Singles' Day: Alibaba stops showing its numbers

Alibaba did not publish its Singles' Day sales total on 11 November 2022, the first time in the festival's fourteen-year history that it has kept the number to itself. It said only that performance was in line with the prior year. For more than a decade the event was China's great corporate showcase for middle-class spending. Alibaba and its e-commerce rivals turned it into a media production, with celebrity performances and live scoreboards flashing record gross merchandise value (GMV) figures across auditorium screens. This year the screens went dark. When the biggest retailer in the country chooses to say nothing, the message about the Chinese consumer is hard to miss. Shoppers have pulled back.

The blackout is more than a public relations choice. It is a data point, and it confirms that domestic demand in the world's second-largest economy is exhausted. Rolling zero-COVID lockdowns, a drawn-out property bust and youth unemployment close to twenty per cent have pushed Chinese households out of spending on hope and into protecting what they have. The silence reflects an economy that corporate marketing can no longer dress up as growth.

A scoreboard that had stalled

The warning signs were visible last year. Alibaba reported 540.3bn yuan of merchandise sold over the 2021 festival, but growth had slowed to the weakest on record, and the celebrations were already muted. Beijing had fined the company 18.2bn yuan for antitrust violations that April, and the government's campaign for common prosperity made conspicuous boasts about consumer excess politically awkward.

The wider data have since weakened further. Retail sales grew by just 2.5 per cent in the year to September, a fraction of the pace it managed before the pandemic. Shanghai spent two months under lockdown in the spring, and cities from Chengdu to Guangzhou have faced fresh restrictions since. A household that cannot be sure its district will stay open next week is unlikely to commit to a large purchase this week.

Property drags on spending

The slump starts with housing. Residential property makes up roughly seventy per cent of Chinese household wealth. For two decades rising apartment prices produced a large wealth effect that encouraged households to spend on luxury goods, electronics and services. Now developers are defaulting on their debts, buyers of unfinished flats are boycotting their mortgages and prices are falling in tier-two and tier-three cities. The wealth effect has turned sharply negative.

The rot set in when Evergrande, the most indebted developer, defaulted on its dollar bonds late last year, and it spread as others followed. The mortgage boycotts that began in July showed a new kind of fear: buyers who had paid in advance for flats that might never be finished. Pre-sales had been the developers' main source of funding, so once buyers stopped trusting them, construction slowed further and the confidence problem fed on itself.

Households are paying debt down rather than borrowing to spend. Early mortgage repayments have hit record levels, and new consumer credit has all but stopped growing. People who watch their biggest asset lose value, and who can be locked down at short notice, spend less of each extra yuan. Eighty billion dollars on discounted clothes and cosmetics in a single twenty-four-hour promotion stops looking like a fun annual ritual and starts looking reckless.

The yuan limits Beijing

The consumer slump has arrived just as pressure from abroad builds. The Federal Reserve's rapid rate rises have wiped out the yield premium Chinese government bonds used to hold over US Treasuries, and the gap has now inverted. Capital outflows have picked up, pushing the yuan towards 7.30 per dollar, a level not breached since the global financial crisis of 2008.

That leaves Beijing's policymakers in a painful bind. Textbook economics says a country with falling domestic demand should cut interest rates to encourage borrowing. But cutting while the Fed is tightening widens the rate gap, speeds up capital flight and pushes the yuan lower still. To defend the currency the People's Bank of China has to fall back on administrative guidance, dollar sales by state banks and cuts to reserve requirements, which leaves domestic monetary policy largely stuck.

The central bank has used the full kit this autumn. In September it cut the share of foreign-currency deposits that banks must hold in reserve, which frees dollars for the market, and reimposed a 20 per cent risk reserve on banks' sales of forward dollars to clients, which makes betting against the yuan more expensive. Those measures slow the currency's slide without adding any stimulus at home.

The case for a quieter explanation

There is a more benign reading of Alibaba's silence. The festival has been diluted for years, with presales now starting in October, and livestreaming platforms such as Douyin have taken a growing share of the spending that once flowed through Alibaba's sites alone. A company losing market share has reasons to stop publishing a number that measures only its own slice. Regulatory caution after the antitrust fine points the same way.

Both explanations can be true at once, and neither contradicts the macro data. Market share losses would explain a flat total; they would not explain weak retail sales, cautious borrowing or falling house prices. The signal from the dark screens is consistent with every other gauge of Chinese demand this year.

What would change the picture

The one development that could revive spending quickly is an end to zero-COVID. On 11 November the National Health Commission shortened quarantine periods for close contacts and inbound travellers, a modest step that markets greeted as a sign of more to come. A property rescue that let stalled projects be finished would do more for confidence than any rate cut, because it would address the fear behind the mortgage boycotts directly.

The number Alibaba kept back is the best scoreboard for the Chinese economy in late 2022. China's biggest retailers can no longer produce growth headlines because households are stuck in a balance-sheet slump that e-commerce discounts will not fix, and consumer spending is likely to stay weak for as long as house prices keep falling. Global brands and investors who built their plans on an endless supply of Chinese shoppers should read the dark screens as a warning that easy growth in China is over, and luxury and consumer-goods groups with the largest Chinese exposure will feel it first in their results for the Christmas quarter.