
Zhejiang, Ningbo
- Extending the operational time of shopping malls, supermarkets, CVS, commercial districts etc
Discounts/Promotions
- Launched "Thousand Store Promotions": jointly launched with 1,000 merchants with a total promotion value of over
Jiangsu, Nanjing RMB100m
- Extending the operational time of shopping malls and commercial clusters to 10pm
- Launch "New National Brand Plan 2020" to help domestic merchants overcome difficulties, accelerate product innovation
and brand building. The plan aims to add three more Chinese brands in consumers' shopping cart
Alibaba - On May 19, Tmall announced that during the period of 618, Tmall will, together with many local governments and brands,
issue the largest scale of cash consumption coupons and subsidies this year, with an estimated amount of more than
RMB10 billion.
- To launch online shopping festival during April 28 to May 10 with 109 e-com platforms participating including Alibaba,
JD.com, Suning.com, VIP shop, RED, Jumei, and Gome.
Mainland China
E-commerce/Digital - Support foreign trade enterprises to cooperate with e-commerce platforms and set up foreign trade products areas for
various online shopping festivals (Jun 22). New!
Shanghai - Launched "Cloud Flash Payment" promotion with China UnionPay
Hubei - Providing free cloud office services and speed-up services from March to June
Zhejiang, Ningbo - Launched series of online promotions from Mar-18 to end of May related to restaurants, groceries and retail
- Up to RMB1m reward for companies who outperform in e-com and digital payment areas
Sichuan, Chengdu - Improving e-com related supporting facilities such as community unmanned containers, electronic vegetable cabinets, and
contactless distribution stations
Alipay - To distribute nationwide consumption vouchers for 17 consecutive days from July 1, totaling RMB 10billion New !
Henan, Luoyang - Distributed RMB50 million of consumer coupons on May 20 including 20m for restaurants and 20m for retail
Shandong - Distributed vouchers worth RMB 138 million for culture- and entertainment-related spending from April 25
Zhejiang, Yiwu - Distributed consumer vouchers worth RMB 100 million from April 29
Hubei, Wuhan - Distributed RMB2.3bn of consumer coupons
Guangdong, Dongguan - Distributed RMB100m of consumer coupons and RMB400m worth of promotions during Apr 18-Jun 18
Zhejiang, Hangzhou - Distributed RMB485 million of consumer coupons and will follow up with more from April 3 til May 31.
- Distributed RMB400 million of consumer coupons during April to May, out of which RMB 320m is for retail consumptions
Henan, Zhengzhou
- Distributed RMB200 million of consumer coupons including 30m for restaurants, 30m for retail, 10m for cultural activities
Shenzhen, Baoan
and travel, 60m for auto purchase and 10m for low income group
Consumer vouchers
Shenzhen, Luohu - Distributed RMB50 million of consumer coupons including 10m for auto purchase
Guangdong, Foshan - Distributed RMB100 million coupons for consumptions in restaurants, hotels, travels etc.
Zhejiang, Jiaxing - Distributed RMB8 million coupons for auto purchase and RMB15 million coupons for 5G handset purchase
- Distributed RMB318 million worth of consumer coupons to union members and low-income groups
Jiangsu, Nanjing
- Local citizens can register for online lucky draws to win more vouchers with a face value of RMB50 or RMB100
Shandong, Jinan - Distributed vouchers worth RMB 20 million for culture- and entertainment-related spending
Zhejiang - Distributed a total of RMB1 billion worth of coupons on culture- and entertainment-related spending
Zhejiang, Ningbo - Distributed vouchers worth RMB10 million
- Distributed vouchers worth RMB50 million for culture- and entertainment-related spending from May 2
Beijing
- Distributed RMB150 million of consumer coupons
Hebei - Distributed a total of RMB15 million coupons for sports-related spending
Source: SCMP, Xinhuanet, China Daily, Yicai, China.org.cn
2aeb9e8b174644998c7303f5a989d953
8 July 2020 30
Exhibit 25: Weekly retail trend of appliances sales

Source: AVC
Offline Online
Category Value ASP Category Value ASP Category Value ASP Category Value ASP
White goods White goods
AC Electric water heater AC Electric water heater
Apr-20 -33% -12% Apr-20 -24% -5% Apr-20 -18% -20% Apr-20 48% -12%
May-20 -14% -8% May-20 -22% -1% May-20 -1% -16% May-20 31% -14%
Jun-20 W3 30% Jun-20 W3 84% Jun-20 W3 77% Jun-20 W3 48%
Jun-20 W4 -55% Jun-20 W4 -55% Jun-20 W4 -9% Jun-20 W4 -8%
Refrigerator Gas water heater Refrigerator Gas water heater

Apr-20 -8% 7% 0 Apr-20 -21% -4% Apr-20 13% -4% 0 Apr-20 12% -8%
May-20 0% 7% 0 May-20 -17% -3% May-20 -1% -13% 0 May-20 2% -14%
Jun-20 W4 -43% Jun-20 W4 -52% Jun-20 W4 26% Jun-20 W4 2%
Washing machine Washing machine

Apr-20 -13% 9% Apr-20 5% -6%
May-20 -10% 9% May-20 -11% -10%
Jun-20 W3 82% Jun-20 W3 73%
Jun-20 W4 -47% Jun-20 W4 6%
Kitchen appliances Kitchen appliances

Range hood Gas hob Range hood Gas hob
Apr-20 -18% 1% 0 Apr-20 -15% 0% Apr-20 8% -18% 0 Apr-20 9% -13%
May-20 -10% 1% 0 May-20 -9% 2% May-20 1% -22% 0 May-20 9% -11%
Jun-20 W4 -52% Jun-20 W4 -49% Jun-20 W4 7% Jun-20 W4 29%
Kitchen appliances set Dishwasher Kitchen appliances set Dishwasher

Apr-20 -18% 5% 0 Apr-20 27% -1% Apr-20 0% -13% 0 Apr-20 51% -10%
May-20 -8% 2% 0 May-20 26% 0% May-20 -3% -15% 0 May-20 34% -10%
Jun-20 W4 -64% Jun-20 W4 -54% Jun-20 W4 -2% Jun-20 W4 6%
Small appliances Small appliances

Rice cooker High speed blender Rice cooker High speed blender
Apr-20 -29% 8% 0 Apr-20 -30% -21% Apr-20 15% -9% 0 Apr-20 188% -22%
May-20 -29% 10% 0 May-20 -25% -21% May-20 -2% -15% 0 May-20 201% -33%
Jun-20 W4 -53% Jun-20 W4 -49% Jun-20 W4 -7% Jun-20 W4 63%
Pressure cooker Soymilk maker Pressure cooker Soymilk maker

Apr-20 -22% 0% 0 Apr-20 -53% 2% Apr-20 13% -6% 0 Apr-20 31% -15%
May-20 -27% 4% 0 May-20 -55% 0% May-20 -1% -7% 0 May-20 8% -20%
Jun-20 W3 22% Jun-20 W3 -46% Jun-20 W3 19% Jun-20 W3 62%
Jun-20 W4 -43% Jun-20 W4 -69% Jun-20 W4 -14% Jun-20 W4 -11%
Source: AVC
2aeb9e8b174644998c7303f5a989d953
8 July 2020 31
Exhibit 26: Important events calendar

Week Event Week Event
Gourmet Master monthly sales updates

Makalot monthly sales update Adidas 1H20 results (Aug 6)
Eclat monthly sales update WYNN 2Q20 earnings (Aug 6; BBG est.)
Jul 6-Jul 12 Aug 3-Aug 9
Fast retailing results (Jul 9) GENS 2Q20 earnings (Aug 7; confirmed)
Pou Sheng/Yue Yuen monthly sales (Jul 10) Bloomberry 2Q20 earnings (Aug 7; BBG est.)
Gourmet Master monthly sales updates

Makalot monthly sales update
Sa Sa quarterly trading updates (Jul 13) Eclat monthly sales update
Chow Tai Fook quarterly trading updates Pou Sheng/Yue Yuen monthly sales (Aug 10)
China Jun retail sales (Jul 16) GKL 2Q20 earnings (Aug 10; BBG est.)
Jul 13-Jul 19 Aug 10-Aug 16
Luk Fook quarterly trading updates (Jul 16) Galaxy 2Q20 earnings (Aug 13; BBG est.)
Jun beer volume growth (Jul 18) Paradise 2Q20 earnings (Aug 13; BBG est.)
Stella quarterly trading updates KWL 2Q20 earnings (Aug 13; BBG est.)
China Jun retail sales (Aug 14)
Haier Electronics 1H20 results (Aug 14)
Anta quarterly trading updates

Naga 2Q20 earnings (Jul 23; BBG est.)
July beer volume growth (Aug 18)
Jul 20-Jul 26 LVS 2Q20 earnings (Jul 24; BBG est.) Aug 17-Aug 23
Hisense 1H20 results (Aug 20)
MGM 2Q20 earnings (Jul 24; BBG est.)
MLCO 2Q20 earnings (Jul 24; BBG est.)
Joyoung 1H20 results (Aug 25)

Opple 1H20 results (Aug 26)
GZSP 1H20 results (Aug 27)
Robam 1H20 results (Aug 27)
Starbucks results (Jul 28)
Supor 1H20 results (Aug 27)
McDonald’s results (Jul 28)
Oppein 1H20 results (Aug 27)
Yum China 2Q20 result (Jul 30)
Suofeiya 1H20 results (Aug 30)
Jul 27-Aug 2 HK Jun retail sales (Jul 30) Aug 24-Aug 30
Gree 1H20 results (Aug 30)
SJM Holdings 2Q20 earnings (Jul 30; BBG est.)
Haier Smart Home 1H20 results (Aug 30)
HK Jun tourist data (may annouce on during Jul 29- Jul 31)
Midea 1H20 results (Aug 30)
Makalot quarterly trading updates
GENM 2Q20 earnings (Aug 28; BBG est.)
GENT 2Q20 earnings (Aug 28; BBG est.)
CTG DF 2Q20 earnings (Aug 31; BBG est.)
HK Jul tourist data (may annouce on during Aug 29- Aug 31)
Source: Bloomberg, Company data
2aeb9e8b174644998c7303f5a989d953
8 July 2020 32
Disclosure Appendix
Reg AC
We, Michelle Cheng, Lincoln Kong, CFA, Sho Kawano, Simon Cheung, CFA, Xufa Liao, CFA, Nicolas Yi, Christine Cho, Fei Fang and Ronald Keung, CFA,
hereby certify that all of the views expressed in this report accurately reflect our personal views about the subject company or companies and its or
their securities. We also certify that no part of our compensation was, is or will be, directly or indirectly, related to the specific recommendations or
views expressed in this report.
Unless otherwise stated, the individuals listed on the cover page of this report are analysts in Goldman Sachs’ Global Investment Research division.
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China Consumer: Measuring the recovery path

Introducing our consolidation framework: What is unique

machine/refrigerator/AC domestic shipments, baijiu/beer production, dairy Sara Steiner

Goldman Sachs China Consumer: Measuring the recovery path

Our consolidation framework 6

What is new (local vs global) 15

Our recovery framework 17

High frequency data by companies and sectors 20

Goldman Sachs China Consumer: Measuring the recovery path

1) Introducing our consolidation framework

To better analyze the opportunities for further consolidation, we compare different

Exhibit 1: Summary of our four bucket consolidation framework

Home Spirits Sportswear

Low growth High growth

Beverage Snacks Cosmetics Foodservice

Source: Euromonitor, Goldman Sachs Global Investment Research

Goldman Sachs China Consumer: Measuring the recovery path

2) Concerns about a second COVID-19 wave impacted dine-in/shopping mall trafﬁc

Exhibit 2: Government re-imposed strict controls to avoid a second wave of COVID-19

Announcement date Province, City Policy details

Source: Xinhuanet, China Daily, SCMP

3) Sales recovery for staples were even stronger

Goldman Sachs China Consumer: Measuring the recovery path

4) Continuous government stimulus packages to drive consumption recovery

Goldman Sachs China Consumer: Measuring the recovery path

Our consolidation framework

Consolidation status: China vs Japan

Exhibit 3: Market size vs consolidation status in China vs Japan

125 Mobile phone(14.1)

104 102 After school tutoring (9.0)

Mkt size X axis & Y axis)

5.0x 317 Auto (2.3)

Source: Euromonitor, Goldman Sachs Global Investment Research

Goldman Sachs China Consumer: Measuring the recovery path

Exhibit 4: Changes in leaders’ market shares, 2019 vs 2010

Market size in 2019 (Market size multiplier vs. 2010)

Source: Euromonitor, Goldman Sachs Global Investment Research

Goldman Sachs China Consumer: Measuring the recovery path

Exhibit 5: Top 5 players in 2019 vs 2010

Source: Euromonitor, Goldman Sachs Global Investment Research

Key drivers for consolidation

1. Government policy: License approval, regulation changes, ESG requirement, etc.

Goldman Sachs China Consumer: Measuring the recovery path

Consolidation could be higher if more regulatory approvals are needed.

2. Capital requirement: Higher capital requirement for manufacturing facilities (capex),

3. Channel/supply chain: Layers of distribution channels, online vs ofﬂine mix, channel

E-commerce penetration Food delivery penetration

Food delivery as % of restaurant

Others 12% Others

4. Consumer behavior change: Consumers’ increasing demand for quality products

How will the consolidation trend evolve by sector?

Goldman Sachs China Consumer: Measuring the recovery path

Bucket 2: High growth categories but more fragmented vs other markets

Goldman Sachs China Consumer: Measuring the recovery path

brands/products (esp. for mass cosmetics) may be largely affected by

Goldman Sachs China Consumer: Measuring the recovery path

Bucket 4: Low growth categories and more fragmented vs other markets

Goldman Sachs China Consumer: Measuring the recovery path

Goldman Sachs China Consumer: Measuring the recovery path

Exhibit 8: Factors leading to different consolidation trends by sector