Temu owner PDD's warning sounds alarm on China's growth

One of the last remaining bright spots for Chinese consumption is rapidly fading, as the nation's economic malaise takes a toll on demand for even the most accessible of goods.

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In the latest warning to global markets on the health of the Chinese economy, Temu's owner PDD Holdings on Aug 26 surprised investors with an unusually gloomy outlook.

The e-commerce firm, which became a market darling with lowpriced goods that helped propel sales and profits during China's economic downturn, also reported revenue that missed estimates.

During a post-earnings briefing, chief executive Chen Lei mentioned at least eight times that revenue and profits must "inevitably" decline as economic growth slows.

"We are seeing many new challenges ahead, from changing consumer demand, intensifying competition, and uncertainties in global environment," Mr Chen told analysts.

He and his lieutenants were careful to stress they remained confident in Chinese consumption over the longer term, but the damage was done. PDD's US-listed shares plunged 29 per cent on Aug 26 in their biggest fall on record, wiping out US$55 billion (S$71.7 billion) of market value. Its closest rivals Alibaba Group Holding and JD.com followed suit, sliding about 5 per cent in Hong Kong on Aug 27.

PDD's warning stunned investors because the company was long viewed as the main beneficiary of a Chinese "consumer downgrade" - its low-pricing strategy on Pinduoduo domestically and Temu abroad was intended to appeal to cost-conscious shoppers at a time of unprecedented economic volatility.