During our November 2011 trip to China we reserved some time to get a first-hand impression of the current developments in the wider real estate sector and the consumer and services sectors.

We met among others with KWG, a Guangzhou based listed property developer, several non-listed property developers in central China’s Henan province and several building materials suppliers including Liansu, China’s biggest listed piping company. In the consumer and services sectors we had discussions with Belle International, China’s largest retailer of women shoes, and several private retailers and producers of cosmetics, baby nutrition/care products and healthcare related products. We also met with 51jobs, China’s leading recruitment services provider, to review the company’s business strategy and operations.

In short, in the real estate sector, a two-year-effort by the Chinese Government to bring the real estate market under control is eventually showing the intended impact. The coming months will no doubt be highly challenging as prices and volumes in the physical market will continue to fall; however, the current cleansing process should provide the basis for a (more) sustainable development going forward. Social housing start-ups and commercial real estate will help to ensure a single digit growth in overall construction activity. Issues at listed developers often highlight underlying strategic and operational deficiencies which come to fore in current market conditions.

We made similar observations in the consumer and services sectors: Companies with good business models, positioning and execution are well placed to continue to thrive irrespective of potentially tighter consumer budgets and more scrutinizing consumer demand. Me too players run a high risk – or already show – signs of stress.

For details please see the attached full PDF-report.