China's consumer confidence tipped to improve in Q2

Local governments have launched incentives to stimulate consumption.

China is expected to regain consumer confidence in Q2 following a weak demand amidst the COVID-19 pandemic, according to a Jefferies report.

Most listed companies expect mainland China to see a resumption of sales growth in the second half of the year, with the most bullish ones projecting the recovery to return back to its pre-outbreak level.

Further, various local governments have launched incentives to stimulate consumption, as well as policies aiming to relieve corporates’ burden, urging full resumption of operations since the end of February.

However, controls remain strict in Beijing, as the return of overseas Chinese has caused some concerns of a second virus outbreak. By industry, the China Film Administration has re-closed all cinemas on 27 March until further notice.

In the mainland, there has been gradual recovery but limited pent-up demand. For example, same-store sales growth (SSSG) has improved MoM in March, although it has crashed 50-60% for some discretionaries and 20-30% for fast food chains.

Some key chain stores have reopened around 70-90% of branches, but sales remain low as consumers are not coming out as often and operating hours have been shortened, resulting in less foot traffic.