China's Economic Woes and High End Audio

[ihmeyers]

I spoke this week with a very large re-seller of high end audio gear. He said the economic turmoil is going to be devastating for worldwide high-end audio. He told me that a package of used gear he just bought that he had earmarked for the Chinese market was juswt rejected by a China re-seller because he doesn't want to hold any inventory. "People here have no money to spend," he said. My buddy said this is his worst month of sales in 10 years. He has deep pockets so he's going to be OK but he told me he has been on the phone will some well known manufacturers and dealers this week that are in a panic. All of this coming 3 months after Audio Research failed.

I didn't realize how important the Asian market is for high-end gear. He thinks it's like 25% of worldwide sales. I guess the silver lining is if you're in the market for something you should be able to get a good deal, especially if you can wait it out a few months. This China crisis will likely take years to resolve. Xi has decided he is not going to prop up the economy with cheap money like has been done in the past/

From Bloomberg 8/20/2023

"Many of those woes can be traced back to President Xi’s determination to shift away from the debt-fueled growth model of his predecessors. Even as the real estate crisis deepens, there’s been only limited measures to cushion the blow, prompting forecasters such as JPMorgan Chase & Co., Barclays Plc and Morgan Stanley to downgrade their projections for China’s economic growth this year to below the government’s 5% target."

 

[exupgh12]

The Asian market is huge, and for the last couple of years, we have seen luxury goods (as well as high-end audio) prices rising due to the massive demands in China and other countries in Asia.

any effect on the Chinese market probably affects every audio manufacturer, and also many dealers.

 

[ihmeyers]

The Asian market is huge, and for the last couple of years, we have seen luxury goods (as well as high-end audio) prices rising due to the massive demands in China and other countries in Asia.

any effect on the Chinese market probably affects every audio manufacturer, and also many dealers.

That's exactly what my dealer friend thought. His exact quote to me was "I think I'm F'd."

 

[PeterA]

Fascinating thread topic that could relate to many markets. Government policy and economics and how they affect the high-end industry.

 

[ihmeyers]

I'm on Bloomberg most of the trading data reading articles, looking at market movements, etc. It didn't really dawn on me that China's new woes were impacting high-end audio until my buddy told me that the package of gear he bought in the states to sell to Chinese buyers was rejected by the Chinese middle man. "I don't want it because I cannot sell it now because the economy is very bad."

 

[Superdad]

The Asian markets being a large percentage of export sales for American and European high-end manufacturers is not new. It has been that way for almost 3 decades. The last big contraction of it was back around 2008.

One thing that has changed in the last 10 years has been the emergence of a bunch of Chinese brands offering affordable products to compete with established western brands. I won’t name the names or pass judgment on any of them. But it is clear that China now has sharp engineers to combine with their low-cost manufacturing capability.
This leaves western firms in a very difficult spot. They either have to compete with truly new/different tech, or entice with brand and industrial design cache.
I would not want to be a manufacturer with only a portfolio of $10K-$50K products right now…. [Been there, done that. (Hovland Company, 1999~2009)]

 

[jeff1225]

China’s slowing economy, seen from ground level

A bossy, secretive party is ill-suited to fixing a crisis of consumer confidence

www.economist.com

 

[Mike Lavigne]

China’s slowing economy, seen from ground level

A bossy, secretive party is ill-suited to fixing a crisis of consumer confidence

www.economist.com

need account to read.

 

[jeff1225]

need account to read.

You’re retired, get a subscription.

 

[PeterA]

Can we just post political articles here now without commenting on them? Is that now allowed?

 

[Kingrex]

Isn't this about economics, not politics. I asked the same about all the Solar promoting and was told.its not politics.

 

[jeff1225]

Isn't this about economics, not politics. I asked the same about all the Solar promoting and was told.its not politics.

You are correct, It’s an article from the Economist and it’s about the economics of China. China is of course controlled 100% by the single political party so it is impossible to discuss economics without discussing politics in regards to China.

Those without intellectual curiosity my be confused however.

 

[Gunnar]

I spoke this week with a very large re-seller of high end audio gear. He said the economic turmoil is going to be devastating for worldwide high-end audio. He told me that a package of used gear he just bought that he had earmarked for the Chinese market was juswt rejected by a China re-seller because he doesn't want to hold any inventory. "People here have no money to spend," he said. My buddy said this is his worst month of sales in 10 years. He has deep pockets so he's going to be OK but he told me he has been on the phone will some well known manufacturers and dealers this week that are in a panic. All of this coming 3 months after Audio Research failed.

I didn't realize how important the Asian market is for high-end gear. He thinks it's like 25% of worldwide sales. I guess the silver lining is if you're in the market for something you should be able to get a good deal, especially if you can wait it out a few months. This China crisis will likely take years to resolve. Xi has decided he is not going to prop up the economy with cheap money like has been done in the past/

From Bloomberg 8/20/2023

"Many of those woes can be traced back to President Xi’s determination to shift away from the debt-fueled growth model of his predecessors. Even as the real estate crisis deepens, there’s been only limited measures to cushion the blow, prompting forecasters such as JPMorgan Chase & Co., Barclays Plc and Morgan Stanley to downgrade their projections for China’s economic growth this year to below the government’s 5% target."

Would it be ok to expand the "economical issues" in China to nclude Europe also? I guess the situation for HighEnd will look even worser then.