May 26 (Reuters) – Two months after the harsh COVID-19 lockdowns that choked global supply chains, China’s economy is staggering back on its feet, but companies from retailers to chipmakers are warning of slow sales as consumers spending in the country hit the brakes.
Auto sales in the world’s largest auto market have slowed dramatically, gamers are buying fewer consoles and people are unwilling to replace their existing smartphones, laptops and TVs as the ongoing COVID shaves spending power and leaves more people unemployed.
“The current lockdowns in China … are having an impact on supply and demand,” said Colette Kress, chief financial officer at US chipmaker Nvidia (NVDA.O), which on Thursday predicted a $400 million drop in gaming sales from China’s strict coronavirus restrictions forecast . Continue reading
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“They have very big cities that are on full lockdown and are really focused on other important things for the citizens there. So that affects our demand.”
In line with China’s zero-COVID approach, Beijing, home to 22 million people, has restricted workplace attendance. Shanghai, the country’s commercial hub, and numerous other megacities are also bound by partial lockdowns or other restrictions. Continue reading
Retail sales fell 11.1% year-on-year in April after falling 3.5% in March. UBS and JP Morgan earlier this week cut their full-year GDP growth forecasts for China to 3% and 3.7%, respectively.
Premier Li Keqiang said Wednesday China will strive to achieve decent economic growth in the second quarter and curb rising unemployment. The cabinet also announced broader rebates on tax credits and deferred Social Security payments and loan repayments to support the world’s second-largest economy.
E-commerce group JD.com Inc (9618.HK) said last week the COVID-19 situation was very different from China’s before, when outbreaks were limited to smaller areas and boosted online shopping. Continue reading
“In April, the order cancellation rate was significantly higher than last year due to logistical disruptions. There was an improvement in May, but it was still higher than a year earlier,” said Xu Lei, CEO of JD.com.
“Consumers are facing loss of income and loss of confidence, and overall consumption is sluggish.”
AUTO, TECH, LUXURY SLOW DOWN
Auto sales in China have faltered after years of rapid growth, and global automakers in particular have taken a hard hit.
Tesla sales in China — where the company has struggled to bring production back to pre-pandemic levels — nearly ground to a halt last month. Continue reading
And while retail auto sales rose 34% in the first three weeks of May from the same period in April, they were 16% down year-on-year, the China Passenger Car Association said on Wednesday, calling for more government support. Continue reading
The industry body said a drop in income related to COVID-19 has depressed sales, even in parts of China that are not in lockdown.
Lenovo, the world’s largest PC maker, on Thursday reported its slowest quarterly revenue growth in seven quarters as demand for its PCs eased after two years of pandemic-driven demand. Continue reading
China’s PC shipments, including shipments of desktops, notebooks and workstations, fell 1% in the January-March period, ending the growth streak of the past seven quarters, market data company Canalys said on Thursday.
Tencent (0700.HK), China’s most valuable company, posted its worst quarterly performance since its IPO in 2004, blaming cuts in ad spend by consumers, e-commerce and travel companies.
Apple supplier Foxconn (2317.TW) warned that smartphone demand is falling in China and the country, which has only recently been a mecca for luxury goods makers like LVMH (LVMH.PA), is faltering in luxury goods sales be.
“Even if China emerges from isolation, the recovery will not be as quick and immediate as we have seen in Europe and the United States,” Johann Rupert, chairman of Swiss firm Richemont, said last week.
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Reporting by Josh Ye in Hong Kong, Jane Lee in San Francisco, Zoey Zhang in Shanghai; Writing by Sayantani Ghosh Editing by Shri Navaratnam
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