There are signs of a turnaround in China’s property market. Home prices increased sequentially for the second straight month, reversing nine previous months of decline. But developers are mindful that curbs on the residential property sector remain as they seek growth through retail and commercial property. Hit by cooling measures, Chinese home prices have been on a broad downward trend for the past two years. But average home prices in China’s 100 major cities inched up 0.3% last month on a month-on-month basis, according to data from the China Real Estate Index System (CREIS).
It isn’t clear whether some U.S. lines will be well-received in China, where consumers favor luxury European brands and logos. The late entrance of U.S. retailers into China means they have to try harder to build brand recognition and loyalty. “It is easy for a Chinese consumer to understand Gucci, ‘It is expensive, so it must be good, and you must be someone if you have it.’ How does a Chinese consumer understand the history and lifestyle that [a U.S. brand] represents?” said Franklin Yao, chief executive of consultants SmithStreet Solutions.
Luxury labels have thrived in China and now their cheaper High Street counterparts are betting that young, fashion-conscious shoppers will help them weather weak economies in their home markets in the U.S. and Europe. However, they’ll encounter stiffer competition from established local chains than their luxury forerunners, and with many brands expanding aggressively in China, they will also be vying with each other for customers.