Yes, yes it does.
The people have money, but as we've posited* they are saving it for future expenditures rather than current spending. This is partly because you have a couple generations of Chinese people who flat-out don't trust the party/government to care for them in their golden years.
Additionally a huge amount of those retirement savings are tied-up in real estate** whose carrying value is high but whose Marx-to-market price may be less than zero.
The central bank may try to introduce a with an expiration date, sooner than expected, for the purported greater good of busting loose some of the accumulated savings
From Bloomberg, August 26/27:
- PDD’s stock plunges 29% after a disappointing sales outlook
- Beijing has been struggling with slowing economic growth
One of the last remaining bright spots for Chinese consumption is rapidly fading, as the nation’s economic malaise takes a toll on demand for even the most accessible of goods.
In the latest warning to global markets on the health of the Chinese economy, Temu-owner PDD Holdings Inc. on Monday surprised investors with an unusually gloomy outlook. The e-commerce firm, which became a market darling with low-priced goods that helped propel sales and profits during China’s economic downturn, also reported revenue that missed estimates. During a post-earnings briefing, CEO Chen Lei mentioned at least eight times that revenue and profits must “inevitably” decline as economic growth slows.
“We are seeing many new challenges ahead, from changing consumer demand, intensifying competition, and uncertainties in global environment,” Chen, also one of PDD’s earliest employees, told analysts.
The CEO and his lieutenants were careful to stress they remained confident in Chinese consumption over the longer term — a big priority for Beijing in rebalancing the world’s No. 2 economy. But the damage was done. PDD’s shares plunged 29% in their biggest fall on record, wiping out $55 billion of market value. Its closest rivals Alibaba Group Holding Ltd. and JD.com Inc. followed suit, sliding about 5% in Hong Kong.
PDD’s warning stunned investors because the company was long viewed as the main beneficiary of a Chinese “consumer downgrade” — its low-pricing strategy on Pinduoduo domestically and Temu abroad was intended to appeal to cost-conscious shoppers at a time of unprecedented economic volatility.
The disappointing results were the latest in a series of red flags about the Chinese economy. This week, popular fast food chain Din Tai Fung — long one of the most popular restaurant brands across the country — revealed it was shutting more than a dozen outlets. Last month, Starbucks Corp. disclosed a 14% plummet in Chinese revenue in the June quarter.
“The big issue is weakness in China consumer,” said Joshua Crabb, head of Asia Pacific equities at Robeco Hong Kong Ltd. “The read-across for competition and a weak consumer will be negative for sure.”
While Starbucks and Din Tai Fung have long wrestled with volatile sentiment, PDD’s warnings were especially surprising given it encapsulated for years how cash-strapped Chinese consumers spurned luxury brands for lower-end alternatives.
Founded by ex-Google engineer Colin Huang in 2014, the company in past years has combined low prices with aggressive rural expansion and game-like elements on its platform to grab market share from Alibaba and JD. It parlayed that formula into the global e-commerce bargains app Temu, which it launched during the Super Bowl in 2023. That app has become a shopping phenom akin to Shein, becoming for a time one of the most downloaded US apps....
**Also:China isn't reopening, it has reopened. This is it. And despite the record savings the population has accumulated over the last three years we are not seeing a wave of demand in the domestic economy. Using one of the most basic proxies for what is actually going on, the price of pork, the grand reopening, is, to say the least, muted. This is especially true considering the country just celebrated the largest, most festive holiday on the calendar.....*****....One data point does not make a trend but it does raise the possibility that the facile expectation of a boom in Chinese consumption is wrong.What if, and I'm just spitballing here, what if the giant ball of savings is being targeted by the rapidly aging population as a retirement cushion, i.e. future consumption, not current?
That would leave China's export economy to carry the weight.
And that is not looking very promising at the moment:...
.... Unsold housing inventory climbed to 3.6 billion square feet last year, the highest since 2016, official data showed. It will cost at least 7 trillion yuan ($967 billion), or 78% of China’s budget deficit this year, for the government to absorb the inventory in 18 months, Tianfeng Securities estimated....*****....That's the unsold stuff. There are another 30 million apartments that were purchased as retirement assets and never lived in because it was assumed future buyers would want that "new apartment smell." If interested see December 2021's "CORRECTION—China Does NOT Have 90 Million Empty Apartments".
