At the end of 2016, I started counting how many people on the Beijing subway were wearing sportswear. It looked like about 30% of commuting Chinese had started wearing some type of sweats or other athletic gear. And if I just counted the running shoes, it was above 50%. This was kind of confusing. Somehow in this city of few gyms and tons of heavy smokers, there was apparently an enormous amount of secret exercising going on.

Looking back, 2016-17 has been the time when Chinese consumers went sports-crazy. You can see it everywhere.

• In fashion, sportswear is the latest fad. Everyone is wearing sweats and trainers. Ads with models in yoga pants are everywhere.
• In entertainment, the Rio Olympics was a hit in 2016. And other sports are growing in viewership.
• Healthy living has also became a major priority for middle class families across the country.
• And politically, there has been a real push by the Central government to make sports a 5 trillion RMB industry by 2025. An increased focus on sports is coming directly from the President’s office.

My question is is this going to last? Is China’s sports craze the start of a long-term trend? Or is it just a fad?

To answer this I think you have to separate this into three overlapping phenomena. And it is important not to confuse them.

First, there is a sportswear fashion fad going on – and that is great for companies like Adidas.

The best symbol of this fad is Adidas AG, which is opening China stores at a frantic pace. The German sportswear company has over 9,000 China stores now. And they booked China revenue of $2.5 billion last year, up 18% from the previous year.

Adidas has also announced plans to open 3,000 more China stores in the next five years. And they will double the number of China cities in which they operate. This makes them one of the most aggressive retailers in China right now. Nike and Under Amour are also popular foreign brands and are benefiting from this fashion fad.

However, it is worth remembering that just 2-3 years ago sportswear companies, particularly Li Ning and Anta, were struggling. Many were booking losses and accumulating inventory.

Overall, this sports fashion fad is good news. But one should be careful not to mistake it for a longer-term trend. Chinese consumers can be pretty fickle. Uniqlo (my favorite store in China) was recently selling a type of “sweat pants-meets-jeans” hybrid, which you’re supposed to wear as regular clothes. It was weird.

Second, the increased focus on healthier living is a real long-term trend. But this could just be Chinese moms.

The McKinsey China Consumer reports have some nice numbers on the increasing focus on “healthy living” across China. Having interviewed +10,000 consumers in 44 cities, they found the middle class is focusing more on eating healthier and safer food, practicing preventive medicine and participating in sports.

This trend is also showing up as a decreased preference for Western fast food (bad for KFC), less drinking of soda and more foreign vitamins, fruits and milk powder sales (good for Nestle and Pagoda Garden). Longer-term this should also lead to more exercise, more healthcare and price premiums for quality goods.

However, I do wonder if this trend is mostly about Chinese moms. This is the group that cares most about health and safety – and also tends to control most of the household spending. It is worth keeping in mind that while only 2-3% of Chinese women smoke, +66% of Chinese men will still start smoking. Healthy living in China is probably more of a female phenomenon overall.

Third, the sports industry is now a priority for Chinese State-directed development. This is a big deal.

In 2014, the State Council announced its intention to make sports a 5 trillion RMB industry by 2025. This has meant relaxed regulations on organizing games and leagues, lots of new stadiums and fields, and increased acquisitions of foreign teams. Basically a big “green light” has been flashed from the top of the country (sort of like the bat signal). Businesses have been racing to respond.

This is State-directed development writ large. And when this happens in China, the results can be startling. Chinese businesses have been raising capital, jumping into the industry, starting construction (these plans always involve infrastructure), and trying to ride this wave.

The rationale for this government focus on sports is not totally clear to me. Certainly, sports can be a large industry, so economic growth likely matters. Additionally, a healthier population has lots of economic and societal benefits. But I suspect there is also a reputation and “soft power” aspect to this. As seen in the 2016 Olympics, sports and Chinese athletes can be very a positive face for China to the world. Everyone loved Fu Yuanhui.

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So I think there are several factors playing out at the same time in the current China sports craze. And within all this sneaker buying, Olympics watching and stadium building, there is still the core question: Are Chinese actually playing sports?

I don’t think it’s totally clear yet. 73% of urban consumers say they are participating in sports activities (McKinsey study). But it’s hard to see where this is happening.

One example we can point to is the surge in marathon runners in the past years. In 2015, the number of marathons held in China jumped to 134 and the number of people who signed up jumped 67% from the prior year (re: General Administration of Sports). According to a Nielsen survey, running is now the most popular sporting activity in China (followed by badminton and basketball).

We’ll see what happens. Thanks for reading. Cheers, – jeff

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I write and speak about “how rising Chinese consumers are disrupting global markets – with a special focus on digital China”.

Photo by Poodar Chu on Unsplash