The Chinese furniture industry is the biggest of its kind in the world. It is also one of the leading producers, consumers, and exporters of furniture.
The industry is expected to grow annually by 11.57% from 2022-2026. According to the data generated by China National Furniture Association, there are 6647 enterprises above the scale in China’s furniture industry and the cumulative revenue is CNY 800.46 billion in 2021, which indicates an increase of 13.5% compared with 2020. The cumulative total profit has reached CNY 43.370 billion, which indicates an increase of 0.9% compared with 2020.
The Chinese furniture industry is mainly driven by real estate sales. The real estate industry, an industry that is one of the backbones of the Chinese economy, had similar remarkable growth. Therefore, it is not surprising that the revenues and profits in the furniture industry in China have increased so much.
Production in the Chinese furniture industry
The size of the furniture industry in China has been rising steadily over the last few years. The production side of the Chinese furniture industry accounts for around 39% of the world’s furniture production. Chinese furniture manufacturers produce various types of furniture from house furniture to office supplies.
Currently, there is five main furniture industry in China that concentrated 90% of Chinese furniture production capacity, including the Pearl River Delta Furniture Industry Zone, Yangtze River Delta Industry Zone, Bohai Rim Furniture Industry Zone, Northeast Furniture Industry Zone, and West Furniture Industry Zone. In these five-furniture industry zones, South China (Pearl River Delta) and East China (Yangtze River Delta) industry zone has the largest production as well as the highest export value. Guangdong Province and Zhejiang Province play an important role in production because these two provinces have lots of technical and labour resources.
Guangdong Province has more than 8,000 furniture enterprises, and more than 1 million employees, forming an important base for furniture production, support, and sales. It is the largest furniture distribution centre in China, occupying one-third of the total furniture capacity in China. Most of the products it produced were exported to American markets.
Zhejiang Province has more than 3,000 furniture enterprises and more than 500,000 employees, and in recent years several large furniture enterprises have emerged, which have a wide range of influence both locally and abroad.
However, recently a shift is taking place in where the furniture itself is being produced. The Chinese furniture industry is slowly moving from the Eastern and Southern coastal regions to the central region of China. Most of the furniture enterprises in first-tier cities have moved their production to Hebei, Henan, Jiangsu, Shandong, Anhui and other provinces.
This trend of transferring production and manufacturing bases from large cities to small and medium-sized cities or counties and keeping R&D and headquarters in larger cities is not limited to the Chinese furniture industry only and can be seen in other industries as well.
There are a variety of reasons why China is the number one consumer of furniture in the world. Furniture is a basic need in every household. Within the Chinese market consumers between the age of 25 and 35, people who mostly just started living on their own or are newly married have the highest demand for furniture. Furthermore, the Chinese middle class has been growing rapidly and has led to an increased demand for higher-quality products.
Moreover, urbanisation is a major cause of demand. According to the latest data released by the National Bureau of statistics; at the end of 2021, the urbanisation rate in China was 64.72%, an increase of 0.83% from the previous year. People moving to cities from rural areas often leave behind a majority of their belongings and purchase new things in the city. This means that a lot of new furniture is needed.
Within the Chinese furniture industry, three main demand trends can be seen. First of all, Chinese consumers have an increasing taste for environmentally friendly furniture. They prefer furniture made from natural and eco-friendly materials. This demand is not only caused by caring for the environment, but also out of fear of chemicals harming the well-being of the customer.
Another demand trend that can be identified is the trend of custom-made furniture. Of course, this trend is mainly seen in the more high-end customer segment. However, with the rising middle and upper class in China, it is a trend worth looking into.
Lastly, intelligent furniture is becoming a trend. According to IDC’s quarterly tracking report on the smart home equipment market in China, shipments of smart home devices in China are expected to reach 230 million units, with an increase of 14.6% in 2021. The intelligent furniture trend is not only popular in the Chinese furniture market. Smartphone manufacturers, like Huawei and Xiaomi, and Internet giants, such as Baidu and JD.com, are actively promoting intelligent furniture with affordable and reliable products. Haier, a home appliance giant in China, provides scenario solutions under the brand Sanyiniao, covering balconies, kitchens, air quality control, water supply, etc.
There are several distribution channels used in the Chinese furniture industry. Firstly, there are the traditional sales channels. Furniture manufacturers sell their goods through distributors, or they set up their shops selling directly to consumers. Examples of these channels are furniture markets, high-end furniture malls, and warehousing-type markets like IKEA. More modern sales channels are e-commerce channels. E-commerce is a growing trend in China.
You can buy anything online; furniture is no exception. Furniture producers either sell their furniture through established online shops, such as Aliexpress, Taobao or Jingdong, or they have their dedicated online shop. The Chinese e-commerce trend and the trend of custom furniture work well together. Online furniture shops often have the option to customise the products to a customer’s liking.
International brand’s penetration of the Chinese furniture market
The latest data shows that the total amount of imported furniture in China is USD 58.39 billion in 2020. There are three ways how a foreign furniture company can enter the Chinese furniture industry: by exporting furniture to China in its original packaging, through manufacturing consignment agreements, and by establishing a local company.
The furniture that is directly imported from abroad has a relatively low market share in China because it is often sold at a high price and is seen as a more high-class product. In manufacturing consignment agreements foreign furniture brands entrust Chinese factories with the production of their goods. However, if the furniture brand is not registered as a company in China, it cannot sell the produced furniture in China. Instead, it could only achieve a successful market entry by collaborating with a local experienced distributor. If a company pursues this strategy, it does not have to go through the hassle of registering and managing its entity in China. Rather, it can find another company to represent them locally or distribute the products.
Finally, foreign brands and companies can establish a wholly foreign-owned enterprise (WFOE) to enter the Chinese furniture industry. A Wholly Foreign-Owned Enterprise (WFOE) in China is a Limited Liability Company (LLC) that is established exclusively by the foreign investor’s capital (wholly foreign-owned). This implies that the WFOE is 100% owned by its foreign shareholders. After the registration of a WFOE, the Chinese factory is allowed to handle the production and processing of the furniture and sell it directly to the Chinese market.
In general, there are three different types of WFOEs, which are following:
- Standard/Consulting WFOE: Licensed to operate as a consulting business within the service industry
- Trading WFOE: Licensed to conduct trading, wholesaling, retailing and franchising activities in China. These types of companies are required to make an additional registration at Customs to be able to import/export goods in/from China
- Manufacturing WFOE: Licensed to manufacture products. The process of registering this WFOE is very similar to other WFOE registrations, but an environmental impact assessment must be completed before submitting the business license application
If you would like to learn more about the registration of a WFOE and establishing your own company in China, you can request our white paper here.
China International Furniture Expo
The largest furniture exhibition in China is the China International Furniture Expo, held on 13-17 September 2022 in Shanghai. The China International Furniture Expo, better known as Furniture China, has been leading in the industry for over two decades. As one of the world’s leading B2B trade fairs, over 100,000 participants are involved in the show every year. It has transferred from B2B offline trade platform into B2B2P2C both online and offline trade platforms. It is also implementing a dual circulate model which emphasises both growing exports (international circulation) and expanded domestic, powered mainly by rising consumption (internal circulation).