Summary
Credit Suisse undertook its fifth China Consumer Survey of eight
Chinese cities in October 2008, to provide a bottom-up reality check
of the Chinese consumer market. A total of 2,700 respondents was
surveyed on questions within 13 sectors: 1) general and wealth,
2) autos, 3) food and beverage (F&B), 4) food retailers, 5) food
service, 6) household and personal care, 7) luxury goods, 8) sports
and footwear, 9) electronics/tech – computer/TV, 10) electronics/tech
– telecoms, 11) electronics/tech – internet, 12) travel and
transportation and 13) property. Detailed results of each sector are
shown in the ‘Detailed sector notes’ section from page 89, while a
summary of them can be found in the ‘Key sector observations’
section on pages 61-79. The survey methodology is described on
pages 80-88. Credit Suisse’s China Economics Team has contributed
an article on the secular rise of China’s private consumption on pages
54-60. Finally, based on results of the past five surveys, we present
the Credit Suisse China Consumption Exposure Portfolio of 21 stocks
for investors to play the theme, on pages 6-7.
Could consumption hold up?
Overall, we believe that consumption spending growth in China will
slow in 2009. However, the Credit Suisse China Consumer Survey
indicates that, with the exception of property, we should be able to
rule out a major economic collapse. The strongest argument for
relatively stable consumer demand in China is that the balance sheet
for Chinese households is still heavy and underleveraged; China’s
economy is also healthier than it was during the Asian financial crisis.
However, poor consumer confidence, unemployment and property
market weakness are the biggest negatives for Chinese consumption.
Our fifth China consumer survey
In the latest survey, the growth rates of planned budgets for almost all
major consumer items have been slowing, particularly for big-ticket
ones. However, in absolute terms, the planned budgets for most other
consumer items are still recording growth and this probably reflects
that China’s consumption growth for 2009 is likely to slow rather than
grind to a halt. Moreover, this more cautious consumer spending by
Chinese residents is consistent with their more modest income growth
revealed in this survey. As a result, respondents’ expectations of
personal income growth in the next three years have also slowed from
21.1% in the CS 2007 survey to 16.4% a year later.

Credit Suisse China Consumption
Exposure Portfolio
In our 2007 report, we constructed a Credit Suisse China
Consumption Exposure Portfolio with stocks that are mainly from the
leading consumer brands and products across various categories (as
revealed in our survey) and this is interspersed with comments from
our analysts in these industries. Since its initiation in March 2008, the
portfolio has outperformed MSCI China by 5% and had lower volatility.
Almost a year later, we have added six stocks and removed nine to
reflect changes in valuations as well as the fundamentals of the
companies in the original portfolio. The latest portfolio comprises the
following 21 stocks: Ryohin Keikaku, FamilyMart, Kweichow Moutai,
PepsiCo, SAB Miller, Tingyi, Yantai Changyu Pioneer, China Mobile,
MediaTek, Nokia, Belle, Hengan, LVMH, Swatch, Adidas, Li Ning,
Nike, Sina, Tencent, Ctrip and Singapore Airlines.

Can consumption hold up?
One year ago, while we had some concerns about the risk of
overheating, inflation and the weakened export outlook in China, we did
not foresee the sharp slowdown of the last few months. It was entirely
beyond our – and many others’ – expectations. The year-on-year
growth of a number of economic variables, like exports (in RMB terms),
industrial output, electricity output and sedan sales, dropped by over
20 p.p. from the beginning of 2008. To date, retail sales growth
momentum (the key proxy for consumption) is still very strong – but how
sustainable will it be in 2009? Overall, we believe that growth in
consumption spending in China will slow in 2009. However, the Credit
Suisse China Consumer Survey indicates that, with the exception of
property, we should be able to rule out a major economic collapse.

Table of contents
Can consumption hold up? ........................................................... 9
Credit Suisse China Consumption Exposure Portfolio .................. 19
The 21 stocks by sector.............................................................. 27
China: The secular rise of private consumption............................ 54
Key sector observations ............................................................. 61
Survey methodology................................................................... 80
Detailed sector notes.................................................................. 89
General and wealth .................................................................... 90
Autos....................................................................................... 101
Food and beverage (F&B) ........................................................ 111
Food retailers........................................................................... 129
Food service ............................................................................ 133
Household and personal care ................................................... 137
Luxury goods ........................................................................... 145
Sports goods and footwear ....................................................... 152
Electronics and tech ................................................................. 161
Travel ...................................................................................... 207
Housing and property loans ...................................................... 222