{"id":82036,"date":"2023-11-08T04:46:43","date_gmt":"2023-11-08T09:46:43","guid":{"rendered":"https:\/\/ifintechworld.com\/markets\/chinas-consumers-are-still-holding-back-even-singles-day-sales-arent-helping\/"},"modified":"2023-11-08T04:46:46","modified_gmt":"2023-11-08T09:46:46","slug":"chinas-consumers-are-still-holding-back-even-singles-day-sales-arent-helping","status":"publish","type":"post","link":"https:\/\/ifintechworld.com\/?p=82036","title":{"rendered":"China’s Consumers Are Still Holding Back. Even ‘Singles Day’ Sales Aren’t Helping."},"content":{"rendered":"
\n

Wang Zhiwei, who owns a sportswear and equipment shop in the western Chinese city of Chengdu, said he ran out of money after a lengthy closure during the Covid pandemic, but a bank loan got him back up and operating.<\/p>\n

\u201cWe got rent money, inventory, funds to pay employees for the rest of the year,\u201d he said. \u201cWe\u2019re just missing customers.\u201d<\/p>\n

\n

Chinese consumers are entering a \u201cnew normal\u201d of lower spending, beset by a lack of confidence\u2014in job stability, wage growth, property values, and policy support, according to official data and conversations with businesses and would-be buyers.<\/p>\n

The most recent metrics by the statistics bureau support these concerns, with slowdowns in manufacturing, construction, and the services sector.<\/p>\n

The subdued atmosphere is reflected in this year\u2019s Singles Day shopping festival, now under way. The three-week consumer bonanza produces huge sales numbers for e-commerce leaders such as
\n Alibaba Group Holding
\n (ticker: BABA), and
\n JD.com
\n (JD). But this year, merchants on the platforms slashed prices more than usual to hit transaction volumes in the range of prepandemic levels, sellers told Barron\u2019s<\/em>.<\/p>\n

\u201cWe\u2019re basically offering loss-making discounts,\u201d said Li Yuhua, who sells phone accessories such as screen protectors across most of China\u2019s myriad online platforms.<\/p>\n

When asked if the festival\u2019s deep price cuts might offer a stronger appeal during tough economic times, with many consumers requiring\u2014not simply enjoying\u2014lower prices, Li said: \u201cMaybe. Or maybe they don\u2019t buy during the sales period and they don\u2019t buy at other times as well.\u201d<\/p>\n

Discounts or not, evidence points to an emphasis on essentials, such as food and healthcare, validating Li\u2019s low expectations for her nonessential goods.<\/p>\n

\n PDD Holdings
\n (PDD), parent of e-commerce app Pinduoduo, said last week it is seeing a trend of more \u201crational\u201d shoppers\u2014meaning people are buying staples over discretionary goods more so than in previous years.<\/p>\n

In a report on its early Singles Day results, Pinduoduo cited strong sales in categories like home textiles such as bedding, and in produce, particularly fruit. It also noted relative outperformance in lower-tier cities, where residents generally spend a larger share of their income on essential goods compared with their wealthier big-city peers.<\/p>\n

Pinduoduo isn\u2019t the only company noticing this so-called \u201crational\u201d consumer trend. The term is popping up in business circles and financial media, mainly as a euphemism for the increasingly reluctant shopper. It isn\u2019t reluctance, the term implies, so much as selectivity, a growing sophistication in taste. It doesn\u2019t sound like a term that would capture, say, a worried homeowner watching his core investment dwindle as property prices plummet.<\/p>\n

State-run outlet China Consumer News said on Friday that \u201crational consumption has gradually become mainstream in China.\u201d<\/p>\n

\u201cConsumers are now very cautious when shopping, have a richer understanding of products, and only buy the most worthwhile products,\u201d it explained.<\/p>\n

While it\u2019s logical that as China\u2019s middle class swelled over the last two decades, consumers demanded higher quality goods. But it doesn\u2019t fully explain the sudden emergence of the \u201crational\u201d consumer.<\/p>\n

Last month\u2019s official growth rate for retail sales\u2014a loose gauge of consumption\u2014was 5.5%. Many countries would be happy with that kind of consumption, but China\u2019s retail sales have grown at an average rate of 12.5% over the last 30 years. Moreover, the country was supposed to see a year of particularly high consumption rates following the end of the pandemic and the resumption of economic activity.<\/p>\n

On top of that, the property sector\u2014the place where most Chinese put their savings and investments\u2014remains in crisis, with home values tumbling.<\/p>\n

\u201cHouse prices are now falling versus rising at a double-digit rate before 2021. The negative wealth effect from deflating house prices and slower income\/wage growth are dampening consumer spending,\u201d Arthur Budaghyan, chief China and emerging markets strategist for BCA Research, told Barron\u2019s<\/em>.<\/p>\n

Businesses are in turn feeling the pinch. Quarterly results from global consumer giants showed weak demand across a range of sectors, from
\n Est\u00e9e Lauder
\n to
\n Yum China.<\/span>
\n Research firm Canalys estimates that smartphone sales fell 3% in July to September from a year earlier.<\/p>\n

After nearly a year of analysts predicting that Beijing will step in with some form of direct demand-side stimulus, the government has plowed investment into infrastructure, creating what Beijing-based economist Michael Pettis calls \u201clow quality\u201d growth\u2014which harms the economy in the long run.<\/p>\n

Meanwhile, some policy prescriptions have been futile. Beijing ordered banks to cut loan requirements and turn on the money spigots for firms, but that does no good without buyers on the other end.<\/p>\n

Pettis said that businesses tell him their biggest problem isn\u2019t capital but weak demand. \u201cThis just reinforces the argument that the economy\u2019s main problem is on the demand side,\u201d he said.<\/p>\n

Write to editors@barrons.com<\/p>\n<\/p><\/div>\n<\/div>\n

Read the full article here<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"

Wang Zhiwei, who owns a sportswear and equipment shop in the western Chinese city of Chengdu, said he ran out of money after a lengthy closure during the Covid pandemic, but a bank loan got him back up and operating. \u201cWe got rent money, inventory, funds to pay employees for the rest of the year,\u201d […]<\/p>\n","protected":false},"author":1,"featured_media":82037,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"gallery","meta":{"footnotes":""},"categories":[241],"tags":[83],"class_list":["post-82036","post","type-post","status-publish","format-gallery","has-post-thumbnail","hentry","category-markets","tag-featured","post_format-post-format-gallery"],"yoast_head":"\nChina's Consumers Are Still Holding Back. 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