As the auspicious Year of the Dragon approaches- known to bring good fortune and success, the economic landscape at the beginning of 2024 presents a contrasting narrative...
Recent data reveals a less optimistic picture, with persistent declines in consumer prices, stagnant import growth, and a deceleration in lending pace.
These indicators collectively point to a looming challenge for the nation's economy, with sluggish domestic demand and property sector emerging as a prominent concerns expected to shape the economic trajectory in the coming year.
Source: SCMP
Deflationary pressures expected persist due to weakened confidence, even with the potential rebound in pork and energy prices. Last Monday, the PBOC's choice to maintain its one-year policy loan rate left investors hoping for the possibility of adjustments, especially if the US Federal Reserve decides to cut rate, thereby easing the depreciation pressure on the yuan.
It is acknowledged that, the days of China growth rally has passed. The big Chinese firms are well aware that profitability in the future can only be extracted from craftsmanship, technology and good management.
Fosun Group, a significant Chinese player in global asset acquisition, demonstrated its move towards an asset-light strategy by selling its 60% stake in Nanjing Iron and Steel, having held the company for two decades. The group is actively divesting underperforming assets and channeling investments into core areas like bioscience, pharmaceuticals, and tourism.
As emphasized by Fosun Group's founder, Gou, those who are able to survive the ferociously competitive home market, they can probably thrive almost anywhere else in the world.
One of the proven able vehicle to achieve this is none other than Tiktok.
TikTok holds the top rank in 2023 for both downloads and consumer spending, surpassing Instagram and YouTube. Despite lagging behind in terms of global monthly active users, it has achieved the milestone of becoming the first non-game mobile app to generate USD10 bn in consumer spending across the Apple App Store and Google Play combined.
Source: Data.ai
Achieving this feat in a brief period, TikTok experienced its highest growth during the pandemic, going from its initial billion in 2020 to USD 10 bn in ~3 years.
Source: Data.ai
The spending on TikTok primarily originates from in-app purchases of "coins," a virtual currency users can use to buy gifts for platform creators. These gifts serve as a reward for creators' content and can be converted into flat currency, with TikTok retaining 50% of the payout.
Known as Douyin in China, it was introduced prior to TikTok's entry into the livestream sales or live shopping trend, Douyin Live's integration for livestream sales is a fully developed feature. It includes seamless integration with Douyin's native ecommerce functions, incorporating in-stream one-click purchasing buttons.
The top 50 streamers by income in China saw the first-ranked streamer earning ~IDR 7 tn last year, comparable to the size of a mid-cap company in Indonesia. Even the streamer in the 50th position earned an impressive ~IDR 1.3 tn.
China's social ecommerce market is projected to reach USD430 bn by the end of 2023, constituting nearly 29% of the country's USD1.49 tn ecommerce market.
Which way forward?
It's crucial to emphasize that China's 5.2% yoy GDP growth in 11M23 is far from unfavorable; in fact, the IMF adjusted its forecast upward from 5.2% to 5.4%. Citigroup had also revised its forecast a month earlier, increasing it from 5% to 5.3% yoy.
China is likely to be focused on a more sustainable growth by balancing its economy this year, strengthening weak sectors, boosting domestic demand, and creating a favorable environment for business and investment- paving its way to potentially surpass the US as the world's largest economy.
Despite China’s current economic slowdown, let’s not forget these are still the same people who drove the world's highest growth for years and they refuse to stay flat. China’s non-financial outbound direct investment rose by 12.7% to USD115.7 bn in 11M23.
Other nations should be vigilant as Chinese companies gear up to shift their growth in the international market—a substantial influx of investments from China is imminent, bringing big guns to the game!