Chinese Economy Sees Hope In Tech Giants’ Performances
$AAPL, $BABA
Eye-catching Quarterly gains by Apple (NASDAQ:AAPL) and Alibaba (NYSE:BABA) in China have provided fresh proof that growing online and high-tech consumption may be coming to the rescue of the country’s economy.
Both e-Commerce giant Alibaba and the iconic tech giant Apple reported better-than-expected Quarterly earnings Tuesday, thanks mainly to strong performances in the Chinese market.
“There is no lack of demand in China so long as companies provide products that are the apple of Chinese consumers’ eyes,” wrote Yu Fenghui when commenting on Apple’s performance on his blog.
Apple’s sales nearly 2X’d in China despite concerns of an economic slowdown. The company reported US$12.5-B in revenue from China, almost a 25% of its total.
Tuesday, Alibaba announced faster revenue growth of 32% in Q-3 of the year. The revenue of US$3.49-B beat expectations as its growth slowed to 28% in Q-2 from 45% in Q-1.
The NYSE-listed Alibaba has been under tremendous pressure this year amid worries that a slowing economy might drag down consumer spending in the world’s 2nd-largest economy.
But Alibaba defied the doubters through its expansion.
“We are winning in mobile and remain focused on our top priorities, including internationalization, expanding our ecosystem from cities to villages, and building a world-class high tech cloud computing business,” said CEO Daniel Zhang.
China is shifting its economic drivers.
Compared with investment and exports, consumption has been a less conspicuous source of growth for the country in recent decades, but it is catching up fast.
In the 1st 9 months, retail sales of consumer goods in China rose 10.5%. Meanwhile, the high-tech sector grew 10.4% Y-Y, out-pacing value-added industrial output by 4.2 percentage points.
“Some must win, some must lose. This time, the iron and ore sector became a loser, as the government plans to put more emphasis on the green economy, improve the industrial structure and support low-carbon energy consumption,” said Zhang Shuyu, a researcher with the University of International Business and Economics.
China’s once-sizzling steel industry has cooled as the economy shifts gear from export and investment-oriented growth to consumption and service-oriented expansion, hurting industry profits and forcing factories to close.
In the 1st 9 months, medium-sized and large steel producers suffered losses of RMB 55.27-B (US$8.7-B) in their main businesses, more than double the RMB 21.7-B loss registered in 1-H of this year, the China Iron and Steel Association announced Wednesday.
Crude steel output also continued to decline. In the 1st 8 months of Y 2015, output fell 2% Y-Y, with the dive accelerating from 1.8% in the 1st 7 months. In the January-June period, the sector posted its 1st half-year drop in nearly 20 years, according to data from the National Development and Reform Commission.
“Providing upgraded tech products and services can be a way out for the losers,” said Zhang Shuyu.
Although China is experiencing growing pains in shifting from old drivers of growth to new ones, new industrialization, IT application and entrepreneurship have generated strong domestic demand and great potential for future growth, according to the researcher.
“I know some people are worried about the economy, but we’ll continue to invest,” Apple CEO Tim Cook said. “If you look at the long term, it’s clear that China is a great place to be.”
Apple will open its 25th Apple Store in greater China this weekend, closing the gap on the goal of 40 stores by mid-2016. Meanwhile, there are around 1.5-M developers in China working on projects related to Apple operating system iOS.
By Han Yang
Paul Ebeling, Editor
HeffX-LTN
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