In this week’s issue local governments line up for handouts, solar sector gets squeezed and Shein smiles on Britain’s Missguided fashion. On a scale of 1 to 100, we give the week a 45 for offshore-listed China stocks.

Doug Young, Editor in Chief

You can sign up to get China Bulletin weekly in your inbox.


Manufacturing Contracts, Foreign Investment Plunges

The latest indicators show that China’s economy continues to sputter, with the Caixin Manufacturers Purchasing Managers’ Index (PMI) falling to 49.5 in October from 50.6 the previous month. The Caixin Services PMI did a little better, rising to 50.4 from a nine-month low of 50.2 over the same period. Anything above 50 is considered expansion, while below that is contraction.

At the same time, some data crunching by the Financial Times showed foreign direct investment (FDI) in China plunged by 34% to 72.8 billion yuan in September from a year earlier, the biggest-ever drop since monthly data became available in 2014. While the two PMI figures tend to move in very small steps, the huge decline in FDI should be bigger cause for concern in Beijing.

Their Growth Slowing, Provinces Line Up for Government Largess

New data suggests that growth in China’s 31 provinces is slowing, even as Beijing tries to help these debt-strapped governments that are the engines of the nation’s economy. Just 11 of China’s 31 provinces reported growth in the first nine months of the year that exceeded their first-half growth, implying growth slowed for the other 20 in the third quarter.

Meantime, another report says local governments are already clamoring for a piece of 1 trillion yuan worth of sovereign debt approved by Beijing last month for infrastructure construction. This particular debt issue is quite large and will add a heavy repayment burden for Beijing. But it may feel it has no choice since local governments are even more heavily debt-strapped.

China Stocks Eke Out Gains

Offshore Chinese stocks managed to finish in the black last week, but only in a familiar pattern that saw them slump for most of the week before being lifted into positive territory by a Friday rally. The Hang Seng China Enterprises Index rose 1.2% during the week after the 2.4% Friday rally, while the Hang Seng Index rose 1.5%. The iShares MSCI China ETF rose by a larger 3.7%.

The rest of the world did quite well last week, so the fact that China stocks could only muster small gains based on a single-day rally sort of sums up the weak sentiment in the market right now. Things could continue to hobble along until mid-November, when stocks could get a lift if things go well at an expected summit between Xi Jinping and Joe Biden in San Francisco.

A residential construction site in Henan, China


Property Loans Post First-Ever Decline

Nobody needs to be reminded that China’s property market is currently in a state of crisis. Now, yet another new data point is nicely illustrating how weak things are right now. That data point comes from the sector for property loans, which have fallen for the first time ever as new building activity shrivels.

Specifically, the outstanding amount of loans to China’s property sector totaled 53.19 trillion yuan at the end of September, which was down 100 billion yuan from that time a year earlier. The shrinking loan volume is the result of growing caution by banks and other lenders, which fear they’ll never get repaid by China’s increasingly shaky property developers.

Airlines Jet Back to Profits

After three years in the red, China’s big three state-owned airlines have cruised back into the black with their first quarterly profits since the pandemic began. Air China and China Southern led the way with profits of about 4.2 billion yuan each for the three months to September, while China Eastern trailed slightly behind with a profit of 3.6 billion yuan.

In a separate report from the airline space, China and the U.S. announced an increase in flights between the two countries, raising them to 70 each week from the current 48. While that’s an improvement, it’s still well below the 300-plus flights between the two countries pre-pandemic. It’s unclear if the number will ever return to the earlier level, however, due to declining demand.

China Feels Solar Squeeze

First it was makers of polysilicon, the main material used to make solar panels, that felt the squeeze as prices for their product plunged early this year. Now, makers of finished panels are getting sucked into the vortex of this highly cyclical industry as well, with one leading company, Longi, recently complaining that current prices are roughly just enough to cover its costs.

Longi made the remarks as it reported a 44% profit plunge in the third quarter. We also spotlighted the trend in our own look at the latest earnings from JinkoSolar, another leading Chinese name. With this kind of bloody competition occurring frequently, many Westerners might be thinking they’re better off leaving the Chinese to fight among themselves for supremacy of this industry.

Apple and Huawei products


HSBC Sucked Into China’s Ailing Property Black Hole

While China’s property woes have been mostly an internal family affair, a limited but growing number of foreigners are also getting sucked in to the crisis. Holders of dollar-denominated bonds issued by Chinese property developers are one major group in that category, and now global banking giant HSBC is joining their ranks.

HSBC said that of the $1.1 billion in credit loss charges it took in the third quarter, nearly half, or $500 million, were related to China’s commercial real estate sector. That brings charges by HSBC related to its Chinese property portfolio to $800 million so far this year. That means the final figure is likely to top well over $1 billion as more loans continue to sour.

Apple Confident on China as Huawei Eyes Comeback

There’s been lots of talk about a new rivalry in China for Apple, following Huawei’s recent launch of a new cutting-edge smartphone model in its home market. Now, Apple CEO Tim Cook is saying not to worry, that Apple continues to see strong demand in China, and even set a quarterly record for the market in September following the release of its latest iPhone.

Huawei once dominated its home market, and was challenging Apple at the upper end. But that ended when the U.S. choked off Huawei’s supply of 5G chips. The launch of its latest phone appears to show Huawei has found a way around the U.S. bans, and could soon mount a comeback. Many Chinese consumers are sympathetic as well, believing Huawei has been unfairly bullied by the U.S.

Shein Smiles on British Fashion Brand

Some may call it “misguided,” but Chinese fast-fashion sensation Shein quite likes what it sees in the British Missguided fashion brand. As part of its new deal to purchase the brand, Shein, which began in China but is now officially a Singaporean company, will form a joint venture with Missguided’s founder Nitin Passi to manage the brand under a licensing agreement.

Missguided doesn’t have the greatest track record. It was teetering on the brink of bankruptcy when it was acquired by Britain’s Frasers Group for 20 million pounds, or about $24 million, in 2022. This kind of cheap acquisition certainly matches Shein’s own reputation for bargains, and also fits a pattern of Chinese companies that love to buy struggling foreign brands for bargain prices.


Transsion Emerges as China’s Next Smartphone Giant

Last week we shined our spotlight on Transsion, a company whose name would probably elicit blank stares from most of our readers. But this company has quietly emerged to become China’s next smartphone sensation by focusing on emerging markets. Transsion was one of the top five global smartphone makers for a second consecutive quarter in the third quarter.

The company, whose main brands are Tecno, Itel and Infinix has carved out a niche as Africa’s largest smartphone supplier, with around half of the market. It’s also quite big in India and other parts of Asia. Interestingly, the company has yet to enter its home China market, which is the world’s largest but also fiercely competitive. But perhaps that’s just a matter of time.
mRNA Pioneer Stemirna Faces Post-Covid Reinvention Test

We also brought you the story of Stemirna, a former hot-shot that was set to become one of China’s leading makers of mRNA vaccines. Founded in 2016, Stemirna was in the vanguard of China’s mRNA research industry and became one of its first companies to work on anti-Covid therapies.

But it quickly ran into difficulties, and is now being sued in at least 55 disputes over labor, construction and service contracts. China never let in any foreign vaccines, leading many to believe that local mRNA vaccine makers could rake in big bucks from the market. But with the pandemic now in the past, China’s mRNA aspirations appear to be losing momentum as well.

Recent Articles