Shoppers line up to shop at Laop Gold Outlet at Digi Plaza in Nanjing, China on February 21, 2025.
Fang Dongxu |Featured China | Future Publishing | Getty Images
Beijing – The latest revenue report from Chinese companies shows improvements in consumer spending, but it is not necessarily returning to pre-pandemic levels.
Ecommerce Giants Alibaba and JD.com said in the past few weeks that in the last three months of 2024, Chinese retailers have grown faster revenues than in 2023 compared to the previous year.
“We believe that consumption growth is in a healthy recovery period, but not so. [yet reaching] Previously, Charlie Chen, head of Asian Studies and head of Asian Studies at China Renaissance Securities, said in a Mandarin translated by CNBC on Wednesday.
For consumer spending to return to pre-pandemic growth, Chinese companies’ revenue growth needs to recover in double digits, and consumer confidence needs to improve, Chen said. He noted that recent real estate slump has hampered a consumer sense of wealth.
China’s policymakers emphasize that increasing consumption this year is their priority. So far, authorities have expanded their trade-in grant programs to include smartphones, in addition to home appliances and electric vehicles. In September, Beijing also showed a change in real estate policy by calling for a halt to market decline.
JD.com benefits directly from the Tradin-In program, reporting a 15.8% year-on-year increase in electronics and consumer electronics sales in the fourth quarter of 2024. However, full-year segment revenue of 4.9% was just the fastest growth since 2021, when sales surged nearly 23%.
Sandy Xu, CEO and Executive Director of JD.com, said this month “we are steadily recovering consumer trust” this month, according to Factset records, and the government has been implementing policies to stimulate consumption since the second half of last year, “helping a steady recovery of consumer trust.”
“In the short term, we still think there are challenges on the macro side, but in the long term, we will remain very optimistic about consumer sentiment,” she said.
The niche market stands out
Tencent, which operates the mobile payments and social media app WeChat, reported 3% growth in Fintech and Business Services to 56.1 billion yuan ($7.7 billion) in the fourth quarter of 2024, saying “Commercial payment services revenue was very stable compared to the previous year.” This was compared to 39% segment growth in the fourth quarter of 2019, resulting in Tencent’s “increased contributions to revenue from commercial payments.”
However, certain companies have discovered niches where Chinese consumers spend.
In late February, Beijing-based Laopu Gold manufactures and sells gold jewelry in Chinese designs, but last year it forecasts net profits to 1.4 billion yuan, up at least 236% in 2024. The company is scheduled to release the full 2024 results on Tuesday.
Toy company Pop Mart has also pushed ahead, reporting on Wednesday that mainland China’s revenue more than doubled last year to 2.64 billion yuan.
NIU Technologies reported that e-scooter sales in China increased by more than 80% per year to 646.2 million yuan in the fourth quarter of 2024. Sales in the segment for the full year increased by 27.5%. The company is attributing growth to its focus on premium models and store expansion.
In contrast, the NIU said that a relatively slow recovery in China’s economic growth in 2023 led to a decline in sales that year.
Official China economic data earlier this year showed slight improvements in growth.
Retail sales growth of 4% year-on-year for January and February was the biggest increase in the last 12 months on a seasonally adjusted basis, Chen said. That rise is expected to exceed 4% this year, as it has a high growth rate of 5.5% in the first two months of 2024.
Retail sales fell 3.5% in 2024. Retail sales increased by 9.7% each year from 2015 to 2019.
Chen said he hopes government policies will support more consumer discretion or service spending as the recovery potential is greater than daily necessities.
Chinese travel booking site Trip.com said in late February that its net revenue for 2024 increased by 20% to 53.3 billion yuan. This was faster than the 15% increase in 2019, with net revenues rising by 35.7 billion yuan.
The company did not elaborate on its views on the domestic market, but emphasized that international travel has recovered to over 120% of its 2019 level. CEO Jane Sun also highlighted in her revenue call that “Silver Generation” or travelers over 50 are the target demographic, as the market segment is likely to be worth more than 1 trillion yuan over the next few years.
Fierce competition
China, the world’s second largest consumer market, remains extremely competitive, especially as consumer demand is soft. Electric car companies have cut prices, but retailers are struggling to compete with large online discounts.
Home accessories retail chain Miniso reported that mainland China’s revenues rose 10.9% last year. The company plans to accelerate the pace of store openings, and says online sales in China are increasingly driving growth.
China’s major beverage chains, from milk tea to coffee, saw sales of the same stores in the second half of 2024.
The competitors that have slowed the industry as a whole and launched low-priced products have contributed to a 0.7% decline in the same-storey sales in the first nine months of 2024, bubble tea chain Guming said it was announced on February 4 in Hong Kong’s initial public offering prospectus.
In the fourth quarter of 2024, average monthly sales per CHAGEE milk tea store in China fell 20.6% from a year ago, after moderate growth in the last quarter. Overseas sales rose 29.2% year-on-year in the fourth quarter.
China’s bubble tea chain mix said it fell to 108 million yuan in one month for the first three months of 2024, according to the latest figures available.
Even the Chinese coffee chain startup fell 3.4% in the same self-controlled store sales in the quarter that ended December 31st from the same year ago. During that time, Starbucks saw a 6% drop in comparable store sales.
– CNBC’s Ying Shan Lee contributed to this report.
