China's big slowdown

Hi all, this is Zheping in Hong Kong. China’s biggest tech companies have reported their weakest quarterly earnings in more than a decade. B [View in browser]( [Bloomberg]( Hi all, this is Zheping in Hong Kong. China’s biggest tech companies have reported their weakest quarterly earnings in more than a decade. But first… Today’s must-reads: • What to expect at Apple’s Worldwide Developers Conference [next week]( • Coinbase said it will extend a hiring freeze and [rescind some offers]( • The CEO of Palantir met with the [Ukrainian president]( Zero growth The results are in, and they’re not good. Over the last few weeks, as most of the major Chinese internet companies reported their quarterly results, investors were already bracing for lackluster numbers. I wrote a couple of months ago that the Chinese players have grown resigned to a [new era]( of low growth and caution, more than a year into Beijing’s sweeping crackdown on the sector. But in many cases, these multibillion-dollar tech behemoths still disappointed. Take [Tencent Holdings Ltd.](bbg://securities/700%20HK%20Equity), perhaps this earnings season’s biggest downer. Many people expected a tough quarter for the conglomerate; few expected virtually zero growth. China’s most valuable company [barely increased]( its revenue in the March quarter, and almost every other metric fell below analysts’ consensus. At the same time, Tencent’s arch-nemesis [Alibaba Group Holding Ltd.](bbg://securities/BABA%20US%20Equity) posted a fresh all-time low for quarterly topline growth. But the worst news for Chinese tech companies is this: It’s possible that the bad times are just getting started. On recent calls with investors, many tech executives (Tencent’s included) warned about even weaker ad sales and consumer spending for the current quarter, because of the quarantining of Shanghai that just concluded this week after a [chaotic two months](. Beijing’s officials are now [struggling]( to meet their own GDP target for the year. And for the first time in more than four decades, growth in the US economy could outpace China’s, according to an [estimate]( by Bloomberg Economics. This earnings season did have a few bright spots for Chinese tech companies, of course. But they mostly revolved around cost-cutting measures. China’s Netflix-style streaming service iQiyi Inc. posted its first quarterly profit ever after [breaking off]( costly content and subsidy wars with rivals like Tencent and Alibaba. And e-commerce upstart [Pinduoduo Inc.](bbg://securities/PDD%20US%20Equity)—once known for its aggressive promotions in lower-tier Chinese cities—slashed marketing expenses by 14%, boosting the bottom line. Meanwhile, in a development that could hinder future growth in the region, fundraising for new startups in China has fallen off a cliff, mirroring the stock performances of giants like Alibaba and Tencent. The value of venture deals in the country [tumbled 44%]( to $24.7 billion in the first four months of 2022, according to industry data tracker Preqin. That’s almost twice the rate of decline in the US and nearly four times the pace of the global slide. The [rout now sweeping]( the entire global tech market may prove to be particularly bad in China, aggravated by the Communist Party’s internet crackdown and draconian Covid-control measures. People in Shanghai are ready to move on. At midnight on June 1, when the citywide lockdown was lifted, photos started to pour in on my WeChat feed of congested traffic, friends hanging out over beers and skewers, and once again lit-up landmarks like the Oriental Pearl Tower. But for China’s tech companies and broader economy, the pandemic’s impact could last much longer.—[Zheping Huang](mailto:zhuang245@bloomberg.net) The big story Sheryl Sandberg’s advertising empire leaves a complicated legacy. The Facebook executive built the company into a global ad giant, [but developed blind spots]( on data, misinformation and more. What else you need to know Apple has agreed to make work schedules at its retail stores more flexible, part of a push to improve conditions [after a unionization push](. In other union news, Microsoft said it will [work with labor groups]( when workers wish to join them, taking a preemptive stance amid a wave of organizing at tech companies. China’s economic slowdown is [also hurting]( the global smartphone market. Bloomberg TV dissected Tiger Global’s [very bad year]( so far. Follow Us More from Bloomberg Dig gadgets or video games? [Sign up for Power On]( to get Apple scoops, consumer tech news and more in your inbox on Sundays. [Sign up for Game On]( to go deep inside the video game business, delivered on Fridays. Why not try both? Like getting this newsletter? 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