Muyuan downgrade; Dining behavior shift; Electricity demand

Muyuan outlook downgrade

Muyuan, China’s largest publicly traded hog producer, continues to face pressure as ratings agency China Chengxin changed its outlook from stable to negative while still maintaining an AA+ rating on the company’s debt.

Among reasons cited by the ratings agency for the change was the overdue of commercial paper, which was covered by Sitonia Consulting last week.

Muyuan’s stock price was weaker in response today, falling over 4% during the first hour of trading.

Continuous covid outbreaks shift Chinese dining behavior

Consumer habits continued to be impacted by sporadic outbreaks of covid in China. A recent news article in Dalian, Liaoning explored this topic. The northeastern city had an outbreak of covid-19 in November this year with the number of cases peaked at 61 cases in a single day.

In December, the entire province of Liaoning (population 42.6 million) has had only 4 cases. However, restaurants in the city estimate that the number of dine-in customers is down two-thirds compared to the level before the outbreak.

A survey by the Dalian Municipal Food Culture association, an industry group, found that the November outbreak led to a jump in demand for snacks, noodles, and fast food, while traditional restaurants saw a decline in business.

With in-person dining slumped, delivery orders also dropped.

The fact that deliveries dropped with more people staying at home is very notable. Food delivery in China is ubiquitous, cheap, and fast. The delivery fees in China are typically around $1 USD. Hence, food consumption and dining habits in China could have been structurally changed by covid which was described in the survey as a “consumption downgrade”.

The survey found two main reasons behind this shift with one being consumers are more willing to eat at home and make food themselves, and the other being the population’s disposable income has shrunk.

Industrial electricity demand overshadows consumer usage

China’s National Energy Administration reported that electricity demand in November rose by more than 3% on the year and is up 13.6% compared to November 2019. The cumulative usage from January through November electricity spiked 11.4%.

The numbers show the divergence being seen in the economy. Industrial producers and factories buzzing and needing much more electricity to run those operations and export products. But at the same time, the consumer sector including hospitality, travel, tourism, and restaurants continue to suffer as people stay put due to continued outbreaks of covid.

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