A JD.com courier drives past the Zaha Hadid-designed Galaxy Soho complex in Beijing, China, on Saturday, February 18, 2023.
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BEIJING — According to major companies, China has yet to see a strong rebound in consumer spending.
Consumer spending is recovering in an unbalanced fashion, meaning it will likely take until the second half of the year for the recovery to accelerate, says Lei Xu, CEO and executive director of e-commerce giant JD. comsaid in an earnings call on Thursday.
He said it will take some time for the government’s stimulus measures to show up in consumer income and confidence.
JD on Thursday reported a 7.1% increase in fourth-quarter net sales to 295.45 billion yuan ($42.8 billion). That is below expectations for 296.2 billion yuan, according to Reuters.
Shares of JD fell more than 11% in Hong Kong trading on Friday. The company’s US-listed shares closed more than 11% lower overnight.
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JD.com stock performance over the past 12 months
Many investors were disappointed with JD’s net margin of 2.7%, William Ma, chief investment officer of Grow Investment Group, said on CNBC’s “Squawk Box Asia” Friday.
Ma expects margins to drop to around 1% due to competition in the Chinese consumer market. He pointed out that JD did not indicate on Thursday that it would end the subsidies — having launched a 10 billion yuan subsidy program earlier this year.
Official data released this week shows consumer prices in China rose a modest 1% in February compared to a year ago.
The greater-than-expected weakness in the consumer price index “casts doubts on the strength of the recovery in domestic demand in the household sector,” Zhiwei Zhang, president of Pinpoint Asset Management, said in a note. “It’s puzzling to me because it contradicts other data that suggests the recovery in domestic demand is quite strong.”
Covid controls and a real estate slump dragged China’s economy down last year, weighing heavily on consumer and business confidence.
Beijing ended Covid controls late last year. Many consumers rushed to shop and travel during the Lunar New Year in late January.
But JD is not alone. Comments from alibaba CEO Daniel Zhang also pointed to a lukewarm recovery in the Chinese consumer market last month.
Online sales remained weak until early February this year, Zhang said during a quarterly call in February.
However, he said some categories started to see a recovery last month. Companies want to work hard to recover from the losses of the past three years, Zhang said.
Alibaba shares traded more than 3% lower in Hong Kong on Friday.
Adidas’ outlook for China
Non-Chinese companies such as Adidas are also cautious about the near-term outlook for Chinese consumer spending.
In the medium term, however, he expects China to be a growth engine for the company again.
Adidas’ sales in Greater China fell 36% last year on a currency-neutral basis to 3.18 billion euros ($3.37 billion).
Learn more about China from CNBC Pro
On Sunday, China announced a relatively conservative economic growth target of around 5% for the year. Officials went on to say boosting consumption was a priority and they expect it to be a driver of overall growth. But they noted that the recovery in the sector still faces limitations.
Official retail sales data for January and February will be released on Wednesday.
Chinese consumer e-commerce Meituan And pinduo have yet to say when they will release final quarter results.
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