Global firms warn of weak Chinese demand due to lengthy COVID restrictions

May 26 (Reuters) – Two months after the start of harsh COVID-19 shutdowns that suffocated global supply chains, China’s economy is recovering, but companies from retailers to chipmakers are warning of the sluggish sales as consumers across the country put the brakes on. expenses.

Car sales in the world’s biggest car market have slowed dramatically, gamers are buying fewer consoles, and people are unwilling to replace their existing smartphones, laptops and TVs as prolonged COVID reduces purchasing power and puts more unemployed people.

“The current lockdowns in China … have implications for both supply and demand,” said Colette Kress, chief financial officer of US chipmaker Nvidia (NVDA.O), which on Thursday forecast a drop of 400 million. dollars from game sales due to strict coronavirus restrictions in China. . Read more

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“You have very large cities that are in full lockdown, really focusing on other things important to the citizens there. So that’s impacting our demand.”

At least 14 analysts cut their price targets on Nvidia following its latest earnings report, with the median price target now standing at $300, according to data from Refinitiv.

In line with China’s zero-COVID approach, Beijing, with its 22 million people, has clamped down on workplace attendance. Shanghai, the country’s commercial hub, and many other giant cities are also shackled by partial shutdowns or other restrictions. Read more

Retail sales in April fell 11.1% year-on-year, after falling 3.5% in March. UBS and JP Morgan lowered their full-year GDP growth forecasts for China to 3% and 3.7% respectively earlier this week.

Premier Li Keqiang said on Wednesday that China would strive to achieve reasonable economic growth in the second quarter and stem rising unemployment. The cabinet also announced broader tax credit refunds and postponed social security payments and loan repayments to support the world’s second-largest economy.

E-commerce group Inc (9618.HK), said last week that the COVID-19 situation was quite different from what China had seen before, when outbreaks were limited to smaller areas and stimulated online shopping. Read more

“In April, the order cancellation rate was significantly higher than a year ago due to logistical disruptions. There was an improvement in May, but it was still higher than a year earlier,” said said CEO Xu Lei.

“Consumers are facing a loss of income and confidence, and overall consumption is sluggish.”

Alibaba Group Holding (9988.HK), cited pandemic-related risks and uncertainties for not releasing a forecast for its new fiscal year on Thursday.

Since mid-March, domestic businesses have been significantly affected by the resurgence of COVID-19 in China, the e-commerce giant said in its statement. Read more


Auto sales in China have faltered after years of meteoric growth, and global automakers in particular have been hit hard.

Tesla’s sales in China – where the company has struggled to bring production back to pre-pandemic levels – were nearly wiped out last month. Read more

And while retail car sales for the first three weeks of May were up 34% from the same period in April, they were 16% lower than a year earlier, the State said on Wednesday. China Passenger Car Association and called for more government support. Read more

The industry body said a drop in revenue related to COVID-19 was driving down sales, even in parts of China that are not on lockdown.

Lenovo, the world’s largest PC maker, reported its weakest quarterly revenue growth in seven quarters on Thursday as demand for its personal computers waned after two years of demand due to the pandemic. Read more

PC shipments in China, including shipments of desktops, laptops and workstations, fell 1% in the January-March period, ending the seven-year growth streak. quarters, market data firm Canalys said Thursday.

Tencent (0700.HK), China’s most valuable company, posted its worst quarterly performance since its IPO in 2004, blaming reductions in advertising spending by consumers, e-commerce and travel companies.

Apple supplier Foxconn (2317.TW) has warned that demand for smartphones is waning in China, and the country, most recently a mecca for luxury goods makers such as LVMH (LVMH.PA), has seen sales of luxury wane.

“Even when China emerges from its isolation, the rebound will not be as quick and immediate as we have seen in Europe and the United States,” Johann Rupert, president of the Swiss company Richemont, said last week.

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Reporting by Josh Ye in Hong Kong, Jane Lee in San Francisco, Zoey Zhang in Shanghai and Akash Sriram in Bangalore; Written by Sayantani Ghosh Editing by Shri Navaratnam and Anil D’Silva

Our standards: The Thomson Reuters Trust Principles.

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