China’s consumer firms to face increased global competition

This includes the restaurants, apparel, and home appliances sectors.

Consumer companies in China are anticipated to face increased competition from global peers both domestically and internationally, according to a new report from S&P Global Ratings' China Consumer Versus Global Peers: More Direct Competition In Restaurants, Apparel, Appliances report. 

"Global consumer peers in the comparable rating range tend to have more scale, business diversity and better global brand recognition than their China counterparts," said S&P Global Ratings credit analyst Aras Poon. Whereas China players tend to be relatively cash rich and have low leverage."

The domestic restaurant sector in China presents significant growth opportunities for both local and international players. 

Meanwhile, consumer discretionary sectors, particularly home appliance manufacturers, are expected to advance beyond mere price competition, focusing more on innovation and higher value offerings.

S&P suggested that Chinese companies may need to adopt new strategies, including increased product innovation, enhanced marketing, and exploration of new markets. These changes could lead to higher business risks and potentially greater leverage for some companies.

Despite these challenges, S&P Global Ratings expects that rated issuers will maintain sufficient cash flows to support their strategic goals and keep their leverage low over the next 12 to 24 months.