May 26 (Reuters) - Two months into harsh COVID-19 lockdowns
that have choked global supply chains, China's economy is
staggering back to its feet, but businesses from retailers to
chipmakers are warning of slow sales as consumers in the country
slam the brakes on spending.
Car sales in the world's largest auto market have slowed
dramatically, gamers are buying fewer consoles, and people are
unwilling to replace their existing smartphones, laptops and
TVs, as prolonged COVID curbs crimp spending power and put more
people out of jobs.
"The current China lockdowns ... has implications to both
supply and demand," said Colette Kress, chief financial officer
at U.S. chipmaker Nvidia, which forecast on Thursday a
$400 million hit to gaming sales from China's stringent
"You have very large cities that are in full lockdown,
focusing really on other important things for the citizens
there. So it's impacting our demand."
At least 14 analysts have cut their price targets on Nvidia
following its latest earnings report, with the median price
target now standing at $300, according to Refinitiv data.
In line with China's zero-COVID approach, Beijing, with its
22 million population, has clamped down on workplace attendance.
Shanghai, the country's commercial hub, and numerous other giant
cities are also shackled by partial lockdowns or other curbs.
Retail sales in April shrank 11.1% year-on-year, after
falling 3.5% in March. UBS and J.P. 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 rebates and postponed social security payments and loan
repayments to support the world's second-largest economy.
E-commerce group JD.com Inc said last week
the COVID-19 situation was far different than what China had
previously experienced, when outbreaks were limited to smaller
areas and had boosted online shopping.
"In April, the order cancellation rate was significantly
higher than last year due to logistical disruptions. There was
an improvement in May, but it was still higher than a year
earlier," JD.com CEO Xu Lei said.
"Consumers are facing loss in income and confidence, and
overall consumption is sluggish."
Alibaba Group Holding's cited
pandemic-related risks and uncertainties for not issuing a
forecast for its new fiscal year on Thursday.
Since mid-March, domestic businesses have been significantly
affected by the COVID-19 resurgence in China, the e-commerce
giant said in its earnings statement.
AUTO, TECH, LUXURY SLOWDOWN
Auto sales in China have faltered after years of blistering
growth, and global automakers especially have taken a hard
Sales of Tesla in China - where the company has struggled to
get production back to pre-pandemic levels - was nearly wiped
out last month.
And while retail car sales for the first three weeks of May
rose 34% from the same period in April, they was 16% lower than
a year earlier, the China Passenger Car Association said on
Wednesday and called for more government support.
The industry body said a drop in income related to COVID-19
was depressing sales, even in parts of China that are not locked
Lenovo, the world's largest PC maker, reported on Thursday
its slowest quarterly revenue growth in seven quarters as demand
for its personal computers waned after two years of
China's PC shipments, including desktop, notebook and
workstation shipments, fell 1% in the January-March period,
ending the growth streak of the last seven quarters, market data
firm Canalys said on Thursday.
Tencent, China's most valuable company, posted its
worst quarterly performance since it went public in 2004,
blaming cuts in advertising spending by consumer, e-commerce and
Apple supplier Foxconn warned that smartphone
demand was slipping in China, and the country, just recently a
mecca for luxury goods makers such as LVMH, has seen
luxury sales falter.
"Even when China comes out of isolation, the bounce back
will not be as quick and as immediate as we have seen in Europe
and the United States," Johann Rupert, Chairman of Swiss firm
Richemont said last week.
(Reporting by Josh Ye in Hong Kong, Jane Lee in San Francisco,
Zoey Zhang in Shanghai and Akash Sriram in Bengaluru; Writing by
Editing by Shri Navaratnam and Anil D'Silva)