“Everything has collapsed" at China's No 1 Live Streaming Village for Internet Celebrities

Everything has collapsed at China's number. One live streaming village for internet celebrities. Beijing faces a desperate challenge. A total collapse larger than the 2015 stock market crash. Beixiazhu, located in Yiwu, has attracted a large number of live streamers and merchants in recent years, earning titles such as the first village of live streaming by internet celebrities and the capital of e-commerce. However, fierce competition, price wars, and weak domestic demand in recent years have caused this e-commerce town to lose its former prosperity. The craze in Beixiazhu began around 2019, when live streaming e-commerce emerged on short video platforms like Kuaishou and Douyin. Beixiazhu, situated in the suburbs of Yiwu, Zhejiang province, the global wholesale capital, became a starting point for entrepreneurs eager to enter the industry and get rich overnight. According to the South China Morning Post, today, in the 99 houses in Beixiazhu once occupied by live streaming sellers, traces of that period still linger. Advertising signs for Beixiazhu super supply chain and hot supply still hang on storefronts. On a weathered wall, one can still make out a fated slogan, Without dreams, why go to Yiwu? But now, the bustling crowds have disappeared, and the shopkeepers who were once busy packing orders have slowed down. Without internet celebrities shooting jokes or starting live broadcasts to sell goods, Beixiazhu has returned to a factory store. Pointing to a narrow path outside the store, a shopkeeper said it used to be crowded with cars and live broadcasters. If a product became popular, everyone would make it, competing to sell it at a lower price to squeeze out competitors. In the end, when no one made money, everything collapsed. This brutal competition is called volume locally, a term often heard in China in recent years. The word comes from the Chinese term involution, which describes a society or industry stuck in an endless rat race with no real progress, where people undercut each other until all resources are exhausted. Bidding to the extreme means that the product has no quality. Industry observers believe the phenomenon of involution will not disappear soon. Kenny Ng Laiyin, a strategist at Everbright Securities International, told the South China Morning Post, China's overall consumer demand remains weak, and deflation concerns persist. With the collapse of China's real estate market, household wealth has fallen, along with consumer confidence. Since last year, China's e-commerce industry has been caught in a fierce price war due to the economic slowdown and weak domestic consumption after the COVID pandemic. When bidding reaches an extreme low price and costs are compressed to the limit, the final outcome is a decline in product quality. Prices are reduced to the point where they cannot be lowered further because costs cannot be compressed anymore. Products become close to fake and may lose even their basic functions. On December 27th last year, China Entrepreneur Magazine published an article stating that in 2023, hot-selling products such as carrot knives, mini-mops, and sun hats were staged in Baixiazhu stores one after another. Their life cycle may only last a few weeks. When one product disappears, another rises immediately. The article cited the example of a 9.9 yuan kettle that was once a perennial hit in Baixiazhu. Almost all the cups received by users leaked, resulting in a 90% return rate. Involution is too fast, making money harder and harder. The price race has also affected merchants and manufacturers in Yiwu. Yiwu International Trade Market is only a 10-minute drive from Baixiazhu where buyers from all over the world are bargaining. Piles of goods are scattered on the floor, ready to be packaged. There are no fancy brands here, only the lowest prices. Many small merchants say it is getting harder and harder to make money. Yiwu merchant Huang Qiankian, transliteration, told the South China Morning Post, The involution of our industry has come too fast, leading to some unhealthy practices. She mainly sells products to Southeast Asian customers on Shopee, Shine, TikTok Shop, and Temu. She said the industry's main problem is an oversupply of goods, coupled with insufficient purchasing power. Further up the supply chain, manufacturers are also struggling to cope with meager profits. In the past, orders from a few big customers were enough for us to make money, said Zhang Jianhong, owner of a clothing factory. In more than two decades in Yiwu, she has witnessed how rising rents and labor costs have eroded her profit margins, which have shrunk from 40% to 10%. For suppliers like Zhang, the internet can be a double-edged sword. While online business helps bring in new customers, it also makes it easier for competitors to copy products and undercut prices. Our goal for the next few years is just to survive, she said. On the other hand, starting in late 2020, Chinese regulators began to follow up with increasingly detailed restrictions on the words and deeds of live streaming influencers. Part of a broader crackdown on the tech industry, which Beijing believes has become too influential. Beijing faces a desperate challenge, a total collapse larger than the 2015 stock market crash. Stimulated by a series of measures taken by the Chinese Communist Party, the Chinese stock market has been rising for days and many people have entered the market. However, Nomura Securities warned that the Chinese stock market frenzy will be followed by a crash, which may repeat the tragedy of 2015, as the foundation of China's economy is more fragile than before the outbreak. From September 24th to 27th, the Chinese Communist Party officially announced a series of measures to boost the economy, such as lowering interest rates and reserve requirements, reducing the down payment ratio for home purchases, providing about 1 trillion yuan of long-term liquidity funds to the financial market, and spending 800 billion yuan to support the stock market. Subsequently, the Chinese stock market rose abnormally and has been closed since then due to the National Day holiday. According to a report by Bloomberg on October 4th, Nomura Securities' latest report pointed out that investors should be prepared for the biggest rebound in the Chinese stock market in 16 years to turn into a crash, as the current economic foundation is much weaker than before the epidemic. In the most pessimistic scenario, the Chinese stock market frenzy will be followed by a crash, similar to what happened in 2015, economists wrote in a report to clients on October 3rd. The possibility of a crash is much higher than the more optimistic assumptions. The report said that given current market trends and Nomura's tracking of mainland social media sentiment, the risk of China repeating the ups and downs of 2015 will rise rapidly in the coming weeks. There is optimism that this rebound in Chinese and Hong Kong stocks is different from previous short-lived rebounds, and many global fund managers are beginning to reassess the Chinese market. But Nomura disagrees. The report warned that although investors may be immersed in the enthusiasm of the stock market boom, a more sober assessment is needed. Nomura said that the nearly four-year real estate crisis, high local government debt, escalating geopolitical tensions, the bursting of the investment bubble in the new energy field, the continued weakening of trust between the government and private enterprises, and the significant weakening of trust between the government and private enterprises have all led to the fragility of the economy. The report predicts that if the stock market rebound bubble bursts, the Chinese central bank may be forced to respond by printing money, which will lead to increased capital flight and pressure on the depreciation of the renminbi, further worsening the economy. Nomura's basic forecast is that the bubble burst this time will be smaller in scale. Beijing may introduce fiscal measures to stabilize demand and maintain the basic operation of local governments, but it may not solve any serious structural problems or clean up the mess in the real estate industry. According to reports, from September 2014 to June 12, 2015, the Shanghai Composite Index more than doubled and then plunged 40% in the following two months. Neo Wang, Managing Director of China Research at Evercore ISI in New York, believes that if the 2015 Chinese stock market crash is repeated, it will be too much for the Chinese Communist Party leadership to bear. As the Chinese stock market soars, listed companies are intensively transferring their holdings to private equity funds. According to statistics from mainland media, from September 24 to 28, at least a dozen companies announced the transfer of important shareholder agreements involving a total amount of more than 2 billion yuan. On September 30, another 18 listed company stocks were sold by important shareholders, and Hangzhou Thermal Power was sold by important shareholders by 12.003 million shares, with a reduction of 250 million yuan. From September 22 to September 28, at least 146 listed companies collectively reduced their holdings, and a total of 280 reduction announcements were disclosed. Some shareholders of listed companies also completed the reduction during this round of stock market surge. Industry insiders questioned whether these listed companies reduced their holdings through private equity funds that took over the shares and reminded investors to invest cautiously. Switzerland's Lombard ODIER liquidates its China assets to flee. Lombard ODIER liquidates its China assets to flee. The investment chief says recovery can't last. Under the strong stimulus policies of the Beijing authorities, the Chinese and Hong Kong stock markets have recently been excited and soaring. Michael Stroback, chief investment officer of Lombard ODIER, a Swiss company that resolutely sold all its Chinese assets, said that the current surge in A shares is only a temporary phenomenon caused by the stimulus policy and is difficult to sustain. Other analysts have also warned that technical indicators show Hong Kong stocks are overbought and investors should exercise caution. Last week, the Chinese government took a three-pronged approach to stimulate the economy. This included the People's Bank of China's announcement of a reserve requirement ratio cut, interest rate cuts, and reductions in existing mortgage rates, providing loans to investors, companies and institutions repurchasing stocks, and a promise from a Politburo meeting to launch fiscal measures of an unspecified scale. First-tier cities such as Guangzhou, Shenzhen and Shanghai immediately aligned with the central government's intentions, relaxing housing policies at the same time, driving the Chinese and Hong Kong stock markets to rise sharply for several days. On Monday, September 30th, the Shanghai Composite Index opened at 3,194.72 points, rising to close at 3,336.5 points, an increase of 8.06%, with a transaction amount reaching 1.17 trillion yuan. On September 30th, Hong Kong stocks also continued to rise. As of the close, the Hang Seng Index closed at 21,133.68 points, up 501.38 points, or 2.43%. The Hang Seng Technology Index closed at 4,751.81 points, up 6.7%. The state-owned Enterprise Index closed at 7,509.79 points, up 2.88%, and the Red Chip Index closed at 4,042.52 points, up 1.95%. However, according to Bloomberg, the chief investment officer of Lombard ODA, renowned as the Swiss private banking model, said in an interview on September 27th, I cleared all Chinese assets and transferred to U.S. stocks, U.S. treasury bonds, and U.S. dollars. This investment decision has been very effective. I don't think the government's strong stimulus policy will have a lasting impact on the stock market or the economy, Strobeck said. This is a short-term measure to boost some market confidence, he added. Frankly, when the Beijing authorities intervene in the capital market in any specific way, I usually think it's not a good sign. After Strobeck took office as Lombard ODA's chief investment officer in November last year, his first major decision was to clear all the company's Chinese assets. He told Bloomberg that Lombard ODA's previous investment in China accounted for about 6% of its strategic asset allocation, but now it has dropped to zero. He emphasized that he will never regret it. Strobeck said the company has made substantial gains in the U.S. stock market this year. The next step will be to consider reducing investments in the U.S. stock market and turning to markets outside the United States, including emerging markets, but excluding China. Data shows that Lombard ODA Switzerland manages assets as high as 209 billion Swiss francs, most of which come from private clients, and its asset management department handles about 63 billion Swiss francs. Coincidentally, as the Hong Kong stock market has been soaring for several days, some Hong Kong analysts have warned investors that the current performance of Hong Kong stocks is no longer active trading, but rather in a hyperactive state. With technical indicators showing that Hong Kong stocks are seriously overbought and mainland China beginning its National Day holiday on Tuesday, market funds will stop flowing in, and Hong Kong stocks may face adjustments, so investors need to remain cautious.