Growth Dragons Weekly: Chinese Splurge on Gold Overseas, Bank Profits Rise, BYD Surpasses Tesla and Xiaomi's Fastest Car

What happened in China this week:

1. Chinese Overseas Spending Recovered, Driven by Gold Purchases

2. China’s Manufacturing Expanded in October

3. 246 Stocks on Beijing Stock Exchange Gained 50% or More in One Day

4. Bank Reports Profit Growth Despite Net Interest Margin Compression

5. BYD Surpasses Tesla’s Quarterly Revenue for the First Time, and Xiaomi Launches the Fastest 4-Door Car in SU7 Ultra

6. Miniso Aims for 40,000 Stores Worldwide, Competes with Pop Mart via Top Toy

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#1 Chinese Overseas Spending Recovered, Driven by Gold Purchases

According to a McKinsey report, Chinese overseas spending has already surpassed pre-COVID levels, aligning with recent travel data from China’s holiday periods. However, while outbound travelers currently stand at 87% of pre-COVID numbers, they are spending more per trip. So, what’s driving this increase? A closer look reveals a significant uptick in spending on gold bars and coins, which rose by 27.14% year-over-year to 282 tons. This growing demand for gold amid rising prices suggests cautious sentiment towards China’s economic recovery. It signals that consumers may prefer to secure their wealth in gold rather than in low-interest bank deposits or beleaguered real estate.

While an all-out spending boom may not be imminent, the statistics do show an increase in outbound travel and spending, indicating that Chinese consumers have both the means and the willingness to spend.

From the luxury alcohol sector, Kweichow Moutai has demonstrated resilience and strong demand, reporting Q3 2024 revenue of 38 billion yuan—a year-over-year growth of 15.29%. With a net profit margin of approximately 49% for the quarter, despite a slight dip from the previous quarter, Moutai’s financial health remains robust. This double-digit growth in revenue and profits highlights a rise in domestic consumption.

Some analysts argue that China’s F&B industry expansion abroad stems from weak domestic demand. However, we’d contend that this is only part of the story. Businesses venturing overseas are financially stable domestically, and their expansion is often more about testing international appeal than compensating for slower growth at home. Companies like Haidilao, Luckin Coffee, and Mixue indicate that expanding internationally is a strategic move rather than a reaction to sluggish local sales. This perspective underscores the enduring strength of Chinese consumer spending and the confidence businesses have in it.

According to Caixin, there are now 600,000 Chinese restaurants operating overseas. Notable brands like Luckin Coffee and Tai Er Sauerkraut Fish have opened their first international stores in Singapore, while bubble tea chain Tianlala has ventured into Indonesia. Mixue Ice Cream & Tea, with over 36,000 outlets in China, now has nearly 4,000 stores abroad.

As we compiled the list of Chinese brands in Singapore, it quickly became overwhelming—and we haven’t even captured everything yet:

#2 China’s Manufacturing Expanded in October

Shifting to the industrial side, China’s PMI data has offered positive signals this month. In October, China's manufacturing sector expanded for the first time in six months, buoyed by recent government stimulus measures aimed at revitalizing the economy. The National Bureau of Statistics’ purchasing managers' index (PMI) rose to 50.1 from September’s 49.8, just crossing the 50-point mark that separates growth from contraction and exceeding the median forecast of 49.9 in a Reuters poll. Additionally, the non-manufacturing PMI, which includes construction and services, inched up to 50.2 from 50.0 in September.

This improvement was primarily driven by large enterprises, with their PMI increasing from 50.6 to 51.5, while medium-sized firms showed a slight rise from 49.2 to 49.4. Small firms, however, experienced a decline. Sub-indices further signal growth, with production at 52 and new orders at 50, though raw materials inventory and employment remain in contraction at 48.2 and 48.4, respectively, albeit with modest improvement.

Finally, Reuters reported that China is considering issuing over 10 trillion yuan ($1.40 trillion) in additional debt in the coming years, primarily to help local governments address off-the-books debt risks. Expected to be approved next week, this issuance could significantly boost the economy, representing approximately 10% of China’s 2023 GDP. With these positive indicators, we see continued strength in China’s economy and a robust outlook leading into 2025.

#3 246 Stocks on Beijing Stock Exchange Gained 50% or More in One Day