🇨🇳 China’s property panic
Hey Snackers,
It has the juice… but it’s not corn. A California interstate was covered in tomato juice after a big rig crashed and scattered 150K tomatoes.
US stocks notched a three-day losing streak yesterday. But consumer confidence rose for the first time in four months as cheaper gas and cooling ’flation boosted Americans’ financial optimism.
China’s property market is in a panic — and its slumping tech sector is looking abroad
A proper(ty) predicament… China’s growth forecasts are getting slashed as its property market wavers. FYI: up to three-quarters of China’s household wealth is in real estate. Home sales have slipped for 11 months straight (China’s longest slump on record) while property prices have tanked. The US may be in a housing recession, but China is in a full-on property-market depression.
- Profits: Country Garden, China’s biggest developer, saw profits plunge 96% in the first half of the year. Evergrande, China’s second-largest developer with $300B in debt, defaulted on its US bonds in December.
- Protests: Hundreds of thousands of Chinese homebuyers are refusing to pay their mortgages because of building delays and sinking property prices.
- Plan: To spur investment, China’s central bank slashed the five-year mortgage rate by 15 basis points, matching its biggest cut on record.
Beyond real estate… China’s tech sector is slowing after intense Covid crackdowns and regulatory heat (think: big fines). Amazon rival Alibaba and Tesla competitor Xpeng just suffered their slowest quarterly growth ever, while gaming giant Tencent posted its first sales decline. To swerve a struggling domestic economy, tech titans are trying to expand into the US:
Real estate’s stuck at home… even though companies can expand internationally. China’s property industry accounts for up to 30% of its GDP — roughly 2X as much as in the US. While experts say a 2008-style housing-and-financial-crisis combo isn’t likely, China’s property problems extend beyond its borders: every 1% decline in China’s GDP is estimated to cause a 0.3% dip in global GDP.
From upcycled clothes to used cars, the resale economy is booming as new products get pricier
Recommerce on the rise… Suddenly that 2012 Volvo in your garage and the vintage dress in your closet are looking valuable. As inflation continues to strain wallets, more consumers are buying goods secondhand.
- Growth is booming: The US’s secondhand market is expected to more than double by 2026.
- Used = mainstream: More than three-quarters of Americans say they buy or sell secondhand products.
- Overstock opportunity: Liquidators are taking piles of unsold inventory from retailers like Target and Walmart and offloading it to resellers, boosting secondhand supply.
Pre-worn, low-rise Levi’s… Secondhand shopping became popular with sustainable Gen Z shoppers on social-friendly marketplaces like The RealReal, ThredUp, and Poshmark. The fashion resale industry is forecast to double to $77B in the next five years. But thanks to #flation, young shoppers are beginning to buy other products secondhand too:
- Used everything: Secondhand marketplace OfferUp says that non-clothing categories like electronics, furniture, sporting goods, and auto parts make up 76% of its sales.
- High tech, low cost: This month DoorDash partnered with Facebook Marketplace to deliver resale products. Uber launched a similar program last year with Mercari.
Recommerce is a “flation flourisher”… Inflation boosts recommerce by encouraging thrifty shoppers to buy and sell used items. But traditional retailers are also placing big bets on resale, which could push more consumers into the secondhand economy. Macy’s, Walmart, Gap, Adidas, Everlane, and Crocs have all struck “resale as a service” partnerships with ThredUp (think: ecomm portals). Buzzy brands like Lululemon, Levi’s, and Ikea have even launched their own resale programs.
What else we’re Snackin’
- Worst: Best Buy's quarterly sales fell 12% from last year as demand for pricey electronics (think: computers, projectors) retreated after the home-tech boom. Competitors' discounted inventory isn't helping.
- Flexxon: Exxon might sue Russia unless it’s allowed to sell its stake in a major Russian gas project. Moscow has blocked that kind of transaction this year. Now: other Russian-invested companies could also sue.
- ThieFi: The FBI warned crypto investors about DeFi hacks and asked developers to boost security. Thieves stole $1.3B from DeFi platforms in the first quarter alone as the industry struggles to combat crime.
- Screen: California passed a sweeping children’s online safety bill requiring digital platforms to add basic protections for users under 18. It could prompt social platforms to make nationwide changes.
- Lego: Walmart released its holiday "top toys" list a month early. Possibly driving the move: #flation. Shoppers are facing daunting prices, and early holiday deals = more time to stretch budgets.
Wednesday
- Earnings expected from: Okta, MongoDB, and Five Below
Authors of this Snacks own: shares of Tesla, Walmart, Amazon, and Uber
ID: 2404218