Consumer spending in China is yet to recover, companies say

BEIJING – China has yet to see a strong rebound in consumer spending, according to major companies.

Consumer spending is recovering unevenly, and it may take until the second half of the year to improve the pace of recovery, said Lei Xu, CEO and executive director of the e-commerce giant. JD.comsaid during the earnings call on Thursday.

He said it will take time for the government’s stimulus measures to reduce revenues and consumer confidence.

On Thursday, JD reported a 7.1% rise in fourth-quarter net income to 295.45 billion yuan ($42.8 billion). That was lower than expectations of 296.2 billion yuan, according to Reuters.

JD shares fell more than 11% in Hong Kong trading on Friday. The company’s US-listed shares closed down more than 11% overnight.

Grow Investment Group Chief Investment Officer William Ma told CNBC’s “Squawk Box Asia” on Friday that many investors were disappointed by JD’s 2.7% net margin.

Ma expects margins to fall to around 1% due to competition in China’s consumer market. He noted that JD did not indicate whether it would end subsidies on Thursday after launching a 10 billion yuan subsidy program earlier this year.

Official data released this week showed that consumer prices in China rose 1% in February from a year earlier.

Zhiwei Zhang, president of Pinpoint Asset Management, said in a note that the deeper-than-expected weakness in the consumer price index “casts doubt on the strength of the recovery in domestic domestic demand.” . “It surprises me because it contradicts other data that shows the recovery in domestic demand is very strong.”

The Covid-19 outbreak and housing slump have weighed on China’s economy and hit consumer and business sentiment hard in the past year.

Beijing ended testing for Covid late last year. Many consumers rushed to shop and travel during the Lunar New Year in late January.

But JD is not alone. Comments Ali Baba Last month, CEO Daniel Zhang highlighted the recovery in China’s consumer market.

Online sales were weak until early February this year, Zhang said at the quarterly earnings conference call in February.

However, he said some categories started to recover last month. Companies want to work harder to offset losses over the past three years, Zhang said.

Alibaba shares fell more than 3% in Hong Kong on Friday.

such as non-Chinese companies Adidas It is also cautious about the near-term outlook for China’s consumer spending.

CEO Björn Gulden told analysts on earnings this week that he does not expect the Chinese market to recover this year and make a big contribution to sales.

In the medium term, he expects China to once again become the company’s growth engine.

Adidas’ sales in Greater China fell 36% to 3.18 billion euros ($3.37 billion) last year on a currency-neutral basis.

On Sunday, China announced a relatively conservative economic growth target of around 5%. After that, officials said that increasing consumption is the priority and they expect this to be the driver of overall growth. But they noted that the recovery in the sector is facing limitations.

Official retail sales data for January and February will be released on Wednesday.

Chinese consumer e-commerce Meituan And Pinduo-duo they have not yet said when they will announce their latest quarter results.