China’s Retail Sales and Industrial Data Fall Short of Expectations in August

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China’s retail sales, industrial production, and urban investment for August all missed market expectations, signaling a slowdown in the world’s second-largest economy. Data released by the National Bureau of Statistics (NBS) on Saturday revealed that retail sales grew by just 2.1% from a year ago, falling short of the expected 2.5% growth forecasted by economists. This marked a deceleration from the 2.7% growth seen in July, further highlighting China’s ongoing struggle with weak consumer demand.

Online sales of physical goods also saw minimal growth, with an increase of less than 1% compared to a year ago.

Industrial production, a key indicator of manufacturing activity, increased by 4.5% in August from a year earlier, missing the 4.8% forecast by Reuters and slowing from the 5.1% growth seen in July. Despite the decline, industrial production continued to grow at a faster pace than retail sales, reflecting China’s persistent economic imbalance of stronger supply with weaker demand.

Darius Tang, Associate Director at Fitch Bohua, noted that the current data points to a structural imbalance in China’s economy. Tang expects the Chinese government to roll out more gradual stimulus measures in the fourth quarter to support sectors like consumption and real estate, both of which have been underperforming.

Fixed asset investment for the January to August period rose by 3.4%, slightly below the projected 3.5% growth. Urban unemployment edged up to 5.3% in August from 5.2% in July, with the NBS attributing this increase to the graduation season. However, the bureau acknowledged that further efforts are needed to stabilize employment.

Additionally, real estate investment continued to decline, falling by 10.2% year-over-year through August, the same rate as in July. Investment in infrastructure and manufacturing also slowed compared to July, further signaling the weakening pace of growth in these sectors.

Amid these economic challenges, the NBS spokesperson, Liu Aihua, warned that the Chinese economy faces “multiple difficulties and challenges” due to changing external conditions. The bureau also emphasized the need for sustained efforts to ensure a stable economic recovery, as domestic demand remains insufficient to fuel growth.

China’s youth unemployment rate, reported separately after the main jobless figures, stood at 17.1% in July for those aged 16 to 24 who are not in school. Although this figure wasn’t updated for August, it remains a significant concern.

The economic downturn comes as China prepares for its Mid-Autumn Festival, a national holiday stretching from Sunday to Tuesday. Despite recent weaker consumption data, policymakers have not announced large-scale stimulus, opting instead for targeted support in key sectors like real estate.

In recent trade data, China’s imports rose by just 0.5% in August compared to a year ago, missing expectations. However, exports grew by 8.7%, surpassing forecasts.

China’s Consumer Price Index (CPI) for August also underwhelmed, rising by only 0.6% year-on-year, disappointing analysts who had expected stronger price growth. These figures collectively underscore the persistent weakness in consumption and domestic demand that continue to hamper the country’s economic recovery from the COVID-19 pandemic.

 

Shein and Temu Prices Set to Rise as Biden Administration Targets Chinese E-Tailers

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The ultra-low prices that have made Shein and Temu popular among American consumers could increase significantly as the Biden administration moves to restrict a trade law loophole. The changes to the de minimis provision could result in price hikes of at least 20%, according to the Republican-majority House Select Committee on the Chinese Communist Party (CCP). This provision currently allows products under $800 to enter the U.S. without import duties, which has enabled companies like Shein and Temu to sell goods at bottom-barrel prices.

Retail analyst Neil Saunders from GlobalData concurs that the elimination of the de minimis exemption would drive up costs, although the exact increase is difficult to predict. While Shein and Temu would still offer low-cost items, their competitive edge in pricing might diminish, potentially impacting their market share. Saunders also suggested that these retailers may shift to higher-priced goods to counterbalance the loss of their price advantage.

On Friday, the Biden administration unveiled plans to halt the use of the de minimis exemption for products subject to U.S.-China tariffs, intensifying pressure on the Chinese-linked e-commerce platforms. This comes after more than a year of bipartisan scrutiny from lawmakers, specifically the House Select Committee on the CCP. The committee has been investigating both Shein and Temu, with accusations that they exploit the loophole to evade U.S. Customs scrutiny.

Shein and Temu have not confirmed whether they will raise prices in response to the proposed changes but maintain that their low prices are driven by their business models, not the de minimis exemption. Shein, for example, has already joined a voluntary pilot program with U.S. Customs and Border Protection to increase transparency in its shipping practices.

Impact on Competition

The rising prices could erode the significant price gap between Shein, Temu, and their competitors like H&M, Zara, Target, and Amazon. As of June, the average price of a dress on Shein was $28.51, well below H&M’s $40.97 and Zara’s $79.69, according to research firm Edited. A 20% increase would bring the average Shein dress price to $34.21, narrowing its competitive pricing advantage.

The companies’ long shipping times, coupled with smaller price differences, could push consumers toward more established retailers with faster delivery times. Although the de minimis reform aims to create a level playing field, it could ultimately lead to higher prices for consumers.

Political and Economic Scrutiny

The scrutiny on Shein and Temu extends beyond pricing. Last year, the House Select Committee began investigating their alleged use of forced labor in supply chains, as well as their reliance on the de minimis exemption. The committee claimed that the majority of their products fall under this exemption, enabling the companies to dodge import duties and Customs scrutiny, a claim that Shein disputes.

Shein’s hopes for a U.S. public offering have been dampened by these investigations. As lawmakers push for de minimis reform, Shein’s plans for a New York IPO appear to have stalled. Instead, the company has turned to London, where it has confidentially filed for a public listing.

It remains unclear how these proposed changes will impact Shein’s IPO plans or Temu’s continued growth in the U.S. market. However, with mounting scrutiny and potential price increases, both companies may face significant challenges in maintaining their current market positions.

 

Oracle’s Larry Ellison Briefly Becomes World’s Second-Richest Person, Surpassing Jeff Bezos

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Oracle Chairman Larry Ellison briefly claimed the title of the world’s second-richest person on Friday, overtaking Amazon founder Jeff Bezos. Ellison’s net worth reached $208.4 billion shortly after the market opened before settling at $197 billion, according to Forbes’ real-time billionaires list. Meanwhile, Bezos’ fortune stands at $204 billion. Elon Musk remains the world’s wealthiest person, with a net worth of $252 billion.

Ellison’s rise in wealth was driven by Oracle’s best stock market performance since 2021. The company’s shares surged, closing at $162.03 on Friday, bolstered by an optimistic revenue forecast through fiscal 2029 and strong quarterly results. Oracle’s stock has risen about 54% this year, second only to AI chipmaker Nvidia among large-cap tech stocks.

As Oracle’s co-founder and its largest shareholder with a 40% stake, Ellison has significantly benefited from the company’s resurgence in cloud infrastructure and the growing demand for its cloud databases. Over the past year, Oracle has strengthened its cloud offerings by partnering with Amazon Web Services (AWS), Microsoft, and Google, positioning itself for further growth in both public and private cloud markets.

Ellison’s wealth fluctuated as he and Bezos competed for the second spot on the world’s richest list, just days after Oracle announced a new partnership with Amazon. Under this partnership, Oracle’s database software will be available for AWS customers, further boosting Oracle’s cloud presence.