Features China tech retail sales growth of 10.6 % for the same period . Furthermore , over the first three months of 2023 , China ' s online retail sales grew by an impressive 8.6 % YoY , surpassing the 5.8 % YoY growth in overall retail sales of goods and services .
Despite the challenges posed by the adjustment to the reopening and shifting consumer preferences , China ' s online retail sector continues to demonstrate its resilience and potential for sustained growth .
2 . Policy wise there is an emphasis on domestic consumption in China ’ s growth strategy
While exports continue to play a vital role in the Chinese economy , the country ' s authorities have adopted a new development pattern since 2020 that places domestic demand at the forefront of their growth strategy .
The State Council ' s 2023 Work Report reinforces this approach and emphasises the expansion of domestic consumption .
These developments reflect a concerted effort by the Chinese government to create a more self-reliant and resilient economy , less dependent on external factors . The shift in focus towards domestic demand signals a new chapter in China ' s growth story and presents new opportunities for investors and businesses seeking to tap into the country ' s enormous consumer market .
Furthermore , over the past two years , the Chinese government has introduced strict regulations on e-commerce and internet platform companies and has cracked down on certain business activities and behaviours . However , signs have emerged that the most drastic actions and changes have already taken place .
As such it is also plausible that China has entered a more stable and favourable stage in the regulatory policy cycle . This new approach may present opportunities for commerce driven platform companies and private enterprises seeking to navigate the evolving regulatory landscape in China .
FIGURE 1 : CHINA ' S REAL GDP GROWTH ( Y / Y )
20
15
10
5
0
-5
-10
Source : Bloomberg , Saxo
FIGURE 2 : CHINA ' S RETAIL SALES GROWTH ( Y / Y )
40
30
20
10
0
-10
-20
Source : Bloomberg , Saxo
2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023
2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023
“ While the focus has been understandably on the upside from AI , we believe there may other positive factors for China tech that investors may be overlooking . The clearer shorter term upside is for Chinese tech giants that have more consumer and eCommerce exposure ”
3 . Chinese authorities prompt business empire breakup for tech giants is a blessing in disguise for investors
The remarkable growth of mega-cap internet companies in China has come under increasing scrutiny from regulatory authorities . For example , Alibaba has announced a restructuring plan that will divide the conglomerate into six independent groups , each specialising in a specific business area . The end result is the value of the six individual companies will likely far exceed the original valuation of Alibaba due to the conglomerate effect . Furthermore , com- panies like Alibaba now are more free to move forward and proactively chase for more growth and profitability .
This development may drive valuation multiple expansion in the coming months and lead to the undemanding forward P / E ratios of tech giants such as Alibaba at 11x and JD . COM at 13x seeing an uptick .
Seeking out opportunities in the consumption and technology sphere in China , we anticipate prospects arising from the economic recovery through summer , expanding domestic consumption stimulated by the lifting of pandemic restrictions , credit extension and governmental policy initiatives . As China ' s regulatory environment toward internet companies becomes less stringent , these companies could see a significant boost .
Ken Shih is head of wealth management , greater China , at Saxo Bank
Redmond Wong is market strategist , greater China , at Saxo Bank
MAY 2023 | ETF INSIDER 21