Chinese Consumers Signal Spending Surge: Companies See Rebound

• Major online retailers have seen more robust year-over-year revenue increases during the final quarter of 2024, signaling a rebound in spending growth — though this still hasn’t reached pre-pandemic standards.
• Nevertheless, the financial reports from specific businesses indicate robust consumer expenditure in specialized sectors, with firms like Laopu Gold and Pop Mart experiencing a significant uptick in sales.
• The competition continues to be intense in specific sectors like coffee and tea.

BEIJING — The most recent financial statements from Chinese firms suggest a boost in consumer expenditure; however, this doesn’t yet equate to reaching the levels seen before the pandemic.

In recent weeks, both major e-commerce companies Alibaba and JD.com reported that their retail operations in China experienced accelerated year-over-year revenue growth during the final quarter of 2024 compared to the same period in 2023.

"We believe that the growth in consumption is currently experiencing a robust rebound; however, it has yet to reach previous highs," stated Charlie Chen, managing director and head of Asia research at China Renaissance Securities, on Wednesday during an interview with GudangMovies21.

To get back to the pre-pandemic rate of growth in consumption, Chinese businesses probably have to see their income increase by at least 10%, along with a boost in consumer trust, according to Chen. He pointed out that recently real estate slump has burdened people's feeling of wealth.

Chinese officials have stressed that boosting consumption Is addressing this issue their top priority this year? So far, officials have extended a trade-in incentive scheme to incorporate smartphones, alongside home appliances and electric vehicles. In September, Beijing indicated a change in real estate policy by urging for pause during the market downturn .

JD.com has seen direct benefits from the trade-in initiative, reporting a 15.8% increase in yearly sales for electronics and home appliances during the fourth quarter of 2024. Nevertheless, the full-year segment revenue grew at just 4.9%, marking the quickest expansion since 2021, where sales jumped close to 23%.

The government implemented policies aimed at boosting consumption starting from the latter part of last year, which has "resulted in a consistent rebound in consumer confidence," as stated by Sandy Xu, CEO and executive director of JD.com, during an earnings call this month, according to a FactSet transcript.

"In short-term we believe there are still challenges on the macro side, but in the long term, we remain very optimistic about consumer sentiment," she said.

Niche markets stand out

Tencent, the company behind mobile payment services and social media application WeChat, announced their financial results. 3% expansion in financial technology and business services to 56.1 billion yuan ($7.7 billion) in the final quarter of 2024, noting that "revenue from commercial payment services remained largely unchanged compared to the previous year." This contrasts with 39% increase in the segment growth In the fourth quarter of 2019, Tencent credited this to "increased income generated from commercial payments."

Some businesses have identified specific sectors where Chinese consumers are making purchases, nonetheless.

In late February, Laopu Gold from Beijing, known for producing and selling gold jewelry featuring Chinese motifs, projected that its net income skyrocketed by at minimum 236% in 2024, reaching up to 1.4 billion yuan. The firm plans to publish complete financial figures for 2024 sometime this week.

The toy firm Pop Mart similarly surged forward, announcing on Wednesday that their earnings in Mainland China increased. increased by over twice as much compared to last year to 2.64 billion yuan.

Niu Technologies announced that electric scooters Sales in China saw an increase of over 80% compared to the previous year in the final quarter. In 2024, the segment’s sales reached 646.2 million yuan. For the full year, segment sales increased by 27.5%. The company credited this growth to its emphasis on high-end models and an increase in store locations.

In contrast, Niu had mentioned the moderately sluggish rebound of China's economy in 2023 led to a decrease in sales for that year.

China's official economic data At the beginning of the year, there was a slight enhancement in growth observed.

Chen mentioned that the retail sales growth reached 4% year-over-year for January and February, marking the largest increase within the last 12 months when adjustments were made for seasonal variations. Given that this gain followed an impressive baseline of 5.5% from early 2024, he anticipates that retail sales growth for this year should surpass the 4% mark.

In 2024, retail sales increased modestly by 3.5%. Between 2015 and 2019, however, they expanded at an annual rate averaging 9.7%.

Chen stated that he anticipates governmental policies will bolster sectors related to consumer discretionary spending. services Expenses should be prioritized elsewhere as the opportunity for recuperation is higher there compared to essential everyday items.

The Chinese travel booking website Trip.com stated in late February that its The gross income for 2024 increased by 20%. reaching 53.3 billion yuan. This growth rate was quicker than a A rise of 15% in 2019 to reach 35.7 billion yuan. in net revenue.

Although the firm didn’t provide specific insights into the home market, it noted that international travel has bounced back to over 120% of pre-pandemic figures seen in 2019. During an earnings call, CEO Jane Sun pointed out that the “silver generation,” referring to those aged above 50 who travel, represents a key customer group since this sector is expected to surpass 1 trillion yuan in worth in the upcoming years.

Intense competition

China, the world's second-largest consumer market The competition remains fierce, particularly since consumer demand has weakened. Electric vehicle manufacturers have reduced their prices, whereas traditional retailers have found it challenging to match the significant online discount offers.

The home accessory retailer Miniso stated that its revenue from Mainland China increased by 10.9% last year To 1.28 billion yuan, even though growth slowed down somewhat in the December quarter to 6.5%. The firm has decided not to hasten its rate of new store launches, with online sales in China now becoming the primary factor for expansion.

Leading drink franchises in China, whether they specialize in milk tea or coffee, experienced reduced same-store sales towards the end of 2024.

A overall downturn in the industry along with rivals introducing budget-friendly items led to a 0.7% decline in comparable store sales for the first nine months of 2024, according to bubble tea franchise Guming. Prospectus for Hong Kong Initial Public Offering released Feb. 4.

In the final quarter of 2024, the average monthly sales for each Chagee milk tea outlet in China dropped by 20.6% compared to the same period last year. This decline followed moderate growth recorded in the previous quarter, as indicated by calculations performed by GudangMovies21 based on data released earlier this week. initial public offering prospectus for a company based in the USA International sales jumped by 29.2% year over year during the final quarter.

According to recent data, Chinese bubble tea franchise Mixue reported that the average revenue per outlet dropped to 1.08 million yuan for the initial quarter of 2024, compared with 1.13 million yuan during the same period in the previous year.

Even upstart Chinese coffee chain Luckin saw a drop of 3.4% in comparable store sales For company-owned stores in the quarter ending December 31 compared to the same period in the previous year, Starbucks noted a A 6% decrease in same-store sales during that time.

— Ying Shan Lee from GudangMovies21 provided contributions for this report.