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China's retail sales grew at a faster-than-expected pace in May while industrial output missed forecasts but remained relatively robust, painting a mixed picture of the world's second-largest economy.
Total retail sales of consumer goods, a gauge of household spending, were up 3.7%, according to government data published on June 17. This was better than April's 2.3% growth and beat the forecasts of several financial institutions and analysts. Still, it was the third lowest reading since last August and may not allay longer-term concerns over tepid consumption.
Liu Aihua, a spokeswoman for the National Bureau of Statistics (NBS), credited Labor Day holidays, trade-in programs meant to encourage consumers to replace old appliances and the <a title="" href="https://asia.nikkei.com/Economy/China-online-sales-event-starts-strong-but-shows-signs-of-slowing" target="_blank" rel="noopener">"618" shopping festival</a> as reasons for the improved sales.
All subcategories of retail sales rose year on year apart from jewelry, automobiles, and building and decoration materials. The value of car sales fell 4.4% on the year, down for the third consecutive month.
Aided by strong exports, industrial production grew 5.6% from a year earlier, but this was down from a 6.7% rise last month and a few ticks below a consensus forecast of 6.0% in a Reuters poll.
Taken together, the retail and industrial data offered at least some hope for narrowing a mismatch between China's consumer spending and the capacity of its manufacturing sector, which has <a title="" href="https://asia.nikkei.com/Spotlight/Asia-Insight/China-s-underutilized-factories-fan-export-dump-fears-in-U.S.-and-Europe" target="_blank" rel="noopener">worsened trade tensions</a> in recent months. The US and Europe—fearing that China's government-subsidized production of green products like electric vehicles will flood their markets with exports Chinese consumers are unwilling or unable to buy—have moved to <a title="" href="https://asia.nikkei.com/Economy/Trade-war/EU-slaps-additional-duties-of-up-to-38-on-Chinese-EVs" target="_blank" rel="noopener">raise tariffs</a>.
But Oxford Economics called the May data "noisy" and said the statistics showed "no clear growth driver."
"Retail sales beat market (and our) expectations in May, but as was the case in previous months, sequential gains were focused on low-value discretionary products, reflecting still-poor consumer sentiment and spending capacities," the research firm said in a note.
Meanwhile, China's seemingly inexorable real estate crisis continued to weigh on investment in fixed assets. The overall investment figure expanded 4.0% in the first five months of the year, below the forecast 4.2%, while property investment dropped 10.1% during the period.
In mid-May, China's central bank rolled out a series of measures aimed at breaking out of the prolonged property slump. This included the establishment of a new lending program worth RMB 300 billion (USD 41.4 billion) to encourage local governments to <a href="https://asia.nikkei.com/Business/Markets/China-debt-crunch/China-unveils-41bn-lending-program-to-digest-unsold-properties">"digest" excess housing supply</a>. But Monday's data suggests the move has had a limited impact so far.
Prices of new homes in first-tier cities dropped 0.7% compared to the previous month and were down 3.2% on the year, extending the declines in April. A similar trend was recorded in smaller cities.
"It will take some time for the policy effects to be released, and the real estate market is still in the process of adjustment," said Liu, the NBS spokeswoman. She warned of existing challenges facing the economy, saying that "the current external environment is complex and severe, and domestic effective demand is still insufficient."
Oxford Economics argued that "more forceful property easing measures, rather than the slow-drip of incremental measures seen last year, are now necessary and likely if authorities were to successfully engineer a desired shallow house price correction path."
Other economic signals for last month have been uneven. <a href="https://asia.nikkei.com/Economy/China-factory-activity-contracts-in-May-breaking-short-growth-spurt">China's manufacturing activity</a> contracted in May after two months of expansion. While the resilience of overseas markets helped drive <a href="https://asia.nikkei.com/Economy/Trade/China-exports-jump-7.6-in-May-as-trade-curbs-loom">exports</a> up by 7.6% on the year, growth in imports slowed to 1.8% while the consumer price index stayed low at 0.3%. The jobless rate stabilized at 5.0% in May, unchanged from April.
The Chinese government is targeting economic growth of around 5% this year, but some economists forecast a slower pace due to the property woes and weak consumption.
Despite the better-than-expected May retail sales, Nomura said in a note that factors such as soft CPI inflation, tepid credit demand in the household sector, negative auto sales growth, and lackluster leisure services during this month's Dragon Boat Festival "all point to a lack of consumer confidence."
"Overall growth momentum has remained sluggish, as the property fallout drags on and as the export sector faces increasing headwinds from trade disputes. The weak activity data in April-May lend support to our below-consensus GDP growth forecast of 4.6% [year on year] in Q2," Nomura said, after the first quarter's 5.3% expansion.
"While we view the policy pivot in the property sector as real, ensuring housing delivery is a daunting task and markets need to exercise patience while awaiting more significant measures," Nomura added.
On June 17, China's central bank kept the one-year medium-term lending facility (MLF) rate, at which it lends to financial institutions to boost liquidity, unchanged at 2.5%.
This article first appeared on <a tabindex="0" href="https://asia.nikkei.com/Economy/China-retail-sales-beat-expectations-as-industrial-output-loses-some-steam" rel="noopener noreferrer" data-token-index="1">Nikkei Asia</a>. It has been republished here as part of 36Kr’s ongoing <a tabindex="0" href="https://www.kr-asia.com/nikkei-teams-up-with-36kr-in-asia-tech-news-coverage/" rel="noopener noreferrer" data-token-index="3">partnership with Nikkei</a>.

China retail sales beat expectations as industrial output loses some steam

Retail

Consumer Services

China

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… was exploring promotions emphasizing reliability and delivery speed.
In a media interview, an Amazon spokesperson said the company is “always exploring new ways to work with [its] selling partners to delight [its] customers with more selection, lower prices, and greater convenience.”
Amazon's flywheel model, which aims to create an excellent service experience for users by driving platform traffic through product selection and convenience, thereby attracting more suppliers to enrich the platform, lower prices, and ultimately enhance user experience, continues to function as intended. However, aggressive entrants Temu and Shein are now disrupting this cycle, with the balance increasingly disturbed.
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Amazon's Prime membership system has always been crucial, with Coresight's survey last year finding that only 72.5% of respondents planned to participate in Prime Day before it started, marking the first time this figure fell below 75% since 2018.
According to Adobe, Amazon's two-day Prime Day event last year reached a total sales volume of USD 12.7 billion, setting a new record. This represented a 6.1% increase from 2022's USD 11.9 billion, although it fell short of Adobe's forecasted 9.5% growth rate.
Prime members still actively participate in discount events, but the growth of Amazon's e-commerce business has been slowing. US inflation and falling interest rates make low-priced products highly attractive to consumers.
For sellers, Gartner subsidiary Capterra found via a survey it conducted that 99% of small and medium-sized Amazon sellers plan to sell on other e-commerce platforms in 2023.
It is noteworthy that Temu and Shein are not just trying to sweep the US market. Amazon may be able to leverage its vast warehousing network and millions of Prime users to fortify its foothold in the US However, it lacks such a deep moat in overseas markets.
Accordingly, Amazon’s current promotion of low-priced products can be characterized as both a direct confrontation and a passive defense.
Zhou said he believes Amazon's latest push to recruit merchants will likely succeed. He's even contemplating listing some products to gather data. Yet, he questions whether Amazon can manage the cost and efficiency of fulfilling small postal packages without the support of “Fulfillment by Amazon” (FBA).
KrASIA Connection features translated and adapted content that was originally published by 36Kr. This <a href="https://36kr.com/p/2838823730482056">article</a> was written by Leslie Zhang for 36Kr.

Amazon courts sellers for new discount store to counter Chinese e-commerce rivals

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… BlackRock portfolio company operating in Taiwan.</li>
</ul>
If there are any news or updates you'd like us to feature, get in touch with us at: <a href="mailto:hello@kr-asia.com">hello@kr-asia.com</a>.

Deals in brief: Cooby secures seed funding, Superbank raises IDR 1.2 trillion from shareholders, Oretha concludes equity crowdfunding campaign, and more

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… e-commerce corporations have <a href="https://www.forbes.com/sites/siladityaray/2023/05/19/apple-joins-a-growing-list-of-companies-cracking-down-on-use-of-chatgpt-by-staffers-heres-why/">banned</a> its use due to concerns about sharing their proprietary data with third-party AI platforms.
To mitigate these concerns, firms can tap on the expertise of trusted partners and vendors to establish a robust governance framework to manage risks and ethical issues, as well as to adopt AI platforms with strict controls on access and data collection. With these guardrails in place, organizations are better placed to offer widespread yet controlled access to generative AI tools, enabling employees to familiarize themselves with new technology while mitigating concerns about trust and data protection.
Another piece of the puzzle is equipping employees with relevant and useful information about AI. For firms that try to develop comprehensive training material or courses for employees, the fast-evolving nature of generative AI applications means these resources will quickly become outdated. Thus, developing shorter training sessions with practical examples, and even real-world case studies, can be more effective to help employees learn better.
<h3>Talent strategy in the era of “Generation AI” </h3>
Apart from equipping current employees with AI knowledge and tools, startups should plan their talent strategy while bearing in mind the new generation of AI-savvy talent making its debut in the workforce.
These individuals—whom Deloitte has dubbed <a href="https://www2.deloitte.com/us/en/insights/topics/emerging-technologies/generative-ai-adoption-asia-pacific-region.html">“Generation AI”</a>—are young adults, up to the age of 24 years old, who have grown up with AI-powered technologies and are leading their adoption.
As the newest entrants to the working world, Generation AI is set to reshape the workforce, and employers need to adapt by harnessing their potential. Students and employees are leading this shift across the Asia Pacific, as a majority of students (81%) and employees (62%) use the technology.
With 76% of students surveyed in the Asia Pacific agreeing that generative AI significantly influenced their career decisions, the impact of generative AI will be felt by businesses that fail to adapt. For instance, talent new to the workforce may be drawn to rival businesses open to empowering them through utilization of AI tools.
Within the region, developing economies in Southeast Asia represent a bright spot in terms of AI-ready talent. According to Deloitte’s report, there are more “digitally native” people in Southeast Asia (excluding Singapore) as compared to developed economies. In fact, generative AI users in Southeast Asia are also more likely (61%) to be taking proactive actions, compared to an average of 49% across the Asia Pacific, to research the basics of generative AI, advance their programming skills, and undertake formal study.
With a burgeoning population and a pool of AI-ready talent, Southeast Asia is a promising landscape for startups looking to scale their business with this technology.
This also signals the importance of appealing to young and tech-savvy talent. While startups tend to struggle with attracting talent in their early stages, they could appeal to prospective young employees by emphasizing their agile adoption of AI and other exciting new technologies, on top of their commitment to delivering innovative solutions.
As generative AI continues to evolve, organizations need to be flexible and empower talent to truly harness its potential. Organizations, large and small, are charting the way forward by incorporating generative AI into their business strategies, while coming to terms with its governance and infrastructure. Startups should act quickly to seize this window of opportunity while managing the risks, so as to leapfrog their competitors and set themselves apart amidst an increasingly crowded market.
About the author: This article is authored by Christopher Lewin, AI and data capability leader at Deloitte Asia Pacific. With over 15 years of experience as a Deloitte practitioner, he specializes in delivering AI, data, analytics, and automation solutions to clients across various industries such as banking, insurance, telecommunications, and energy and resources. His work involves the integration of AI and Generative AI to automate clients’ value chains, unlocking insights and optimizing their operations.

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… https://console.kr-asia.com/wp-content/uploads/2024/07/Starbucks-Laxman-Narasimhan.jpg 1920w" sizes="(max-width: 1024px) 100vw, 1024px" /><figcaption id="caption-attachment-149016" class="wp-caption-text">Photo of Laxman Narasimhan, CEO of Starbucks. Photo and header photo courtesy of Starbucks.</figcaption></figure>
“I think the growth that's taking place in the mass area of the China business, of the China overall coffee and tea segment, is one where we just see intense price competition. We're choosing not to participate in that,” Narasimhan said.
“We are a premium brand. We built a business over 25 years with a great deal of competitive advantages. You can see that there. We have amazing partners and stores. We have stores that look distinctive. We have [an] end-to-end supply chain that, frankly, I would love to have in the US. And then we are steeped in coffee and the tradition of coffee […] as well as with the knowledge that we have in-store. So, we bring that to life very well in our business in China.”

Starbucks upgrades rewards program in China as competition brews fierce

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… module. He believes that generative AI will offer more functionalities in MR, including but not limited to 3D generative AI capabilities.
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Besides the product launch, Play For Dream announced at the event that it will establish its Asia Pacific headquarters in Singapore, with the first overseas markets being Singapore and Malaysia, followed by Thailand, Indonesia, Vietnam, and Japan.
Zhu added that entering the Singapore market was a decision based on factors such as average monthly income and consumer habits. "Currently, the price range of our devices is relatively well-suited for Singapore,” Zhu said.
KrASIA Connection features translated and adapted content that was originally published by 36Kr. This <a href="https://36kr.com/p/2835914800679560">article</a> was written by Qiu Xiaofen for 36Kr.

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Deals in brief: Jollibee to acquire majority stake in Compose Coffee, Heymax.ai snags USD 2.6 million, Google invests in BlackRock solar portfolio company, and more

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Instead of slowing down, the Chinese economy has entered into a period of stabilization where growth will be sustained by trade with the Global South, according to Denis Depoux, a global managing director at German consultancy Roland Berger.
"I would say this is finished, the golden years—the party is over," Depoux told Nikkei in a recent interview. But he was quick to add that he would characterize it more as a "stabilization" than a "slowdown."
Depoux said China's growth rate of roughly 5% is equates to a "massive" scale. "It's adding one Holland every year, it's adding Germany in five years," he said.
"I'm rather optimistic about the Chinese economy," Depoux said.
Depoux is one of Roland Berger's three elected global managing directors. The Shanghai-based Depoux oversees the Asia region. Armed with an extensive business resume in China, he advises global corporations on strategy there and in the area.
China's economy is on track for stable growth thanks to the fast-growing trade and investment with the Global South, according to Depoux.
"China is basically, when you look at the growth of trade, it's double digit with pretty much every country in the Global South," he said.
"The Chinese economy will be less reliant on exporting its products to Europe or to the US or to Japan," Depoux said. "But more dependent on the rest of Asia, on the Middle East, on Africa, on South America, on Russia, whether we like it or not. It's a reality."
Investment flows from China to Southeast Asia in particular are growing "massively," Depoux said.
"And one reason is because Chinese companies themselves are offshoring their production," either to access new markets or to go after low labor costs, he said.
China is importing a lot of oil through Myanmar via pipeline, according to Depoux. The infrastructure reduces dependence on the Strait of Malacca, contributing to the "reality that is fueling the Chinese economy," he said.
"There's no deglobalization—I'm fighting this term," Depoux said. Instead, he sees a "dual globalization" defined by two blocs.
China is also rising as a source of technological innovation, according to Depoux.
"40 years ago, the source of innovation in the automotive industry was in the US and in Japan," he said. "Now it's in China. Maybe 20 or 30 years ago, the source of innovation in machine tools was in Germany and Northern Europe. Now, it's still there, but it's also in Japan, it's also in … China, increasingly, et cetera."
China's economy is not without its risks. Depoux mentioned the slowing recovery in the real estate market, as well as weak consumption fueled by concerns over the aging of society.
There are ways that companies in Japan and Western countries can derisk in China while still being part of its growth, Depoux said. One is joint ownership, so that Chinese capital has skin in the game. Another is for a foreign company to "reuse the proceeds of their existing operations to finance further growth," he said.
And decision-making can be localized at Chinese affiliates, Depoux said.
But even amid heightened Sino-American tensions, "most companies are not exiting the market," he said of China.
A new trade war would damage the US economy to the tune of 4% of its 2023 gross domestic product, while China would take a hit of 10%, Roland Berger estimated.
The two countries' relationship "will, in any case, not get better" regardless of whether Joe Biden or Donald Trump wins the US presidential election in November, according to Depoux.
A Trump administration would "reverse some of the energy transition policy of the US," Depoux said. This would hurt the planet but "limit the implications of the trade war with China, because … there's no need for solar panels, there's no need for electric vehicles, there's no need for batteries in the US."
This article first appeared on <a tabindex="0" href="https://asia.nikkei.com/Economy/China-s-economy-is-stabilizing-not-slowing-Roland-Berger-chief2" rel="noopener noreferrer" data-token-index="1">Nikkei Asia</a>. It has been republished here as part of 36Kr’s ongoing <a tabindex="0" href="https://www.kr-asia.com/nikkei-teams-up-with-36kr-in-asia-tech-news-coverage/" rel="noopener noreferrer" data-token-index="3">partnership with Nikkei</a>.

China's economy is stabilizing, not slowing: Roland Berger chief