SI
SI
discoversearch

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor.  We ask that you disable ad blocking while on Silicon Investor in the best interests of our community.  If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.
Strategies & Market Trends : World Outlook

 Public ReplyPrvt ReplyMark as Last ReadFilePrevious 10Next 10PreviousNext  
From: Don Green6/16/2024 1:07:03 PM
   of 43006
 
Japan-style deflation rears ugly head amid Chinese price war

The Standard
An aggressive market grab by low-cost Chinese retailers has delivered bumper earnings for some firms but has also intensified a bruising price war, exacerbating deflationary fears.

From coffee to cars to clothes, they have cut prices on just about everything in chasing consumers whose confidence has been battered by a property crisis, high unemployment and a gloomy economic outlook.

While the downshift has propelled revenues for firms like discount e-commerce platform Pinduoduo, economists fear their success is entrenching a Japanese-style deflationary mindset in consumers that will be difficult to shake.

As retailers compete on price above all else, they force tough cost cuts on suppliers.

This in turn leads to lower wage growth or higher dependency on low-paid gig work, hurting household demand.

"If this continues, China may end up with a vicious cycle: lower value added consumption, deflation, low profit rates leading to low wages, which further pushes consumers to downgrade consumption," said Monash University economics professor Shi He-Ling in Melbourne.

In the most recent earnings season, revenues at PDD Holdings, owner of Pinduoduo, surged 131 percent while top food delivery app Meituan saw 25 percent growth. Discount retailer Miniso and Luckin Coffee grew 26 and 42 percent.

Data showed that China's consumer price index fell 0.1 percent in May from a month earlier, missing forecasts.

With consumer confidence near rock bottom, price is king.

Carmakers have been in a price war for two years. Over the past two months, some dealers and financing firms have launched loan programs with no down payment and even zero interest.

Starbucks, which saw China revenues decline 8 percent in the first quarter due to "fierce competition among value players," has increased use of discount coupons to bring prices closer to Luckin Coffee.

Food delivery giant Meituan CEO Wang Xing said last week it had expanded coupon offerings and onboarded more delivery-only kitchens with lower overheads than dine-in restaurants. The app's newer hotel booking business is pursuing what he called a "low star" strategy targeting cost-conscious domestic travelers.

Taobao and Tmall Group and JD.com, which saw single-digit growth, said price competitiveness will be key to growth.

Both companies have introduced longer sales periods for China's mid-year "618" shopping festival, with lowest-price guarantees for millions of products. In response, Pinduoduo has launched an "automated price-tracking system" to enable merchants to monitor and beat rivals.

A staff memo from JD.com founder Richard Liu describing his firm as "bloated" has led to speculation it will cut jobs - the opposite of what China needs for domestic demand to recover.

Longer term, price wars may take out weaker players in various industries, allowing rivals to then lift prices and give their supply chains some respite, but Albert Hu, professor of economics at the China Europe International Business School in Shanghai, warned they would only be able to do so if growth in other industries creates enough jobs and income growth to compensate for any market exits triggered by price wars.

"Deflation is a serious issue, Japan has struggled with it for over three decades," said Hu. "A critical factor is wage growth."

REUTERS

The Champs-Elysees, the iconic avenue sweeping through central Paris dotted with cafes and shops, connects the Place de la Concorde in the east with the Arc de Triomphe in the west in a single, breathtakingly straight line.

But one thing seems to be missing amid the tourist throngs - Parisians themselves.

A true Parisian is rare on the avenue, and as one local said, that is not really surprising.

"There's no place for us - no garden, nowhere to sit," Xavier LeBrun, 35, said as he watched tourists stream past on the almost two-kilometer avenue.

It is "where Parisians cross to get from one place to another, and that's it," he said.

A top tourist attraction, locals have gradually abandoned it over concerns that it is too noisy, dirty and expensive, with luxury brands replacing independent shops.

However, that could change if a committee can make its voice heard.

After five years of work the Champs-Elysees Committee, endowed with a budget of five million euros (HK$42.29 million), last week listed 150 proposals, including adding green spaces, reducing pollution, and organizing cultural events.

The starting point for the committee, an association of business and culture representatives, was the "alarming" realization that the world-famous street was "no longer loved, no longer likeable, deserted by Parisians, and feared by foreigners."

A giant open-air picnic held on the avenue late last month was an example of how the committee plans to address the issue.

"It's a way of telling Parisians: come back to the Champs-Elysees," committee chairman Marc-Antoine Jamet said.

With stores and historic cinemas closing due to rising rents and falling sales, "innovation is an absolute necessity," he said.

The plan seeks to reverse the decline while balancing local and tourist needs.

The estimated cost will be 250 million euros, but Jamet said the additional tax revenue generated by the changes would be enough to finance all or some of the project.

A self-proclaimed Paris "superfan" who has visited from Pakistan 22 times, 33-year-old Jawwad Channa said he always visits the avenue, this time bringing along four friends looking forward to hitting the stores.

"It's very crowded, but the shopping is amazing," said his friend Ali Syed, 32.

Shopping will remain a mainstay, but adapting the avenue to global warming and reducing its carbon footprint by a third over 50 years is central, with plans to increase pedestrian space and double bike lanes.

Lowering average temperatures by up to seven degrees Celsius is another objective amid increasingly common heatwaves. Proposals include planting 160 trees, installing seating and fountains, and transforming 20 hectares of unkempt gardens into a "true Parisian park."

Symphony concerts, a "quality" Christmas market and flower stalls are also part of a push for "year-round" cultural offerings to "revamp the neighborhood".

Last month's picnic, at which thousands turned out on the "world's largest tablecloth," came after an event last year when France's bookworms battled it out in a mass spelling test at 1,779 desks.

With the presidential palace and National Assembly nearby, security is a concern, though the proposal includes plans to increase the police presence and establish a 24-hour "health and safety" watch.

For Gabin Contentin, 21, big changes are needed for him and other locals to be lured back, but if all goes well, he predicted, the Champs-Elysees can "once again be the most beautiful avenue in the world."

AGENCE FRANCE-PRESSE
Report TOU ViolationShare This Post
 Public ReplyPrvt ReplyMark as Last ReadFilePrevious 10Next 10PreviousNext