BEIJING —
China suffered its worst economic contraction since since at least the 1970s in the first quarter as it fought the coronavirus, and weak consumer spending and factory activity suggest it faces a longer, harder recovery than initially expected.
The world’s second-largest economy shrank 6.8% from a year ago in the three months ending in March after factories, shops and travel were closed to contain the infection, official data showed Friday.
That was stronger than some forecasts that called for a contraction of up to 16% but China’s worst performance since before market-style economic reforms started in 1979.
Some forecasters earlier said China, which led the way into a global shutdown to fight the virus, might rebound as early as this month. But they have been cutting growth forecasts and pushing back recovery timelines as negative trade, retail sales and other data pile up.
“I don’t think we will see a real recovery until the fourth quarter or the end of the year,” said economist Zhu Zhenxin at the Rushi Finance Institute in Beijing.
Retail spending, which supplied 80% of China’s economic growth last year, plunged 19% in the first quarter from a year earlier, below most forecasts. Investment in factories and other fixed assets, the other major growth driver, sank 16.1%.
The ruling Communist Party declared victory over the virus in early March and started reopening factories and offices even as the United States and Europe tightened controls. But cinemas, hair salons and other businesses that are deemed nonessential but employ millions of people are still closed. Tourism is struggling to recover.
Controls on Beijing, the capital, and some other cities have been tightened to prevent a resurgence of the disease. Most foreigners are barred from entering the country.
Consumer spending is slow to recover despite government moves to encourage spending by giving out shopping vouchers in some cities and launching a media campaign showing officials eating in restaurants.
Many would-be shoppers are holding onto their money out of fear about possible job losses. Others are reluctant to venture into supermarkets or even leave their homes.
That is a blow to automakers and other companies that hope China will power the world economy out of its most painful slump since the 1930s.
“I will definitely be more thrifty,” said Zhang Lizhou, a 26-year-old marketing manager in Beijing.
Zhang said his company, which has yet to reopen, is paying him 1,500 yuan ($215) per month but his finances are strained paying a mortgage. His girlfriend lost her job when her employer failed due to the epidemic.
“I will save money to get through possible difficulties,” Zhang said. “If I had done that, I wouldn’t be like what I am now — anxious but unable to do anything.”
The ruling party appealed to companies to keep paying employees and avoid layoffs. It is promising tax breaks and loans to help entrepreneurs get back on their feet. Still, a wave of bankruptcies has flooded the job market, adding to economic anxiety.
Auto sales sank 48.4% from a year earlier in March. That was better than February’s record 81.7% plunge but is on top of a 2-year-old decline that already was squeezing global and Chinese automakers in the industry’s biggest global market.
Exports declined 6.6% in March from a year ago. That was an improvement over the double-digit plunge in January and February, but forecasters warn exporters likely face another downturn as the fight against the virus depresses U.S. and European consumer demand.
Forecasters including Oxford Economics, UBS and Nomura say China will have little to no economic growth this year.
The operator of a still-shuttered fitness centre in the western city of Xi’an said he doesn’t know whether the business will survive.
“The business may go bankrupt, and I would have to find something else to do,” said the owner, who would give only his surname, Liu.
Beijing is trying to prop up activity by spending more on building next-generation telecoms networks and other projects. But the ruling party doesn’t want to pump too much money into the economy for fear adding to debt or pushing up inflation that is near a seven-year high.
Chinese leaders probably will adopt stimulus measures at least as big as their response to the 2008 crisis but will emphasize “quality instead of quantity,” said Zhu at the Rushi Finance Institute.
He said money was likely to go to technology development and social welfare instead of construction, as it did in 2008.
Last year’s economic growth sank to a multi-decade low of 6.1% under pressure from weak consumer demand and a tariff war with President Donald Trump that depressed exports.
“The epidemic has amplified the problems, so the pace of recovery will be much slower,” said Zhu.
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AP video producer Wayne Zhang and researcher Yu Bing contributed.
TOKYO (AP) — Japanese technology group SoftBank swung back to profitability in the July-September quarter, boosted by positive results in its Vision Fund investments.
Tokyo-based SoftBank Group Corp. reported Tuesday a fiscal second quarter profit of nearly 1.18 trillion yen ($7.7 billion), compared with a 931 billion yen loss in the year-earlier period.
Quarterly sales edged up about 6% to nearly 1.77 trillion yen ($11.5 billion).
SoftBank credited income from royalties and licensing related to its holdings in Arm, a computer chip-designing company, whose business spans smartphones, data centers, networking equipment, automotive, consumer electronic devices, and AI applications.
The results were also helped by the absence of losses related to SoftBank’s investment in office-space sharing venture WeWork, which hit the previous fiscal year.
WeWork, which filed for Chapter 11 bankruptcy protection in 2023, emerged from Chapter 11 in June.
SoftBank has benefitted in recent months from rising share prices in some investment, such as U.S.-based e-commerce company Coupang, Chinese mobility provider DiDi Global and Bytedance, the Chinese developer of TikTok.
SoftBank’s financial results tend to swing wildly, partly because of its sprawling investment portfolio that includes search engine Yahoo, Chinese retailer Alibaba, and artificial intelligence company Nvidia.
SoftBank makes investments in a variety of companies that it groups together in a series of Vision Funds.
The company’s founder, Masayoshi Son, is a pioneer in technology investment in Japan. SoftBank Group does not give earnings forecasts.
Shopify Inc. executives brushed off concerns that incoming U.S. President Donald Trump will be a major detriment to many of the company’s merchants.
“There’s nothing in what we’ve heard from Trump, nor would there have been anything from (Democratic candidate) Kamala (Harris), which we think impacts the overall state of new business formation and entrepreneurship,” Shopify’s chief financial officer Jeff Hoffmeister told analysts on a call Tuesday.
“We still feel really good about all the merchants out there, all the entrepreneurs that want to start new businesses and that’s obviously not going to change with the administration.”
Hoffmeister’s comments come a week after Trump, a Republican businessman, trounced Harris in an election that will soon return him to the Oval Office.
On the campaign trail, he threatened to impose tariffs of 60 per cent on imports from China and roughly 10 per cent to 20 per cent on goods from all other countries.
If the president-elect makes good on the promise, many worry the cost of operating will soar for companies, including customers of Shopify, which sells e-commerce software to small businesses but also brands as big as Kylie Cosmetics and Victoria’s Secret.
These merchants may feel they have no choice but to pass on the increases to customers, perhaps sparking more inflation.
If Trump’s tariffs do come to fruition, Shopify’s president Harley Finkelstein pointed out China is “not a huge area” for Shopify.
However, “we can’t anticipate what every presidential administration is going to do,” he cautioned.
He likened the uncertainty facing the business community to the COVID-19 pandemic where Shopify had to help companies migrate online.
“Our job is no matter what comes the way of our merchants, we provide them with tools and service and support for them to navigate it really well,” he said.
Finkelstein was questioned about the forthcoming U.S. leadership change on a call meant to delve into Shopify’s latest earnings, which sent shares soaring 27 per cent to $158.63 shortly after Tuesday’s market open.
The Ottawa-based company, which keeps its books in U.S. dollars, reported US$828 million in net income for its third quarter, up from US$718 million in the same quarter last year, as its revenue rose 26 per cent.
Revenue for the period ended Sept. 30 totalled US$2.16 billion, up from US$1.71 billion a year earlier.
Subscription solutions revenue reached US$610 million, up from US$486 million in the same quarter last year.
Merchant solutions revenue amounted to US$1.55 billion, up from US$1.23 billion.
Shopify’s net income excluding the impact of equity investments totalled US$344 million for the quarter, up from US$173 million in the same quarter last year.
Daniel Chan, a TD Cowen analyst, said the results show Shopify has a leadership position in the e-commerce world and “a continued ability to gain market share.”
In its outlook for its fourth quarter of 2024, the company said it expects revenue to grow at a mid-to-high-twenties percentage rate on a year-over-year basis.
“Q4 guidance suggests Shopify will finish the year strong, with better-than-expected revenue growth and operating margin,” Chan pointed out in a note to investors.
This report by The Canadian Press was first published Nov. 12, 2024.
TORONTO – RioCan Real Estate Investment Trust says it has cut almost 10 per cent of its staff as it deals with a slowdown in the condo market and overall pushes for greater efficiency.
The company says the cuts, which amount to around 60 employees based on its last annual filing, will mean about $9 million in restructuring charges and should translate to about $8 million in annualized cash savings.
The job cuts come as RioCan and others scale back condo development plans as the market softens, but chief executive Jonathan Gitlin says the reductions were from a companywide efficiency effort.
RioCan says it doesn’t plan to start any new construction of mixed-use properties this year and well into 2025 as it adjusts to the shifting market demand.
The company reported a net income of $96.9 million in the third quarter, up from a loss of $73.5 million last year, as it saw a $159 million boost from a favourable change in the fair value of investment properties.
RioCan reported what it says is a record-breaking 97.8 per cent occupancy rate in the quarter including retail committed occupancy of 98.6 per cent.
This report by The Canadian Press was first published Nov. 12, 2024.
