Investors are betting that China’s cosmetic surgery industry will become the next target of regulators


China Business and Finance Update

To understand China’s US$50 billion obsession with cosmetic surgery, just look at a “little red book.”

This is the English translation of Xiaohongshu, a beauty e-commerce and social media application popular with young Chinese women. Its hashtag #PreAndPostOp has received more than 290,000 posts. Many of them show off before and after photos of overhauled jaw lines, plump lips, and reconstructed cheekbones.

But since the beginning of July, despite the popularity of cosmetic surgery, the market value of the country’s three listed medical aesthetic companies has fallen by one-third, and collective losses have exceeded $17 billion.

This shift in investor sentiment shows that as Chinese President Xi Jinping attempts to reshape China’s cultural and commercial landscape as part of the pursuit of perfect looks, the days of Chinese young people’s swordsmanship may be numbered. Driven by “common prosperity”.

Investment bank CITIC estimates that the sales revenue of China’s aesthetic medicine market will exceed 330 billion yuan (US$51 billion) in 2020. But analysts warn that if Beijing considers the negative social impact of the industry to be comparable to that of private tutoring, the industry may be hit hard. online game -In recent months, strict supervision has destroyed the market value of the dominant group of industries.

“It is entirely possible that we will see another industry disappear,” said Mark Tanner, managing director of marketing company China Skinny.

The official media has stepped up criticism of the industry because it promotes admiration of appearance and causes more suffering to young people Already consciously About their looks.

In a comment published on Tuesday, the People’s Daily, the party’s mouthpiece, warned that advertisements in the cosmetic industry “have crossed the regulatory bottom line”. The newspaper warned against publishing before and after photos of Chinese celebrities aimed at “attracting consumers,” and called for “immediate standardized supervision of this lucrative emerging industry.”

Tanner, a senior analyst in the Chinese beauty industry, said that many people in China will actively face the blow of cosmetic surgery. “[If] Everyone is not so’perfect’, then you don’t have that much pressure to spend your hard-earned savings and do the same thing,” he said.

Investors’ anxiety has intensified along with health officials’ concerns about a surge in illegal surgeries in unlicensed clinics that have been severely condemned by Beijing for “appearance anxiety” and “young surgical clients”.

Last month, Shanghai and Shenzhen exchanges banned structured debt products related to consumer loans for cosmetic surgery.

Traders looking for the regulator’s next target have set their sights on So-Young, an app listed on the Nasdaq that allows users to evaluate their facial features, make adjustment plans, and find plastic surgeons. In recent weeks, the ratio of So-Young’s short equity to total stock trading volume has soared because its share price has fallen to a historical low and has fallen by more than half this year.

“The market is right to be cautious here,” said Brock Silvers, chief investment officer of Kaiyuan Capital.Silvers says the economic recovery is disappointing expenditures The stocks of companies helping cosmetic surgery companies in China have suffered setbacks this year, and the latest signal from Beijing “does not bode well for the near-term growth prospects.”

The histogram of China's aesthetic medicine market value (billion RMB) shows that China's cosmetic surgery industry is expected to grow rapidly

Officials also expressed unease about the trend of Chinese beauty standards. According to So-Young, the 25-year-old South Korean actress Go Youn-jung is the most popular model for “replication surgery,” which is designed to replicate the characteristics of celebrities.The pre- and post-operative photos of men on social media often show off exquisite features similar to those from South Korea and more and more Chinese idols-this trend is said to have been slammed by the official media Undermine Chinese masculinity.

There are also signs that the public’s awareness of body image sensitivity is increasing. Posts with hashtags such as #DoYouHaveAppearanceAnxiety and #SayNoToAppearanceAnxiety on the social network Weibo have been viewed approximately 490 million times and attracted tens of thousands of responses.

Some young Chinese welcome industry liquidation. “The education industry has been hit hard [by regulators]”, Weibo user Camry wrote in a recent post. “Please take stricter measures against the plastic surgery industry. “

The crackdown by regulatory agencies may undermine the rapid expansion of the cosmetics industry over the years and break expectations for heavy growth. According to online data service provider Qimai Data, since its launch in 2014, So-Young has been downloaded more than 400 million times in China.

Estimates of the value of the Chinese aesthetic medicine market vary, but industry analysts agree that the industry’s growth rate has been widely expected to continue. A report released by Deloitte in January predicted that by 2023, the value of China’s licensed cosmetic surgery business will exceed 310 billion yuan, an increase of more than 50% over 2020 and an increase of more than 10 times over 2012. It is estimated that by 2030, the value of this industry may exceed RMB 1 trillion.

But as expectations for regulatory intervention have grown, investor concerns have spread beyond the open market, postponing private funds that are usually eager to invest in cosmetic surgery startups.

“We have been looking for… to become a potential investment target for plastic surgery or aesthetic medicine companies,” a private equity investor focused on China told the Financial Times. But the investor said that in the face of an imminent regulatory rebound, the fund has decided to “exclude the entire industry from its future portfolio”.

Reported by Hudson Lockett in Hong Kong, Sherry Fei Ju in Beijing and Edward White in Seoul


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