China’s Trade War Expands Beyond Semiconductors 

China’s Trade War Expands Beyond Semiconductors

China’s Trade War Expands Beyond Semiconductors (Source: Shutterstock)

This semiconductor trade war is being fought over the narrative of national security and military advancements

The Chinese economy might be in shambles, but the women are splurging on personal care products, mainly cosmetics. The strenuous three years of strict COVID restrictions have maneuvered Chinese consumers from high-ticket investments like houses to extravagant spending on perfume, moisturisers, lipsticks, etc. 

But this has become a nightmare for its other trading partners, namely, France, South Korea, Japan, and its arch-rival, the United States. These countries have made substantial investments in China, and it is itching them to miss out on the spending spree.  

The problem here is China’s trade war with these nations. Its indigenous cosmetic companies are making a fortune in this season as their parent country has imposed restrictions on the import of cosmetics goods during the pandemic.  

This semiconductor trade war is being fought over the narrative of national security and military advancements. The fight over the cosmetics industry is over money.  

Bruno Le Maire, French Finance Minister, stated that they are really serious about this issue. The Chinese market accounts for more than 30-35% of the total revenue share for French companies.  

Foreign companies were put in a tough spot in 2021 by the Chinese government. Back then, they announced that companies would have to disclose the ingredients in every product with the exact quantities being used. They will have to enter all this data into the Chinese database along with the location of their suppliers from where their ingredients are sourced. This has created a fearful environment amongst them that could lead to low-cost Chinese products being bombarded into the market and increasing competition for them.  

Large corporations like LVMH, Dior, Maybelline, etc., have the resources to meet the sudden changes in regulatory demands. Small players are instead halting their sales in China till they find a way to meet these demands in a longer tenure and a cost-effective manner. 

Gerald Renner, director of the technical regulatory affairs at an industry association, Cosmetics Europe, complained that the time provided for fulfilling these burdensome demands is unrealistically short. 

Emmanuel Macron, the French President, had raised concerns over these issues with the Chinese leaders in his visit in April. The French government had also led a group consisting of the European Union, The United States, Japan, and 11 other cosmetics-exporting countries to push China to reverse many of the demands.  

Le Maire also visited Beijing in July and said that this issue had been the core of discussions with his Chinese counterparts. He later announced that He Lifeng, the Chinese Vice Premier, had agreed to establish a working committee that will develop common standards and has planned to meet in France before the end of this year.  

Statistics show that the Chinese domestic players have gained a substantial market share of the cosmetic industry in the country from foreign companies. Retail sales of cosmetics have surged by 8.7% in the first six months of this year. The imports tanked by 13.7% for the same period.  

This staunch difference in the fall of imports and rise of sales is visible in the growth of factories run by Chinese companies. Hangzhou-based Proya Cosmetics announced a 35% increment in sales in the first six months of the year on a YoY basis.  

Chinese customs data report that the imports of cosmetics, toiletries, and perfumes from France were valued at $5.4 billion last year, and this year, they were down by almost 6.2% in just the first half of the year. Similarly, cosmetics imports from the United States and South Korea were also down by 19.8% and 22.2%. 

As per the data published by Euromonitor International, a market research company reported that Chinese beauty brands have registered massive growth in the last three years and have captured 27% of the cosmetics retail sales among the top brands. 

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