Stalling growth, tech curbs, and cheap socks – China in 5

Welcome to China in 5, in its new home on LinkedIn! Each week, we bring you up to speed with what’s caught our eye in the China-sphere in five(ish) minutes.?Grab a coffee, take a break, and dive in!

Bumpy road to China's economic recovery

China’s recently released economic data for July continued to point to stalling economic recovery, sparking concern about whether the country’s economy can reach its target of around 5% growth.

Fact 1: Key economic data including industrial output (3.7%) and retail sales (2.5%) grew at a slower pace than expected in July while the urban unemployment rate remained high (5.3%).

Fact 2: While Chinese consumers have been less willing to purchase ‘products’ this year, they have been more inclined to spend on ‘services’.

Fact 3: In particular, China’s box office has bucked the trend amidst economic slowdown, surging to a record high in July, reaching 8.7 billion yuan.

Following the reopening, Chinese consumers have been eager to spend on services such as going to the cinema, dining out and travelling, as opposed to buying products, indicating a change in Chinese consumers’ spending patterns. While the increasing spending on services, including the surging box office, has been a bright spotlight in China’s economic recovery, the country’s economy in general is facing challenges with persistently high unemployment rates, continued slump in the housing market and weak consumer demand. A spate of policy measures have been introduced in recent weeks to encourage the development of private and foreign companies, support the property sector and to stimulate demand. While British businesses support the release of measures aimed at reinvigorating the economy, we will still need to wait and see their effects. Sally Xu, Manager, Government Affairs and Advocacy

Rishi Sunak weighs following Joe Biden on curbing tech investment in China

On August 9th, the Biden administration announced that it was placing new restrictions that will come into force next year on certain outbound US investments into China’s tech sectors relevant to military, intelligence, surveillance, or cyber-enabled capabilities.

Fact 1? UK Prime Minister, Rishi Sunak, entered into the ‘Atlantic Declaration’ with the US in June this year placing economic security at the heart of the UK-US relationship.

Fact 2 The UK government has stated that it will consider the new US measures closely as it continues to assess potential national security risks associated with certain investments.

Fact 3 China is the UK’s fourth-largest trading partner, however it is not a significant destination for UK outbound foreign investment, with the UK’s investment in China accounting for only 0.6% of the global total in 2021.

The cautious approach by the British government as it contemplates whether it will echo the recent moves by the US underscores the delicate balance the UK needs to maintain between economic cooperation and safeguarding national interests. For British businesses, this undoubtedly contributes to feelings of uncertainty with the prospect of restrictions on outbound investment in certain areas potentially prompting companies to reassess their strategies and focus. As our Position Paper highlighted, companies appear to be adopting a “wait-and-see” approach towards their investment in China, reflecting concerns about potential risks such as evolving geopolitical dynamics. In any event, the hope is that whatever approach the British government takes, it is one that is informed by the nature and risks associated with the British supply chain, aligning any investment restrictions with its unique circumstances and individual national security concerns. Alexandra Hirst, Manager, Policy and Advocacy

Coffee break read – Temu's approach to cracking the US market

Why we like it: Pinduoduo may be a familiar brand to Chinese consumers, but it is its Western subsidiary, Temu, which is rapidly gaining traction around the world for its unlabelled goods at heavily discounted prices. This analysis from Wired, however, suggests that the company could be losing as much as $30 per order – a potentially unsustainable loss-leading tactic that is putting pressure on Chinese manufacturers to cut their own profit margins. After putting $14 million into two thirty second adverts shown during this year’s Superbowl, Temu began to take off in the US and other Western markets, despite fierce competition from Amazon and other e-commerce giants; now, the company is keen to continue expansion overseas in the face of slowing demand in China for its goods.

Podcast of the Week –The 200th Episode: Interviews with Carnegie Scholars

From China in the World

Why we like it: For the 200th Episode of Carnegie China’s China in the World podcast, host Paul Haenie compiles conversations held over the last 10 years. A valuable retrospective on the last decade of China’s global influence and international relations through the lens of insightful interviews with Carnegie Scholars, this podcast is a compelling listen for anyone interested in understanding how China’s role and position in the world has evolved over the past decade. Click above to listen on Spotify, or here for other platforms.

And finally...

A space where we share an interesting image, infographic, article, or other tidbit that's got us thinking at BritCham this week.

This week, we're keeping tabs on China's housing market; a new release from China's National Bureau of Statistics showed that housing prices contracted by 0.1% year-on-year in July 2023. While this is better than the much larger contractions seen over the last year, it suggests that property is still a sector worth watching.

Thanks for reading China in 5! We want to hear what you think about this new initiative from the British Chamber of Commerce in China. Have thoughts about what you'd like to see, suggestions for our coffee break reads, or a favourite podcast you want to share? Let us know below, or reach out via our website at britishchamber.cn.