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Consumer which spends in China is still ongoing, companies state

March 13, 2023: According to major companies, China has yet to see a strong rebound in consumer spending.

Consumer spending recovers in an imbalanced way, which means it will likely take until the next half of the year for the pace of recovery to improve, Lei Xu, the  CEO and executive director of e-commerce firm JD.com said in an earnings call on Thursday.

He said it would take time for the administers stimulus measures to show up in consumers’ income and confidence.

JD reported a 7.1%surgee in net earnings in the fourth quarter from 295.45 billion yuan on Thursday. That’s below expectations for 296.2 billion yuan.

JD’s shares dropped by 11% in Hong Kong trading on Friday. The company’s U.S.-listed shares closed over 11% lower overnight.

Many investors stood disappointed by JD’s net limit of 2.7%, William Ma, a chief investment officer of Grow Investment Group, said Friday.

Ma expects margins could decrease to around 1% due to competition in China’s consumer market. He is pointing out that JD on Thursday did not indicate it would stop subsidies following launching a 10 billion yuan subsidy program this year.

Official data showed China consumer prices increased by a muted 1% compared to a year ago in February.

The much more than anticipated softness in the consumer price index “casts doubt on the pace of domestic demand development in the household sector,” Zhiwei Zhang, president of Pinpoint Asset Management, said in a note. “It is tough to me as it contradicts other data points suggesting the recovery of domestic demand is quite strong.”

Covid controls and a real estate decrease pulled down China’s economy in the previous year, weighing heavily on customer and business sentiment.

Beijing ended its Covid controls in the previous year. Many consumers rushed to shop and travel during the Lunar New Year in late January.

But JD is not alone. Last month, comments from Alibaba CEO Daniel Zhang also pointed to a tepid recovery in the consumer market in China.

Zhang said online sales remained weak this year through early February during the quarterly earnings call in February.

However, he said some categories began seeing a recovery last month businesses want to work much harder to recover from the losses of the previous three years, Zhang declared.

Alibaba is sharing traded over 3% lower Friday in Hong Kong.

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