Hong Kong Stocks Slip Nearly 1% As Mainland Data Disappoints
The Hang Seng Index fell 0.98% to 25,270.07, while the Hang Seng China Enterprises Index also declined 0.98%, closing at 9,039.09. The Hang Seng Tech Index lost 0.59%, settling at 5,543.17.
Markets were rattled by softer-than-forecast Chinese industrial output, retail sales and fixed-asset investment figures, which triggered cautious trading across the region. Despite regional headwinds, mainland investors engaged in bargain hunting, buying a record HK$35.9 billion worth of Hong Kong-listed stocks via Southbound trading under the Stock Connect programme.
In broader markets, Asia also reflected the chill from US wholesale price pressures. The US Producer Price Index posted a surprise jump, pushing back expectations of aggressive Federal Reserve rate cuts and prompting a cautious tone across Asian equities.
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The Star
4 hours ago
- The Star
As megacities slow, China's smaller counties lead as new consumer hotspots
As widespread economic gloom in China's megacities sees high-end restaurants close their doors one after another, Starbucks is accelerating its expansion into the country's far-flung counties, where a growing number of residents are embracing a petit-bourgeois lifestyle. While county shopping centres might not stock Dyson vacuum cleaners and hairdryers, they have already become part of daily life in households in urban counties thanks to China's ubiquitous e-commerce networks. Driving Teslas and eating expensive cherries imported from South America, the expanding middle class in smaller cities and towns is fuelling China's next wave of consumption. As the world's second-largest economy grows more slowly, residents of major cities have reined in their spending. But the consumption upgrade in China's more numerous lower-tier markets is far from complete, experts said. With lighter economic burdens, faster income growth and greater confidence in the future, consumers in such areas have stronger purchasing power and a greater willingness to spend, becoming a new engine for consumption growth as China seeks to shift its economy towards a consumption-driven model and away from one relying on exports and investment. 'Lower-tier cities have been overlooked in the past, with their consumption potential untapped, while the disposable consumption capacity of first-tier city residents is more affected by the slowing economy,' said Professor Liu Xuexin, who heads a consumer data research institute at Capital University of Economics and Business in Beijing. In China's governance hierarchy, county-level cities sit below prefecture-level ones, covering smaller urban and rural areas, including townships and villages, and serving as regional hubs for commerce, education, healthcare and local government. Classified by their economic strength and population, such cities are usually – and informally – referred to as being third-tier or lower, lacking the scale and influence of first- or second-tier cities such as Beijing, Shanghai and the provincial capitals. A typical third-tier city is Yiwu, in east China's Zhejiang province, which is known for its globally focused wholesale markets. According to the 2020 census, about 509 million people lived in China's first- and second-tier cities, meaning around 903 million lived outside them. A nationwide survey conducted by management consultancy McKinsey & Company at the end of last year found that nearly 80 per cent of Chinese consumers in third- and fourth-tier cities expressed optimism about the economy, compared with 70 per cent in second-tier cities and 67 per cent in first-tier ones. However, the rates for all were down compared with 2023, it said in a report released in May. In terms of retail sales, about 97 per cent of the 171 non-first-tier cities across China that publish such data reported positive year-on-year growth last year, with third- and fourth-tier cities outperforming, according to statistics compiled by Chinese news app in March. Yuxi, a fourth-tier city in Yunnan province, reported the highest growth rate at 8.8 per cent. In contrast, official figures showed that Shanghai's total retail sales of consumer goods fell 3.1 per cent last year, while those in Beijing declined 2.7 per cent. Lily Huang, a housewife who moved from Beijing to Haiyan, a county-level city in Zhejiang, several years ago with her family, said she now buys the same kinds of products she used to buy in Beijing, despite the bad macroeconomic environment in recent years and its effects on incomes. 'We don't feel a lot of pressure, most probably because we don't have a large loan to repay since home prices are much cheaper here,' she said. A lower housing price-to-income ratio than in high-tier cities is one reason lower-tier cities are experiencing faster consumption growth, according to a research note issued by China International Capital Corporation in June. Higher proportions of handed-down properties, greater family financial support for home purchases and lower overall debt burdens have also contributed, it said. Besides, market penetration rates in many consumer sectors in high-tier cities have nearly reached saturation point, leaving little room for further expansion. Using ready-to-drink coffee as an example, the frequency of consumption among consumers in China's first- and second-tier cities is approaching that of Japan, South Korea and Western countries, analysts from Puyin International said in a note issued in June. However, the overall penetration rate in China remained significantly lower than in high-tier cities, they said. Consumers in higher-tier cities, who are generally wealthier, are less sensitive to policy stimuli Well aware of this trend, Starbucks entered 166 new county-level markets in China in the 2024 financial year. In its second-quarter business update this year, Starbucks China said there were Starbucks stores in more than 1,000 county-level markets. A series of government policies has also boosted consumption confidence in such regions, according to the Puyin International note. 'In contrast, consumers in higher-tier cities, who are generally wealthier, are less sensitive to policy stimuli, and meanwhile they face greater employment pressures, more severe asset depreciation due to falling housing prices, and a higher potential impact from tariff wars,' it said. A nationwide consumer goods trade-in programme has been in place in China since March last year as the authorities work to drive spending and boost the economy. Fu Longcheng, vice-president of the China General Chamber of Commerce, told a news conference in January that the consumption structure in county-level markets is being optimised and upgraded, with increased spending on developmental and experiential consumption, as well as service-oriented consumption, and clear trends towards more consumption for personal gratification. 'Entertainment formats such as cinemas, along with new tea drinks, fast fashion and maternity chains are continuously entering county markets, while new consumption models like live-streaming e-commerce and instant retail are rapidly integrating, boosting the momentum for quality enhancement and expansion of county-level consumption,' Fu said. Products in hot demand not only include trendy milk tea and artisanal baked goods, once exclusively found in first- and second-tier cities, but also Boston lobsters and Sam's Club speciality products on dining tables and tickets for music festivals and concerts. More spending by affluent rural residents is also contributing as the country's top leadership pushes forward with an urbanisation drive, reiterating its determination over the past few years to make it easier for farmers to settle in urban areas. Data from the National Bureau of Statistics said that rural retail sales of consumer goods grew by 4.3 per cent last year, outpacing urban growth by 0.9 of a percentage point. In line with that, the McKinsey survey found that the proportion of rural consumers who were optimistic rose by 6 percentage points last year to 73 per cent. Members of Gen Z – those born between 1996 and 2010 – from high-income families in rural areas stood out as the most confident, with 88 per cent having an optimistic outlook, 11 percentage points higher than in 2023. Meanwhile, county tourism is emerging as a vital contributor to efforts to increase consumption's role in the Chinese economy, attracting young people from first-tier cities seeking cost-effective, experiential getaways and at the same time fostering sustainable growth in lower-tier regions. Reports from several travel platforms have highlighted it as a hot trend this year, with posts on RedNote, China's leading lifestyle app, touting the middle-class appeal and affordability of horse riding and tennis lessons in county-level cities. The ITB China Travel Trends Report 2024/25 noted that rural counties are increasingly popular destinations among younger travellers drawn to authentic experiences such as ecotourism and cultural festivals. Huang said she had welcomed several batches of friends from Beijing who had visited Haiyan for sightseeing in the past couple of years. 'They really enjoyed the stay here as it is cheap and relaxing,' she said. In a plan aimed at revitalising rural areas during the period from 2024 to 2027, the State Council, China's cabinet, outlined measures to 'fully promote rural consumption', including the development of county-level commercial systems, providing a key focus for unleashing rural consumption potential. But researchers remain cautious about whether the rise of consumption in lower-tier markets is sufficient to revitalise overall consumer activity. Liu, the Beijing professor, noted that compared to big cities, lower-tier cities lag behind in infrastructure and the overall consumption environment, including consumer rights protection, limiting their consumption potential. 'Whether the consumption boom in these regions can sustain China's shift to a consumption-driven economy is hard to answer, but it is undoubtedly a crucial supplement,' he said. Fudan University economist Shi Lei said that while growth is evident, county-level consumption still faces constraints, primarily due to insufficient local financial resources, with many areas, including regions mainly populated by ethnic minorities, relying on fiscal transfer payments from higher-level governments to sustain development. 'In the long term, the potential arising from underdevelopment should be recognised,' he said. 'But short-term performance should not be overestimated.' -- SOUTH CHINA MORNING POST
The Star
7 hours ago
- The Star
China's early South American soybean buys squeeze US out of peak export window
China has moved early to lock in soybean supplies from Brazil for September and October, sidelining US exporters from what is traditionally their most lucrative selling period. The shift underscores Beijing's growing trade reliance on South America and comes amid renewed political and commercial tensions with Washington. According to market analysis from Brazil's Safras & Mercado, traders reported Chinese purchases of roughly 8 million tonnes of soybeans for September and 4 million tonnes for October, about half of the country's projected demand for the two months. All volumes are sourced from South America, with Brazil capturing the lion's share. The move effectively shortens the US 'window' for soybean shipments to China, which typically runs from September to January before the Brazilian harvest arrives. Last year, China imported 105 million tonnes of soybeans, 22.13 million of them from the US, illustrating how pivotal this early-season slot has been for American farmers. The decision to buy more soybeans from South America comes as Chicago Board of Trade soybean futures hover near five-year lows, with reduced Chinese buying expected to keep prices under pressure. When asked about the soybean purchases and their impact on US producers, Liu Pengyu, a spokesperson for the Chinese embassy in Washington, did not directly address the trade volumes. Instead, he said Bejing hoped 'the US side will work with China to implement the important common understandings reached by our heads of state' and called for dialogue 'on the basis of equality, respect and mutual benefit' to promote sustainable bilateral relations. The Chinese embassy in Brasilia did not respond to requests for comment. On Monday, US President Donald Trump publicly urged Beijing to quadruple its soybean purchases from the United States, a dramatic call just days before a tariff truce between the two countries was set to expire. Posting on social media, Trump claimed China was concerned about soybean shortages and said he expected 'quick' orders from Beijing. The remarks briefly sent Chicago futures higher, but market watchers quickly questioned whether such a deal was realistic. Meeting the request would require China to source most of its soybean imports from the United States, an unprecedented shift that would displace established Brazilian volumes. It remains unclear whether increased Chinese agricultural purchases would be a condition for a lasting trade deal between Beijing and Washington. In the meantime, China has not booked any US soybeans for the fourth quarter, and some feed manufacturers are reportedly testing alternative suppliers, including Argentina, to secure cheaper South American protein meals. In Brazil, the news of both the early Chinese commitments and Trump's gambit was met with quiet confidence among exporters. In a statement, the Brazilian Soybean Producers Association said on Monday that it was monitoring the impact of a potential trade deal on crops, but that the combination of strong September and October sales could be an opportunity to further cement Brazil's role as China's primary supplier. As the US risks losing ground in the Chinese market, Brazil and China are also working on longer-term trade integration. On Sunday, the Brazilian newspaper Folha de S. Paulo reported that officials from both countries were said to be drafting a bilateral protocol to recognise environmental certifications and traceability systems for key agricultural exports, particularly beef and soybeans. The plan would align methodologies for measuring emissions, land use and animal welfare, allowing Chinese authorities to formally recognise Brazilian sustainability seals such as 'Carbon Neutral Meat' and 'Low Carbon Soy'. Measures include integrated digital tracking, QR codes linking to environmental data and shared databases. The protocol aims to smooth trade flows, add value to certified products and pre-empt future non-tariff barriers. A Chinese technical delegation is expected in Brazil later this year to inspect systems on the ground before finalising the deal. The talks come against a backdrop of US tariff hikes on Brazilian goods and growing political friction between Washington and Brasília, even as China expands its list of authorised Brazilian exporters in other sectors, from coffee to processed foods. -- SOUTH CHINA MORNING POST
New Straits Times
10 hours ago
- New Straits Times
Chery becomes first Chinese carmaker to export over 5 million vehicles
KUALA LUMPUR: Chery International Group has become the first Chinese car company to export more than five million vehicles worldwide. It has also maintained the No. 1 position for passenger car exports for 22 consecutive years. In July, Chery International achieved the "Double 500" milestone, emerging as the fastest-rising carmaker on both the Fortune Global 500 and the Fortune China 500 lists. The group is now ranked 233rd globally, up from 385th in 2024. It is ranked 59th in China, up from 100th in 2024. These achievements were driven by the Omoda/Jaecoo brand in 44 markets across Asean, Europe, Australia and South America. In just over two years, Omoda/Jaecoo amassed a 37 per cent share of Chery International's total export volume, with cumulative global sales surpassing 570,000 units. It is the fastest emerging brand globally to exceed the half-million mark in sales. Omoda/Jaecoo models have also made significant strides in the new energy vehicle (NEV) category. In the first quarter of this year, NEV models accounted for 13,023 units, a sharp rise from 2,325 units in the same period in 2024. In the first half of 2025, NEVs accounted for 40 per cent of its total exports. Omoda/Jaecoo's global momentum is equally evident in Europe, where it has become the fastest-growing Chinese automotive brand and the first ever to sell over 10,000 units in Spain within 11 months in the market. In Malaysia, the brand grew quickly after the Jaecoo J7 was launched in July 2024. The company announced that more than 17,000 of its vehicles are now on Malaysian roads. According to the Road Transport Department, Omoda/Jaecoo remained among Malaysia's top five automotive brands in the first half of 2025. Moving forward, Omoda/Jaecoo's global export strategy will focus on deeper investments in key markets in Europe, South America and Asean. Malaysia will serve as the centralised right-hand drive hub to support the brand's global ambitions.
