Yuan  Li
Chairman of Qidian Guofeng (HK01280)
 

In 2023, the Company faced various challenges and difficulties in its overall development due to the changing situations, on both international and domestic fronts. Judging from the international perspective, the external environment became more complex, severe and uncertain with rapidly evolving global landscape, ongoing

geopolitical crises, high global inflation, and mounting unilateralism and protectionism. In China, it turned out to be more challengeable for economic development as natural disasters occurred in several places and economic recovery was just undergoing the first year after a three-year period of the pandemic prevention

and control.

Confronted with the intricate economic environment, the Company has actively adjusted and diversified its development strategies. Being true to our new consumption strategy, we adopted both offline and online retail channels and explored other marketing methods such as live commerce, word-of-mouth platforms and

WeChat Mini Programs, to improve the diversification and fragmentation degree of retail channels in terms of home appliances and Maotai-flavor liquor. In addition, great efforts in our training business helped create a “three-legged” development situation.

Statistics from “2023 McKinsey China Consumer Report” show that high-income households maintain a robust consumption growth. Among high-income households, 26% consumers choose to spend 5% more than the previous year, and 60% consumers remain unchanged in their spending. As household income goes down, the proportion of consumers who spend less for themselves increases. This demonstrates a clear trend among consumers: high-income consumers have the strongest consumer resilience, and thus their purchasing power would gradually recover; meanwhile, middle-income consumers, whose spending tendencies are most vulnerable to macroeconomic fluctuations, would opt for more prudent consumption in

the currently subdued economic environment. As for home appliances with better merchantability, there will be growth potential for high-end products if product upgrades take place due to the intensifying polarization of consumption. Promoting high-end home appliances and attracting more high-spending customers are also

included in the development route for home appliances of the Company.

The “White Paper on Baijiu Consumption Insight of China’s New Entrepreneurs in 2023”(《2023年中國新銳企業家白酒消費洞察白皮書》) released by iiMedia Research shows that as one of the three major flavors of liquor, Maotai-flavor liquor has gained traction in recent years and got a rapid development in liquor industry. Especially since 2017, there has been a wave of Maotai-flavor liquor craze in China. Moreover, the compound annual growth rate of Maotai-flavor liquor sales revenue from 2019 to 2022 reached 15.9%.

With the word-of-mouth effect and demonstration effect amplified among core consumers, the market capacity and consumers of Maotai-flavor liquor continue to expand and it has become a popular product in the industry. The Maotai-flavor liquor segment that the Company vigorously developed has achieved stable and sustained  development, boosted by the rigid demand of the industry and the popularity with consumers.

In recent years, the government has introduced a series of policies to encourage and support the development of small and mediumsized enterprises in terms of capital subsidies, loan financing, taxation, rights and interests protection, etc., continuously invigorating market entities. The business entity data for the first three quarters released by the State Administration for Market Regulation on 7 November 2023 shows that the total number of business entities in China has reached a higher level. 124 million individually owned businesses had been registered in China by the end of 2023, accounting for 67.4% of the total business entities and providing employment for nearly 300 million people. About 22.582 million such businesses were newly registered in 2023, representing a yearon-year expansion of 11.4%. The sub-sector where the Company developed its training business presents great growth potential.

China’s economy will face more opportunities than challenges and more favorable conditions than adverse ones in 2024, according to the Central Economic Work Conference held in Beijing on 11 and 12 December 2023. In general, the government will continue to act on the principle of seeking progress while maintaining stability, promoting stability through progress, and establishing the new before abolishing the old. More policies will be introduced to help stabilize expectations, growth and employment.

Through the past years of economic recession brought by external environment and global inflation, compensatory and retaliatory consumption and the driving role of domestic demand promoted under generally loose macroeconomic policies have become the crucial elements for China’s economic growth ahead. The recovery of consumption demand and the consumption upgrading strategy

will definitely benefit the home appliances retail, liquor and training businesses of the Company.

Finally, on behalf of the Board, I would like to express my wholehearted thanks to all shareholders and investors who have shown their care and support to the Company. The continuous efforts of all staff members of the Group are highly respected and

appreciated, and we would also like to extend our sincere gratitude to different sectors of the community for their support. We will continue to balance the interests of shareholders, employees and customers, and pursue long-term and sustainable development for the Company.

I am very confident in leading all employees of the Group to overcome all challenges and further advance the Company’s new consumption strategy with technological empowerment.