👊 Huawei showed Apple

What’s going on here?

China revealed that it’s shooting for 5% economic growth for the second year in a row, a lofty target given the country’s less-than-celebratory state.

What does this mean?

China’s economy doesn’t have it easy: the country’s population is aging, prices are falling, stocks are creaking, and the property market is as wobbly as ever. Yet, the Chinese government announced an ambitious 5% target for economic growth this year. That might be the same as last year’s goal, but it’ll be a lot harder to achieve: China was still in full-on lockdowns in 2022, so it was much easier to have a better year by comparison in 2023. Still, the country only just scraped by that target last year, with some critics speculating that the real figure was actually lower than the official result.

Why should I care?

Zooming out: Less isn’t always more.

China’s plan involves issuing one trillion yuan ($139 billion) in “ultralong” government bonds for only the fourth time in 26 years. Essentially, that means it’s selling government debt to investors to bring in some short-term cash. That lines up with this year’s budget deficit goal – the difference between money coming in and going out – of 3% of the economy. Mind you, investors had been waiting for some more dramatic initiatives. After all, without bolstering consumer spending, it’s hard to imagine China hitting that 5% target.

The bigger picture: China’s smartening up.

US stocks rode the tech trend all the way to the top of the world’s stock markets last year. No wonder, then, that China’s hoping to pull off something similar. The country’s investing 10% more into science and technology research, keen to fund innovation in future-shaping sectors like electric vehicles, hydrogen power, pharmaceuticals, and aviation. That’ll take some time to pay off – but if it does, China could become self-reliant technologically and kick the US off its throne.

What’s going on here?

Apple’s iPhone sales were 24% lower in China during the first six weeks of this year versus last, after Huawei took more than one bite at the Apple.

What does this mean?

China’s shoppers are usually a reliable crowd for luxury clothing stores, high-end potion and lotion makers, and tech companies. But now they need to watch their wallets, they’ve ditched their souped-up nice-to-haves. The result: the Chinese smartphone market shrunk by 7% in the first six weeks of this year compared to the same time last year. That explains why Apple has struggled to shift its new iPhone 15, with the model selling a lot slower since its September debut than previous releases. It hasn’t helped that Chinese brand Huawei is winning customers back onside, while other local firms like OPPO, Vivo, and Xiaomi have rolled out competitive deals for cost-conscious shoppers.

Why should I care?

For markets: Good job Apple loves a challenge.

Apple’s stock price has fallen 9% this year, handing the title of the world’s most valuable company back to Microsoft. Goldman Sachs removed Apple from the list of its highest-conviction investments, too, not long after Warren Buffett’s Berkshire Hathaway trimmed its holding of the stock in the final quarter of last year. To make matters worse, the European Union slapped Apple with a €1.8 billion ($2 billion) penalty on Monday, alleging that was making it harder for customers to explore different music streaming services.

The bigger picture: Hooray for Huawei.

Even though Apple has resorted to rare discounts, the iPhone is still stuck as the fourth-most popular smartphone in China. Meanwhile, Huawei has nabbed second place. And when Huawei isn’t tucking into Apple’s dwindling market share, it’s carrying China’s chipmaking ambitions on its shoulders: last year, the Shenzhen-based firm designed and produced a semiconductor more advanced than the US thought was possible, only five years after the firm nearly crumbled at the hands of stateside sanctions.