‘We welcome more Indian enterprises to leverage platforms such as the China International Import Expo to bring more premium Indian products to the Chinese market, transforming trade deficits into cooperative surpluses.’
| Photo Credit: Reuters

China’s exports to the United States have fallen for six months straight. File
| Photo Credit: Reuters

Women walk out from a fashion boutique near a display promoting the upcoming China popular e-commerce sales, the “Singles’ Day” global online shopping festival, at a shopping mall in Beijing, Monday, Nov. 4, 2024.
| Photo Credit: AP

Merchants and consumers alike found the Singles’ Day shopping festival Monday less shiny than in years past as e-commerce firms look abroad for growth.

The annual event named by the numeric form of its Nov. 11 date was started by e-commerce platform Alibaba, which offered attractive discounts to entice shoppers to spend big. The extravaganza has since expanded to other platforms like JD.com and Pinduoduo in China as well as abroad.

While Singles’ Day was previously a one-day event, shopping platforms in China now kickstart the festival weeks ahead to drum up sales volume. The festival has also traditionally been regarded as a barometer of consumer sentiment.

But amid China’s lagging domestic economy, dragged down by a real estate crisis and deflationary pressures, consumers no longer go all out on purchases during the shopping extravaganza.

“I only spent a few hundred yuan on daily necessities,” said Wang Haihua, who owns a fitness center in Beijing.

‘Prices not cheaper, all tricks’

Wang said that the prices offered on e-commerce platforms during Singles’ Day are not necessarily cheaper than usual.

“They’re all tricks and we’ve seen through it over the years,” she said.

Zhang Jiewei, a 34-year-old who runs a barber shop in Xi’an city, echoed Wang’s sentiments, saying that he no longer trust Singles’ Day promotions as some merchant tend to raise the usual price of a product before offering a discount, giving consumers the illusion they are getting a deal.

“I used to buy a lot two or three years ago and I even purchased a mobile phone (during Singles’ Day),” he said.

“I stopped doing that following the pandemic because of less income. I am not going to buy anything this year,” Zhang added.

Some experts say that Beijing’s recent stimulus measures have had little impact to boost consumer confidence.

“People are not interested in spending and are cutting back on big-ticket items,” said Shaun Rein, founder and managing director of China Market Research Group in Shanghai. “Since October 2022, the weak economy means that everything has been on discount year-round, 11.11 is not going to bring in more discounts that the month before.” Rein said he expects low growth for the Singles’ Day shopping festival as consumers tighten their spending in anticipation of difficult economic times ahead.

Categories such as sportswear and fitness, however, have been doing well as customers “trade down a Gucci bag for Lululemon sportswear,” he said.

Platforms like JD.com and Alibaba, which operates e-commerce platforms Taobao and Tmall, previously used to publish the value of transactions made during the festival, but have since stopped revealing the total figure. While yearly growth used to be in the double digits, estimates of recent figures have dwindled to low single-digit growth.

Syntun, a data provider, estimated that last year’s gross merchandising volume sales across major e-commerce platforms grew just 2% to 1.14 trillion yuan ($156.40 billion), a far cry from double-digit growth before COVID-19.

High advertising fees: merchants

Merchants who typically take part in the Singles’ Day shopping festivals say the costs of participation no longer pay off, amid high advertising fees and unsatisfactory sales.

Zhao Gao, who owns a garment factory in eastern Zhejiang province, said that after paying advertising costs to e-commerce platforms he would only break even after sales.

“The platforms have so many rules for promotions and customers have become more skeptical,” he said. “As a merchant, I no longer participate in the Singles’ Day promotions.”

Another merchant, Du Baonian who runs a food company processing mutton in Inner Mongolia, said that overall sales in the past year have fallen 15% as consumers downgraded and reduced consumption.

Du said that while he still takes part in the Singles’ Day promotions, the higher expenses do not typically generate returns because of sluggish sales.

“We are seeing shrinking revenue, but advertisement on the platform can help us to maintain our leading sales position,” he said, adding that he was considering advertising on more e-commerce platforms to target more consumers.

Meanwhile, e-commerce platforms grappling with a slowing domestic market have also turned to overseas markets to seek new growth, offering promotions like global free shipping and allowing merchants to sell globally with ease.

Alibaba, for example, said in a blog post on its Alizila site that some 70,000 merchants saw sales double with global free shipping. In markets like Singapore and Hong Kong, new customers also doubled, Alibaba said.

Chinese Finance Minister Lan Fo’an. File
| Photo Credit: AP

“The Chinese government is looking at additional ways to boost the economy,” Finance Minister Lan Fo’an said on Saturday (October 12, 2024,) but he stopped short of unveiling a major new stimulus plan that analysts and stock investors were hoping for.

Mr. Lan’s remarks left the door open for such a plan in the future but he did not divulge what is under consideration. “There are other policy tools that are being discussed that are still in the pipeline,” he said at a news conference, adding that there is “ample room” in the government budget to raise debt and increase the deficit.

China’s economy has remained sluggish despite the lifting of COVID-19 restrictions at the end of 2022. Companies have cut back on hiring and wages and a prolonged downturn in the property market has deflated consumer confidence, curbing spending.

The government has raised pensions and offered subsidies to people who trade in old cars or appliances for new ones, but such steps have failed to jolt economic growth.

Chinese stock markets rallied after the central bank and other government agencies announced steps at the end of September to revive the property sector and prop up financial markets.

But the rally has since cooled amid concern about whether the moves were enough to generate a sustainable economic recovery. Investors were hoping Mr. Lan would announce a stimulus package of up to 2 trillion yuan ($280 million).

The Finance Minister instead said the government would roll out a package of incremental measures to speed up implementation of its existing policies.

They include increasing scholarships for students, issuing bonds to help major banks replenish their capital and providing more support to highly indebted local governments, some of which have had to curtail public services.

A woman sits on the Bund near Huangpu river as she looks on the financial district of Pudong in Shanghai, China. File photo for representational purpose only.
| Photo Credit: REUTERS

Shares in China slumped on Wednesday (October 9, 2024), as details of economic stimulus plans from officials in Beijing failed to live up to investors’ expectations, while other markets in Asia rose.

Stocks in Hong Kong fluctuated between gains and losses, with the Hang Seng Index falling by 2.4 per cent to 20,418.61. This decline followed a plunge of over 9 per cent on Tuesday as traders sold off shares after recent rallies.

“A lack of new stimulus has been the cause of disappointment, with many market participants hoping that its fiscal policies will follow in the footstep of the financial bazooka’ delivered in late-September, but there was clearly a step-down in yesterday’s announcement,” Yeap Jun Rong of IG said in a commentary.

The Shanghai Composite lost 5.1 per cent to 3,311.02 after it gained 4.6 per cent Tuesday, reopening from a national holiday. The CSI300 Index, which tracks the top 300 stocks traded in the Shanghai and Shenzhen markets, gave up 5.6 per cent.

“Let’s call it what it is — an abject failure — as Chinese shares opened sharply lower, sending a clear signal that the market is no longer buying half-hearted promises,” Stephen Innes of SPI Asset Management said in a commentary.

In Tokyo, the Nikkei 225 index advanced 0.6 per cent to 39,178.70. Shares of the Japanese retailer Seven & Holdings soared more than 10 per cent in early trading after media reported that Canadian convenience store operator Alimentation Couche-Tard had increased its takeover bid by about 20 per cent.

Japan’s Parliament was due to be dissolved on Wednesday (October 9, 2024) to pave the way for a general election. Prime Minister Shigeru Ishiba is seeking to consolidate support after taking office last week, amid signs the Liberal Democrats’ ruling coalition remains shaky after Ishiba’s predecessor, Fumio Kishida, stepped down following a slew of scandals among the party’s lawmakers.

Australia’s S&P/ASX 200 gained 0.2 per cent at 8,189.70. South Korea’s markets were closed for a public holiday.

On Tuesday (October 8, 2024) the S&P 500 rallied 1 per cent to 5,751.13. The Dow Jones Industrial Average rose 0.3 per cent to 42,080.37, while the Nasdaq composite led the way with a 1.4 per cent rally to 18,182.92.

The 10-year Treasury yield edged down to 4.02 from 4.03 per cent late Monday. The two-year yield, which more closely tracks expectations for what the Federal Reserve will do with overnight interest rates, slipped to 3.96 per cent from 3.99 per cent, late Monday, though it’s still near its highest level since August.

When Treasurys are paying higher yields, investors generally become less willing to pay very high prices for stocks and other investments. And Treasury yields had been storming higher over the last week following a suite of reports showing the US economy remains healthier than expected.

Such reports, including one last week showing stronger hiring by US employers than forecast, raise hopes that the economy will avoid a recession. But they also force traders to ratchet back expectations for how much the Federal Reserve will cut interest rates by, now that it has widened its focus to include keeping the economy humming instead of just fighting high inflation.

Oil prices extended gains as Hezbollah fired another barrage of rockets into Israel on Tuesday which heightening concerns over escalating tensions in the Middle East. Benchmark US crude oil added 24 cents to USD 73.81 per barrel. Brent crude, the international standard, rose 12 cents to USD 77.30 per barrel.

In currency trading, the US dollar edged up to 148.21 Japanese Yen from 148.20 Yen. The Euro fell from USD 1.0983 to USD 1.0970.

In this photo released on July 18, 2024, by Xinhua News Agency Chinese President Xi Jinping speaks at the third plenary session of the 20th Communist Party of China (CPC) Central Committee held from July 15 to 18 in Beijing. China’s ruling Communist Party wrapped up a top-level meeting by endorsing policies aimed at advancing the country’s technological power and fortifying its national security.
| Photo Credit: AP

Beijing’s leaders vowed on July 18 to resolve “risks” plaguing China’s economy, but were yet to offer any concrete steps to pull the country out of its financial woes.

The world’s second-largest economy is grappling with a property debt crisis, weakening consumption, and an ageing population.

All eyes were on how this week’s Third Plenum meeting of the Communist Party in Beijing, attended by President Xi Jinping, might tackle that deepening economic malaise.

But few new policies were announced as the meeting wrapped up Thursday.

State news agency Xinhua said they had agreed to “prevent and resolve risks in key areas such as real estate, (and) local government debt”.

They also vowed to “actively expand domestic demand”, state media reported, after data this week showed retail sales — a key gauge of consumption — rose just 2% in June.

Gary Ng, a senior economist at Natixis, said the readout offered “nothing out of expectation as it just confirms existing policies.”

‘Market failures’

But Hoo Tiang Boon at Nanyang Technological University in Singapore told AFP the statement “acknowledges certain risks and obstacles to the Chinese economy”.

“It’s a sign that Beijing recognises the problems, but I’m not sure if they know what are the effective measures to address them,” he said.

The Third Plenum has for decades been an occasion for the party’s top leadership to unveil major economic policy shifts.

In 1978, then-leader Deng Xiaoping used the meeting to announce market reforms that would put China on the path to dazzling economic growth by opening it to the world.

And more recently following the closed-door meeting in 2013, the leadership pledged to give the free market a “decisive” role in resource allocation, as well as other sweeping changes to economic and social policy.

Echoing past plena, top officials promised Thursday to “give fuller play to the role of market mechanisms”.

But they also said they would “make up for market failures” and “smooth the circulation of the national economy”.

‘Positive signals’, but few specifics

Lynn Song, ING’s Chief Economist for Greater China, told AFP the readout offered some “positive signals”.

But, he said, the meeting was “not a platform for pushing specific new stimulus measures”.

“Those who were looking for new signals on the property market will likely be disappointed,” Song said.

“While real estate was mentioned as one of the three key risks China prioritises resolving, there was no further mention of expanding affordable housing nor further specifics on efforts to stabilise the property market,” he pointed out.

The meeting comes just days after China posted official statistics showing the economy grew by just 4.7% in the second quarter of the year.

It represented the slowest rate of expansion since early 2023, when China was emerging from a crippling zero-COVID policy that strangled growth.

Analysts polled by Bloomberg had expected 5.1%.

Beijing has said it is aiming for 5% growth this year — enviable for many Western countries but a far cry from the double-digit expansion that for years drove the Chinese economy.

The economic uncertainty is also fuelling a vicious cycle that has kept consumption stubbornly low.

Among the most urgent issues facing the economy is the beleaguered property sector, which long served as a key engine for growth but is now mired in debt, with several top firms facing liquidation.

With the country facing those headwinds, this week’s meeting resolved to “strengthen guidance of public opinion and effectively prevent and resolve ideological risks”, according to state media.

Officials also formally removed ex-foreign minister Qin Gang from the ruling Communist Party’s highest decision-making body, and “confirmed” the party’s move to expel former defence minister Li Shangfu.

Both officials disappeared from the public eye last year after just a few months on the job.

 The economic slowdown has wiped almost $200 billion off the luxury sector’s value in recent months.
| Photo Credit: Reuters

The prolonged downturn in luxury spending in China is unlikely to reverse this year, analysts and executives warn, deepening a rout which has wiped almost $200 billion off the sector’s value in recent months.

Profit warnings from Burberry and Hugo Boss and a 27% drop in quarterly sales in China, Macau and Hong Kong from Richemont this week have reinforced concerns about weakness in China, where middle-class shoppers have cut spending on big-ticket items.

According to consultancy Bain, China accounted for 16% of 362 billion euros ($393.8 billion) of global luxury spending last year.

But data on Monday showed China grew much more slowly than expected in the last quarter as a protracted property slump and job insecurity hampered a fragile recovery.

Expectations for the second-quarter earnings season were already low in the luxury sector, but the slew of bleak reports have dashed hopes of a recovery in the second half.

“China is in the repair shop,” said Bernstein analysts after a recent visit to the country. Analysts said that Cartier owner Richemont’s quarterly sales report on Tuesday had confirmed their fears about lacklustre demand in mainland China.

According to Bain, which in June predicted this year would be the weakest for the global luxury market since the height of the pandemic, China’s richest people are avoiding flaunting their wealth in favour of more discreet fashion.

Jitters about China have spooked investors, which has wiped 180 billion euros off the sector since March.

Chinese security monitors a checkpoint as the Communist Party’s Central Committee holds its third plenum meeting in Beijing, China, on July 15, 2024.
| Photo Credit: AP

China posted lower than expected growth in the second quarter on July 15, with all eyes on how top officials gathering for a key meeting in Beijing might seek to tackle the country’s deepening economic malaise.

The world’s second-largest economy is grappling with a real estate debt crisis, weakening consumption, and an ageing population.

Trade tensions with the United States and the European Union, which have sought to limit Beijing’s access to sensitive technology as well as putting up tariffs to protect their markets from cheap, subsidised Chinese goods, are also dragging growth down.

And on Monday, official statistics showed the economy grew by only 4.7% in the second quarter of the year. It represents the slowest rate of expansion since early 2023, when China was emerging from a crippling zero-COVID policy that strangled growth. Analysts polled by Bloomberg had expected 5.1%.

Retail sales — a key gauge of consumption — rose just two percent in June, down from 3.7% growth in May. “The external environment is intertwined and complex,” the National Bureau of Statistics said.

“Domestic effective demand remains insufficient and the foundation for sound economic recovery and growth still needs to be strengthened,” it added.

Party is planning “major” reforms: Xi

The figures came the same day that China’s ruling Communist Party kicked off a key meeting led by President Xi Jinping focussed on the economy, known as the ‘Third Plenum.’

The Chinese leader delivered a “work report” at the opening of the meeting, state news agency Xinhua said. He also “expounded on a draft decision of the CPC Central Committee on further comprehensively deepening reform and advancing Chinese modernisation”, it added. Beijing has offered few hints about what might be on the table.

Mr. Xi has said the party is planning “major” reforms. Analysts are hoping those pledges will result in badly needed support for the economy. “The four-day meeting of the country’s top governing body couldn’t come soon enough,” Harry Murphy Cruise, an economist at Moody’s Analytics, said in a note. But, he said, “while the case for reform is high, it’s unlikely to be a particularly exciting affair”.

“Instead, we expect a modest policy tweak that expands high-tech manufacturing and delivers a sprinkling of support to housing and households,” he added.

Meeting intended to long-term ideas and structural reforms

The People’s Daily, the Communist Party’s official newspaper, appeared to confirm lower expectations when it warned last week that “reform is not about changing direction and transformation is not about changing colour”.

Ting Lu, chief China economist at Nomura, said the meeting was “intended to generate and discuss big, long-term ideas and structural reforms instead of making short-term policy adjustments”.

The Third Plenum has previously been an occasion for the party’s top leadership to unveil major economic policy shifts.

In 1978, then-leader Deng Xiaoping used the meeting to announce market reforms that would put China on the path to dazzling economic growth by opening it to the world.

And more recently following the closed-door meeting in 2013, the leadership pledged to give the free market a “decisive” role in resource allocation, as well as other sweeping changes to economic and social policy.

Beijing aims for five percent growth this year

Beijing has said it is aiming for five percent growth this year — enviable for many Western countries but a far cry from the double-digit expansion that for years drove the Chinese economy.

But the economic uncertainty is also fuelling a vicious cycle that has kept consumption stubbornly low.

Among the most urgent issues facing the economy is the beleaguered property sector, which long served as a key engine for growth but is now mired in debt, with several top firms facing liquidation.

Authorities have moved in recent months to ease pressure on developers and restore confidence, including by encouraging local governments to buy up unsold homes.

Analysts say much more is required for a full rebound, as the country’s economy has yet to bounce back more than 18 months after damaging COVID-19 restrictions ended.

EV shift:China’s market has stagnated due to the shift to EVs.
| Photo Credit: AFP

Chinese auto sales slumped in June as the domestic economy remained sluggish, but buoyant exports offset the decline at home, an industry association said Wednesday.

Sales in China dropped 7.4 per cent compared to a year earlier to 1.8 million cars, while exports rose 29 per cent to 400,000 units, the China Association of Automobile Manufacturers said in a monthly report.

In the first six months of the year, exports rose 31.5 per cent while domestic sales edged up 1.6 per cent. The surge in exports comes at a time of growing concern in Europe and the United States that inexpensive China-made cars could overwhelm established automakers in the West.

While much of the concern has been focused on China’s flashy and moderately priced electric cars, export growth has been concentrated mainly in gasoline-powered vehicles. They climbed 36 per cent in the first half of the year and accounted for 78 per cent of vehicle exports. Chinese EV exports were down 2.3 per cent, while hybrids jumped 180 per cent from a smaller base.

The exports have helped make up for weaker sales of gasoline vehicles in China as the overall market has stagnated and buyers have shifted to electric vehicles and hybrids.

Russia is by far the largest and a still rapidly growing export market, where Chinese makers have filled a void left by the departure of other automakers after the Russian invasion of Ukraine. Other sizeable markets include Brazil and Mexico in Latin America, the United Arab Emirates and Saudi Arabia in the Mideast and Belgium and the UK in Europe.

The European Union imposed provisional duties on Chinese electric vehicles last week, alleging that government subsidies give automakers in China an unfair advantage.

Chinese makers are moving production overseas. BYD, the country’s largest EV maker, opened a plant in Thailand last week and plans to build factories in Brazil, Hungary and Turkey.

The sales drop in China was the second monthly decline in a row. Separate figures tabulated by the China Passenger Car Association show three straight months of falling sales. A severe real estate slump has dampened economic growth and depressed consumer confidence.

Cautious approach: Banks are reluctant to lend to housing projects fearing more bad loans. File
| Photo Credit: Reuters

When China’s local governments began compiling a “whitelist” of housing projects for loans earlier this year, troubled developers hoped it would open a spigot of credit for a sector that remains a major stumbling block to a broad economic revival.

Four months later, new funding is only coming by the drip, reflecting the deep-seated caution about the outlook for China’s residential property market, according to Reuters interviews with bankers and developers.

Banks have been reluctant to heed Beijing’s repeated nudges to bolster credit to the embattled sector given the risks of more bad loans, further undermining confidence in the crisis-hit property market seen as crucial to shoring up a shaky economy.

New loans were only approved since late March, according to the sources, which surprised companies and investors who had expected fresh lending for developers at the start of the ‘whitelist’ programme months earlier.

The main hurdle to granting more new bank loans is the current weak property market conditions, said Lawrence Lu, managing director at S&P Global Ratings.

“Developers need to have a project in place to get funding … the issue now is whether the project can generate sufficient cash flow to repay the debt,” he said.

At least six defaulted private developers received bank approvals for new loans for “whitelist” projects since late March, according to one company statement, senior executives of two developers and two other people with knowledge of the program.

Those new loans were granted for fewer than a handful of projects and lending received so far was equivalent to hundreds of thousands of dollars per project, three of the people told Reuters.

That’s just a drop in the ocean given the vast stock of unfinished housing—a Reuters report in March estimated that the “whitelist” programme covers projects that need fresh financing of 1.5 trillion yuan.

The loans are only granted depending on the progress of construction, the three sources said, adding the volume of approval was “insignificant” given the huge number of uncompleted homes.

Frozen projects

The slow roll-out of the “whitelist” lending reflects the challenge facing Beijing which has pushed banks to speed up approvals of new loans to cash-starved private developers to complete their projects.

Under the “whitelist” mechanism launched in January, local governments nominate projects and state-owned as well as commercial banks are encouraged to provide lending. By March-end, banks had approved the equivalent of $72 billion in loans for 2,100 housing projects, state media reported.

Developers and bankers said many of these approvals restarted existing loans, rather than providing new credit.

Estimates vary widely, but analysts agree there are tens of millions of uncompleted apartments across China after a building boom turned to bust with the failure of developers. There is no public data available on the scale and terms of lending under the “whitelist” policy.

‘A bad deal’?

One of the six private developers whose projects got bank approval said it had decided to refuse the help.

“We think it’s a bad deal because financing incurs interest,” a senior executive at the developer told Reuters. “Once we use the ‘whitelist’ loans we have to complete the construction. However, we’re not able to sell all of the units under this bad market so it’s only increasing costs for us.”

Some bankers said they would continue to push back on the “whitelist” directive by negotiating with officials and explaining the shortcomings in projects.