Investors Bet China’s Cosmetic Surgery Industry Next on Regulators’ List
Updates on Chinese Business and Finance
Sign up for myFT Daily Digest to be the first to know about Chinese business and financial news.
For evidence of China’s $ 50 billion obsession with cosmetic surgery, look no further than a “little red book.”
This is the English translation of Xiaohongshu, the beauty-focused e-commerce and social media app popular among young Chinese women on which the hashtag #PreAndPostOp has collected more than 290,000 posts. Many of them display before-and-after photos of reshaped jaws, fuller lips, and reconstructed cheekbones.
But since early July, the market value of the country’s three largest publicly listed medical aesthetics companies has fallen by a third, representing a collective loss of more than $ 17 billion, despite the popularity of cosmetic procedures.
This shift in investor sentiment suggests that the days of Chinese youth who have gone under the knife in pursuit of facial perfection may be numbered, as President Xi Jinping attempts to reshape the country’s cultural and business landscape as part of the campaign. ‘a “common prosperity”.
Investment bank Citic estimated that sales revenues in the Chinese aesthetic medicine market were over Rmb330 billion ($ 51 billion) in 2020. Online games – industries where strict regulations have incinerated values dominant groups in recent months.
“It’s perfectly possible that we will see another industry disappear,” said Mark Tanner, managing director of China Skinny, a marketing company.
State media have stepped up criticism of the industry for promoting the idolatry of physical appearances and further worsening misery on young people already embarrassed by their appearance.
In a comment posted Tuesday, the party’s spokesperson People’s Daily warned that the cosmetic surgery industry’s advertising had “exceeded regulatory limits.” The newspaper warned against advertisements featuring before and after photos of Chinese celebrities designed to “attract consumers” and called for “standardized regulation of this new lucrative industry without delay.”
Tanner, a veteran beauty industry analyst in China, said many locals would welcome a crackdown on cosmetic surgery. “[If] Not everyone is that ‘perfect’ so there isn’t as much pressure to spend your hard-earned savings and do the same, ”he said.
Investor unease has grown alongside concerns from health officials about the proliferation of illegal surgeries performed by unauthorized clinics, which have drawn stern reprimands from Beijing for “appearance anxiety” and ” younger surgical clients ”.
Last month, the Shanghai and Shenzhen stock exchanges banned structured debt products tied to consumer loans for cosmetic procedures.
Traders looking for regulators’ next target focused on So-Young, the Nasdaq-listed app that allows users to assess their own facial features, make plans for adjustments, and find plastic surgeons. The ratio of short-term interest for So-Young to total stock turnover – a measure of bets against the company – has risen in recent weeks as its stock has fallen to an all-time high, down more than half this year.
“The market is right to be cautious here,” said Brock Silvers, chief investment officer at Kaiyuan Capital. Silvers said a disappointing pick-up in consumer spending in China this year has helped hamper cosmetic surgery companies’ shares, while Beijing’s latest signals “do not bode well for near-term growth prospects. “.
Officials also expressed unease over trends in Chinese beauty standards. Go Youn-jung, a 25-year-old South Korean actress, is the most popular model for “copy surgeries,” which seek to mimic celebrity features, according to So-Young. Photos of men before and after the operation on social media often show delicate features that resemble idols from South Korea and, increasingly, China – a trend state media have slammed for. allegedly undermining Chinese masculinity.
There are also signs of growing public awareness of body image sensitivities. Posts on the Weibo social network with hashtags such as #DoYouHaveAppearanceAnxiety and #SayNoToAppearanceAnxiety have been viewed approximately 490 million times and have elicited tens of thousands of responses.
Some young Chinese welcome a record of the industry. “The education sector has been hit so hard [by regulators]Weibo user Camry wrote in a recent article. “Please take stronger action against the cosmetic surgery industry.”
A crackdown on regulators could undo years of rapid expansion in the cosmetics industry and shatter expectations of successful growth. So-Young has already been downloaded more than 400 million times in China since its launch in 2014, according to Qimai Data, an online data service provider.
Estimates of the value of the Chinese aesthetic medicine market vary, but industry analysts agree that the industry has grown at a breakneck pace that is expected to continue. A report released in January by Deloitte predicted that the value of licensed cosmetic surgery companies in China would exceed 310 billion Rmb by 2023, an increase of more than 50% from 2020 and a tenfold increase from 2012. Citic, whose estimates also include unlicensed companies, projected the industry could be worth more than Rmb1tn by 2030.
But as expectations of regulatory intervention grow, investor concerns have already spread beyond public markets, pushing back private funds normally keen to invest money in cosmetic surgery start-ups.
“We were looking before. . . in potential investment targets among plastic surgery or aesthetic medicine companies, ”a China-focused private equity investor told the Financial Times. But in the face of an impending regulatory backlash, the fund decided to take the entire industry “out of the equation” for future portfolios, the investor said.
Reporting by Hudson Lockett in Hong Kong, Sherry Fei Ju in Beijing and Edward White in Seoul