Chinese Instant Noodle Sales Peak, Signals China Economy Slowdown?

A continuing spike in the sales of instant noodles in China and Hong Kong is fueling fears Chinese consumers are being hit harder than expected by the country's economic slowdown.

Instant noodles have long been considered a staple food of poor Chinese. The rise and fall in instant noodles sales is seen by the government and economic analysts as an indicator of the health of the Chinese economy. The better the economy, the lower the sales and vice versa.

Analysts noted that consumption of instant noodles in mainland China and Hong Kong fell to 38.5 billion packets in 2016 (two years before the start of Trump's trade war) but rose to more than 40 billion packets in 2018. This number accounted for more than 38.8 percent of total global sales, according to the World Instant Noodles Association.

Analysts expect instant noodle sales this year to exceed the total for 2018 as the U.S.-China trade war grinds on without any meaningful resolution in sight, and as Chinese continue cutting down on their expenses.

Sales of instant noodles are still used to gauge if Chinese consumers are upgrading their spending by buying more expensive items and ditching noodles, or downgrading their consumption by buying cheaper alternatives such as noodles and saving more.

“In the last five years, the sales of instant noodles in China have risen back to 40 billion packets (per year). Many improvements have been made in the industry, but no matter how much (the product) has changed, it’s still instant noodles,” according to Tao Dong, managing director of Credit Suisse Private Banking Asia-Pacific in a recent note to investors.

“Their hot sales are not so much due to a big change in the product side than that there has been a big change in consumer preferences. Similarly popular now are low-end goods like preserved vegetables. On the other side is weak sales of luxuries such as cars. Behind all this ... is the consumption downgrade.”

Tingyi (Cayman Islands) Holding Corporation, the largest instant noodle maker in China and based in Tianjin, said its sales of instant noodles rose 3.68 percent from 2018 to $1.6 billion during the first half of this year.

The communist Chinese government, however, is trying to suppress the notion consumers are cutting down on spending and switching to cheaper instant noodles, instead. They claim the recovery in instant noodle sales is really a Chinese success story because consumers are allegedly buying the more expensive versions and forsaking the cheaper ones.

A recent story in the People's Daily, an official newspaper of the Communist Party of China (CPC), claims the comeback of instant noodles and preserved vegetables isn't because consumers have reduced their consumption grade. It says the spike was caused by noodle makers upgrading their products "through diversification and introduction of high-end goods."

Analysts, however, note that high-end instant noodles can cost as much as 24 yuan per packet, which is more expensive than a bowl of beef noodles sold at restaurants in some Chinese cities.