Major companies claim that China has not yet recovered properly when it comes to consumer spending in the giant country. Consumer spending is recovering unevenly, which means the process could continue into the second half of the year, said Lei Xu, CEO and senior manager of e-commerce giant JD.com.
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. According to him, it will take time for the government’s incentive measures to be reflected in income and consumer confidence.
JD yesterday reported a 7.1 percent rise in fourth-quarter net revenue to 295.45 billion yuan ($42.8 billion) — below expectations for 296.2 billion yuan. The company’s stock fell today by more than 11% in Hong Kong trading, while the one traded in the US also managed to fall by more than 13%.
Many investors were disappointed by JD’s net margin of 2.7 percent of revenue, said William Ma, chief investment officer of Grow Investment Group. Ma predicts that profits may fall to around 1% because of competition in China’s consumer market. He noted that JD had not indicated it would end the subsidies – having launched a 10 billion yuan subsidy program earlier this year.
Official data published this week showed that consumer prices in China rose by 1% in February compared to last year. The greater-than-expected weakness in the CPI “casts doubt on the strength of the domestic demand recovery in the household sector,” said Jiwei Zhang, president, Pinpoint Asset Management. “It’s puzzling to me because it contradicts other data that indicate the strong recovery of local demand.”
The control of the Corona and the downturn in real estate brought down the Chinese economy last year, weighing heavily on consumer and business sentiment. Beijing ended its Corona restrictions at the end of last year and many consumers rushed to go on shopping trips and travel during the Lunar New Year at the end of January.
But JD is not alone. Alibaba CEO’s comments
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Daniel Zhang last month also pointed to a relatively lukewarm recovery of the consumer market in China. Online sales remained weak this year through early February, Zhang said. However, he said some categories began to show recovery last month as businesses show determination to recover from the losses of the past three years, he added.
On the other hand, non-Chinese companies like Adidas
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They are also cautious about the near-term outlook for Chinese consumer spending. CEO Bjorn Golden told analysts that he does not expect the Chinese market to wake up too much this year and make a significant contribution to sales. In the medium term, however, he expects China to be a growth engine for the company again. Adidas’ sales in China fell 36% last year on a Neutral currency to 3.18 billion euros ($3.37 billion).
On Sunday, China announced a relatively conservative economic growth target of about 5% per year. Officials said afterward that boosting consumption was a priority and that they expected it to be a driver of overall growth. But they noted that recovery in the sector continues to face obstacles. Official data on retail sales for January and February are expected to be published later this week.
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